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Extended Auto Warranties

post #1 of 4
Thread Starter 
Hi all, I just helped my mother buy her new 2006 Chevy Impala (Sweet Car by the way) and I had her get an extended warranty.
GM had increased my GM Card rebate from $1600 to $3000 and I let her use the rebate. The dealer offered a warranty from a company called API for $1900 for a 7 yr warranty bumper to bumper. I told them I would take it for $1400 and I got them to drop the price.
Now, for some reason this Chevy dealer was pushing this API Warranty over GM's own Major Guard coverage. Said it was better because she could get repairs done anywhere. Apparently the dealer is making more moolah from selling the API Warranty.
I couldn;t find anything negative about the company over the net so i figured peace of mind was worth the $1400 (especially since GM basically gave me the money). If the warranty isn't used at all you get a full refund after the 7 year period.

Does anyone have any experiences good or bad with auto warranties and do you think I did the right thing?
post #2 of 4
It's very important that you compare the terms and exactly (point by point) what is covered side by side in these two warranties. Read all of the fine print. A lot of these 3rd party companies will slip in things like using used or non-OEM parts for repair which can really hurt you.A lot of these warranties cover only drive-train components and even then don't cover things that are more likely to wear out such as CV-joint boots. Some others only cover repairs and not adjustments (for accesory belts for exmaple). You really have to disect the terms and conditions... It is highly unlikely that any of these warranties will cover "wear-and-tear" items such as brake pads, tires, floor mats, paint (unless it's rust-through) and of course regular maintenance.

Another thing to consider is simple estimation of how much the repairs are likely to cost you. That depends on how long does one plan to keep the car. If, in 7 years, the car is unlikely to pass 100k mile mark, which means that no much should go wrong with it. You're more likely to recover $1400 in case of a catastrophic engine or transmission failure... which doesn't happen unless somebody else (like your mechanic) screws up. On the other side, it would pay if, say, alternator and A/C compressor failed realtively early in the car's lifetime. Again, this is unlikely, unless your operating conditions are vastly differene than "normal". So these are things to consider...
post #3 of 4
Think of an extended warranty as a bet. You're betting that your mom's car will need repair during the warranty period; the warranty company is betting that it won't.

If you do get the refund after the warranty expires, the warranty company still "wins" because they've had an interest-free loan for 7 years.

Skatman is right in that how much the car is driven can affect the usefulness of the warranty. The first 3 years or so, the car's going to be covered by the factory warranty anyway, so you're really betting on 4 years time plus the number of miles the car will be driven after the factory warranty expires.

Another option is simply to put an amount equal to the warranty price into an interest-bearing account. If the car works reliably for 7 years, you've got a nice sum to use as you see fit. If the car needs repairs, in many cases the amount you've put aside will more than cover the cost.
You can never justify the cost of building a bridge by counting the number of people swimming across the river.
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You can never justify the cost of building a bridge by counting the number of people swimming across the river.
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post #4 of 4
Thread Starter 
Interesting points. She really doesn't drive far when she does. In my mind that means the components shouldnt wear out as fast. However, that kind of driving is actually harder on a car than taking it on the highway.
The warranty covers CV Joints, A/C, Power windows, etc so the coverage is good. GM's own warranty states they may use used parts, the API Warranty doesnt say anything about it.
As for wear and tear, it doesnt cover replaceable items, but its important that they say they cover wear and tear in case a major part breaks just from use they cant say it was normal.
As for saving the money, that is an option, IF she can do that which I dont think she will do.
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