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Question DetailsAsked on 8/4/2016

Best extended auto warranty companies

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My personal opinion from family experience and word of mouth and number of complaints on the web - NONE except original equipment manufacturer extended service agreements that basically extend the duration of your original OEM warranty. Personally I have never heard of a person who felt their home or non-OEM auto warranty plan was a good deal or fair to deal with.

You have to realize that the aftermarket warranty or service plan business is real price competitive, so like home warranties the policy pricing tends to be less than enough to cover what the policy says it will, so the norm is for the companies to deny coverage on valid claims, underpay on claims, have terms that make it very difficult or slow to get service, have claim contact numbers that are overseas or only available a few hours a day and/or not during nights or weekends or holidays, very high deductibles or co-pays, do not cover necessary ancillary work to do the repair (like not covering gaskets seals fluids etc that have to be replaced as part of the repair or removal and replacement of components necessary to geat to the problem), may have a very limited number of repair places in their "plan", may cancel automatically if you ever file a claim, and commonly do not cover OEM replacement parts.

Plus, the amount they pay out in claims is typically 50% or less of the premium, so if you have significant claims or a lot of claims you might get your money's worth, on the average the policyholders (like with most insurance) only get about half the benefit of what they pay, on the average. And their call center/claims personnel are commonly compensated partly or totally on the basis of how much of a potential claim they are able to deny or avoid paying, and every $ they don't have to pay out in claims goes to more profit, so their incentive is pretty much totally to deny as much coverage as possible.

OEM extended plans, which my family has used with good results (except in one case where it had to be escalated to national to get results) and a quite good return on investment (thanks to shoddy car design and manufacturing these days), also will not pay off near as much as the premiums paid on the average, but because it is provided by the OEM (Original Equipment Manufacturer) - and be sure it is not just a plan SOLD by the dealer but actually with a third-party company - they have an international corporate auto manufacturer/retailer reputation to uphold and are also subject, as an auto dealer/manufacturer, to a lot more laws about consumer repairs so they tend to be more honest. They also are subject to federal consumer fraud oversight and cannot hide behind state law protections which some do, so they have a lot more at risk if they fail to come through per the contract. Also, the repairs are (except in emergency cases) done at the OEM dealers, so you get the OEM parts and the same service as if it was under the new car warranty, rather than possibly being forced to go to some fly-by-night repair place, or having to fight with the repair shop because it says the plan does not pay enough for the repair.

My recommendation - a 5 year OEM extension of the basic new car warranty for $1000-3000 typically can be a good deal and a good protection against a possible very high major repair bill, or if you can afford the normal $3000-5000 major repair if it happens just put away a regular $50-100 amount every month in a separate good interest-earning account to cover the cost of repairs as if you were paying for an extended plan - as basically a personal insurance fund.

Answered 3 years ago by LCD

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