Which Extended Warranty Is Best? - My Warranty Survey

There are a lot of people making a lot of money selling inferior products.  This is definitely a "buyer beware" situation and in my opinion, unless you're prepared to pay for the very best policies, most extended warranties are more trouble than they're worth. There are over 50 extended warranty companies to chose from.  How do you decide which one offers the best coverage for an acceptable amount of money?  I spent two weeks researching the warranties available from reputable vendors, carefully comparing the coverage and the costs for each one.  I received quotes for the top of the line coverage (the only coverage I recommend) available from each company, for two different vehicles (a 2004 VW Passat Wagon with 10,000 miles and a 1999 Audi A4 Quattro with 65,000 miles). I compared the items that were covered, and the items that were excluded from each company's warranty.  

Much to my surprise, only a couple of the warranty companies were even willing to cover my "low mileage" 1999 Audi A4, while everyone offered coverage for the 2004 Passat. Most companies won't cover a vehicle with over 60,000 miles on the odometer and our recommended company, Warranty Direct is one of them.

California coverage:

If you live in California, a new law went into effect in 2004, that severely limited the ability of insurance companies to operate in the state. Warranty Direct is currently the only online warranty provider that can sell coverage in the state. Three levels of coverage are available. You can chose between exclusionary bumper-to-bumper, special Wrap coverage or coverage for the big ticket items only. Click here for Warranty Direct California Sales.

A further review of the coverages revealed that only a couple of the companies covered engine damage due to overheating, a coverage I consider absolutely necessary (I worked as a service writer at a large dealership and saw over 100 engines destroyed by overheating while I worked there). The repair bill from an overheated engine will run anywhere from $1500 to well over $7500 is certain cases. Warranty Direct offers coverage for overheating.

What about in-car entertainment and GPS navigation systems?. Warranty Direct offers coverage for both.

Another common exclusion is repairs resulting from wear and tear of covered components, this occurs most often in a vehicle's suspension and drive train (transmission & axles). Most of the companies only covered broken components (aka breakdown), only a couple covered items that had worn out (aka wear & tear). The distinction is very important - for example: ball joints rarely break however they wear out all the time. The same holds true for internal engine components like camshafts, bearings, and piston rings. Warranty Direct offers coverage for wear and tear and breakdowns.

My experience as a service writer also taught me that dealerships like to work with customers whose warranty company pays the dealer directly with a credit card. Only a couple of the companies I surveyed did so, the rest either paid by check or made the customer pay the bill first before reimbursing them. Keeping your dealer/mechanic happy ensures that you'll get the best service possible, I should know. Warranty Direct pays the dealer/garage directly with a corporate credit card account. 

Some companies insist that if a warrantied repair exceeds $500, the shop must wait for an inspector to visit and approve the repair.  Only then can the shop order the part.  Needless to say, some garages aren't thrilled with customers who show up for third-party (as opposed to in-house or 50/50) warranty work. Warranty Direct trusts your ASE-certified mechanic and will pay the posted labor rate.

Most companies make you pay a $50 to $100 deductible for every visit to the repair shop.  If your vehicle has a persistent problem, the deductibles can add up quickly. Only a couple of the companies offered a $0 deductible and Warranty Direct is one of them.

Another coverage I like to see is for rental cars (at least $150 per occurrence), travel interruption (again $150 per occurrence), towing (hopefully you're an AAA member), lost key or lockout coverage, and road hazard protection for your tires ($100 per occurrence). As you may have already guessed, only a couple of the companies offered all five coverages. Warranty Direct offers all five. 

The cost of an extended warranty is often a major determining factor in deciding which warranty to purchase.  I found that coverages available from dealerships cost anywhere from 40% to 100% more than the same coverage available from the third party insurers I surveyed. Most of these dealer/manufacturer offered policies covered the same items as the third party offerings. So why do they cost so much? The only explanation is the huge commissions earned by the dealer whenever they convince a customer to purchase one.  At a new car dealership, the single most profitable item sold by the dealer aside from the vehicle itself is the extended warranty. Warranty Direct has prices consistent with other third party insurers (40% to 100% less than at a dealer) yet offers significantly better coverage. 

In each and every category the same firm made my short list: Warranty Direct. Click here for Warranty Direct's website.