What Type Should You Get?

There are three basic organizations that offer extended warranties: automobile manufacturers, new and used car dealerships, and independent companies or third parties. As usual, it is up to the consumer to decide which is best for their circumstances, but here are a few of the pros and cons of each provider.

Provider	Pros	Cons
Manufacturer	Factory-backed dealer repair network nationwide. No haggling about repair, price, or components.	Highest upfront costs, and dealer network might be limited in your area.
Dealer	Lower up-front cost: buy plan and service car at the same place.	Usually only one service point. If they can't fix it, who do you call?
Independent	Lowest cost (usually between 30-50 percent less than manufacturer plans), most coverage choices, dealers, or local repair shops. Third-party warranty programs are usually their only business.	Repair shop coverage might not be as promised. Some are "here today, gone tomorrow" companies.

Regardless of the provider you choose there are a number of things to look for and look out for. Consumers can be overwhelmed by the dizzying array of plans available. If you do a little homework, it is quite easy to separate the good plans from the clunkers.

Signs of a good plan:

• Corporate credit card to pay for services
• Ability to choose dealership or independent repair shop
• Warranty is transferable
• Trip-interruption coverage
• Free loaner car
• BBB certified

Signs of a bad plan:

• Out of pocket to cover repairs
• Specific caps on repair costs
• Large numbers of exclusions
• Dealership pressure to purchase plan
• Non-transferable
• Company lacking strong track record of customer satisfaction

Most plans specify that replacement parts may be either new or remanufactured, and that the choice of those parts is at the discretion of the provider. Many consumers balk at this. However, you wouldn't expect a provider to pay for a shoddy repair that they have to fix again in several months. In the long run, they are going to use the least-expensive part available that offers reliable service.

According to David Tryansky of 1 Source Auto Warranty1SourceAuto Warranty, consumers should check that, "all programs are insured and reinsured, and that the company offering the plan will continue to pay claims for the life of the contract." This might be the most important thing to look for in a provider. The last thing you need to do is pay for a plan that becomes worthless if the company goes bankrupt.

If you purchase from a dealer or from a third party make sure that you investigate the company you are purchasing from. Companies should offer a strong retail history, adequate financial reserves, and should be highly rated by the Better Business Bureau, Standard and Poors, or A.M. Best.