5 Extended Warranty Tips

3. Know What to Watch Out For

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 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.