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Extended Warranty Education - Warranty Myths

Learn some of the most common myths about extended warranties...

Click on any of the following or scroll down to see all warranty business secrets.

  • Myth #1: Always buy your extended warranty from the dealer who sold you your car.
  • Myth #2: All extended warranties are basically the same, so you should just buy the cheapest.
  • Myth #3: You must purchase an extended warranty in order to qualify for dealer financing.
  • Myth #4: No need to read the contract, it looks like any other.
  • Myth #5: A "mechanical breakdown" warranty offers the same coverage as a "wear and tear" warranty.
  • Myth #6: If you buy the extended warranty before the manufacturers warranty expires, you will have double coverage on your vehicle.
  • Myth #7: Now that I have an extended warranty, I do not need to worry about maintaining my car...I'm covered!
  • Myth #8: My dealer won't accept third party warranties for repairs.
  • Myth #9: My powertrain coverage lasts longer than my bumper to bumper coverage, so I don't need to buy an extended warranty.

Myth #1 - Always buy your extended warranty from the dealer who sold you your car.

Not true. Most car dealers are middlemen who make their highest commissions on the financing and extended warranties they sell. Of course they want you to purchase your warranty from them when you buy your car, so it can be included with your financing. But finance charges can increase the overall warranty cost by hundreds, or even thousands of dollars. You should try to buy your warranty directly from a reputable provider with iron-clad financial backing...which will likely be more affordable as well as tailored to fit your long-term automotive needs

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Myth #2 - It seems like all extended warranties are basically the same, so you should just buy the cheapest coverage.

Until you know how an extended warranty actually works, price can seem like the only thing you can base your decision on. However, it's a much better idea to review the actual warranty contract before you purchase. Buying an automobile extended warranty is all about transferring your risk of costly repairs and having your claims paid. Low prices may look good on the surface, but they are often coupled with poor service and many restrictive contract clauses which will lead to more out of pocket costs for you on each claim. On the other hand, low prices can be a great thing, when you are dealing with a highly reputable provider with excellent coverage terms (like Paragon).

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Myth #3 - You must purchase an extended warranty in order to qualify for dealer financing.

It makes no sense that a person would be required to increase the amount they are financing by adding an extended warranty in order to obtain financing. Financing is approved or denied based upon your credit only. By including the extended warranty in your car purchase, you will be stuck paying additional interest!

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Myth #4 - No need to read the contract, it looks like any other.

Ignore the language details of your vehicle service contract at your own risk! Less reputable warranty dealers may try to slip in troubling clauses like the following:

"At the sole discretion of the Administrator"
"Parts may be used or recycled"
"You must maintain your vehicle according to the severe requirements of your manufacturer (that will double your maintenance costs)"
"Any covered part that has not failed, this includes seepage of seals and gaskets."
"The gradual reduction in operating performance is not covered."

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Myth #5 - A "mechanical breakdown" warranty offers the same coverage as a "wear and tear" warranty.

Some service contracts exclude repairs needed due to "wear and tear." Yet a large number of car repairs are needed because a part wears out from a long period of use or improper maintenance, not because it was poorly built and "broke down".

The more miles on a car when a repair becomes necessary, the more likely it is that the repair will be needed because a part wore out, not because the part broke due to poor manufacturing. Still, some service contracts do not cover parts that wear out.

Again, you should carefully review your service contract before purchasing to know what is covered and not covered to see whether wear and tear claims are excluded from coverage. If they are, you might want to consider buying a service contract that does not exclude wear and tear claims. If it is not clear whether a repair is needed due to a manufacturing defect or simple wear and tear, it is more likely that the service contract company will pay for the repair. It is a mistake to assume that a repair agreement will cover every repair your car may need.

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Myth #6 - If you buy the extended warranty before the manufacturers warranty expires, you will have double coverage on your vehicle.

A common misconception. It's not true that waiting to purchase extended warranty coverage means you will get coverage for a longer time and save more money in the long run. Like life insurance, costs rise as we age; the cost for a car warranty will rise as the vehicle ages and accrues mileage. The reality is this: you will be offered the longest terms and the lowest rates for newer vehicles with lower mileage.

Warranty companies understand that you may have a warranty from the manufacturer. They provide coverage that is simply an extension of your manufacturer coverage--not double coverage. In fact, the manufacturer's warranty has been factored into your price quote. The more factory warranty you have remaining, the lower the cost and greater the length of the warranty extension available to you. Essentially, you're paying for tomorrow's coverage at today's rates, while gaining access to additional benefits like roadside assistance during the manufacturer warranty period.

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Myth #7 - Now that I have an extended warranty, I do not need to worry about maintaining my car... I'm covered!

Sure you're covered, but cars will continue to need proper maintenance, as outlined in your vehicle's owners manual. Otherwise, you'll have more than your share of automotive problems and expenses. Be sure to keep accurate maintenance records and receipts. To neglect this responsibility to your car may not only jeopardize your claims getting paid, but will also put your wise investment at undue risk. All extended warranties require that you properly maintain your vehicle and perform the manufacturer's recommended maintenance, don't forget.

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Myth #8 - My dealer won't accept third party warranties for repairs.

That's likely incorrect. Dealers not only offer the manufacturer's extended warranty, but are now offering third party warranties as well. Most third party warranty companies pay the repair facility immediately over the telephone by credit card, so there should be no objections about accepting the warranty. In fact, a warranty from a third party will require the dealer to do less paperwork and not wait for reimbursement.

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Myth #9 - My powertrain coverage lasts longer than my bumper to bumper coverage, so I don't need to buy an extended warranty.

When your bumper to bumper coverage expires, you'll find yourself without coverage for the parts and systems that most frequently fail such as high tech sensors, computers, air conditioning and many more. Even if the manufacturers are extending the original warranty, the additional coverage being offered is very limited. After the initial bumper to bumper warranty expires, longer powertrain warranties only cover components such as the engine and transmission, and may not be transferable to other owners upon sale.

There is a solution to this problem. Wrap programs compliment the longer powertrain warranties being offered, preventing the consumer from having to buy coverage they already have from the manufacturer. A wrap warranty offering additional coverage for new vehicles whose powertrain warranty runs longer than the original bumper-to-bumper plan from the manufacturer.

The manufacturer's powertrain warranty only covers a portion of the vehicle's components. Wrap warranties pick up the remaining portion for the same term, including such things as air conditioning, electronics, electrical, brakes, ABS and more.

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