Who really owns your extended Auto warranty?

Who really has your money?

You need to know a little about the "transfer of risk" associated with Auto Warranties.
A transfer of risk is when the selling dealer pays money to an administrator that sets up "reserves."
These reserves are used to pay for repairs.

Why is this important?

Some  auto retailers DO NOT pay into the reserve, they do not "transfer the risk".
They are gambling with your money. Your auto warranty is then only as good as the financial status of the retail seller. If they hit hard times, your auto warranty is in jeopardy.

If the retailer hasn't "transferred risk" to an administrator that maintains an excellent claims paying ability and the dealership is sold OR GOES OUT OF BUSINESS, you're out of a warranty, and you're out of the money you paid for that warranty.

Why should I care about Vehicle Breakdown versus Wear and Tear?

You should care because you may be covered for one (breakdown) failure and not for another (Wear and Tear) failure with your current warranty.

A breakdown failure occurs when a component or part BREAKS. A wear and tear failure occurs when a component breaks AND/OR fails to perform up to manufacturer's specifications.

For example, piston rings do not break. They wear out. This is wear and tear failure, not breakdown failure.

Another example: Suspension items normally do not break. They wear out. This is wear and tear failure, not breakdown failure.

This is a critical distinction because many manufacturer's warranties and after market warranties DO NOT COVER WEAR AND TEAR FAILURES.

Is your vehicle covered for overheating?

A little known section of the fine print in most manufacturer's and after-market warranties is an exclusion that reads something like this:" You must perform regular scheduled maintenance at manufactures suggest intervals to keep warranty in effect. "Be sure you read the owners manual or ask your dealer about maintenance intervals.

Most people have seen steaming and smoking vehicles at the side of the road due to city traffic, heavy snow, or extreme heat. Your current warranty may not cover this situation.  This is a VERY expensive repair and is specifically excluded in most service contracts.

With your current warranty, do you have one deductible?

Probably not. You could be under a warranty that has a deductible for EVERY repair, as opposed to one for a single repair visit.

For example: During a repair visit you have the brakes, air-conditioning, and transmission fixed. If you have a deductible for EACH repair under your current warranty, it could take hundreds of dollars out of your pocket. Be sure to ask if deductible is per visit or each repair.

With my current warranty, can I go anywhere for repairs?

Probably not. Many factory plans require you to go to factory shops.

For example, as of  January ,2002 with a Chrysler warranty you must go to a Chrysler facility.

Many dealer service contract programs (which are different from the manufacturer's warranty), have an unbelievable exclusion: They make it uninviting for non-dealer repair facilities to honor their vehicle service contracts, which means that you end up having the vehicle repaired AT YOUR DEALER'S REPAIR FACILITIES!

Double Dippers - How Retailers get paid twice from one repair.

Occasionally manufacturers will make exceptions in their warranties to cover special problems or defects with their products. Such exceptions are referred to as "hidden warranties" (as opposed to vehicle "recalls" which are items that relate directly to the safety of a vehicle). An unethical repair facility may charge both the customer AND the manufacturer when repairing a defect covered by a "hidden warranty."

For example, a consumer may find a problem with their vehicle, bring it into a dealership for repairs, pay for that repair, and NEVER know that the problem was actually being paid for by the manufacturer of their vehicle at the same time.

One reason this happens is because it is not mandatory in most states that a manufacturer reveal to consumers that their vehicle has additional "hidden warranties" not expressed in their original manufacturer's warranty. The manufacturers know that retailer service facilities "double dip" on occasion. They do little or nothing about this practice because it is in their best interest not to disclose defects, newly covered items, or get repairs done at their expense.

Many repair facilities know that consumers are unaware of "hidden warranties" and can take advantage of consumers that have a real defect in their vehicles. A consumer can read their manufacturer's warranty countless times but it will never reveal the "hidden warranties."