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Smart Shopper Extended Warranties
2873 messages, Last post on Dec 02, 2009 at 2:13 PM
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Edmunds article: Third-Party Extended Warranty Scams
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These private companies are under no obligation to comply with the Magnusson-Moss Warranty Improvement Act. None at all. Without that compliance, you have no "warranty" - you have no legal recourse, at all, if a claim is denied, if they use "used" parts (happens all the time) or if your legal issues are tied into a lemon law/breach of warranty claim. They are insurance policies, set by their own rules, and if they don't take care of you, you have NO recourse. Before you get any more disrespectful, please understand that my whole job is reviewing breach of warranty and warranty compliance cases in 3 states and at the Federal level. Additionally, most private "warranty" companies aren't signed up with many dealers, so the dealer has to jump through hoops just to get your claim handled. Doesn't bode well, if you expect to in the front of the line. |
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Not being disrespectful, just explaining the facts. There is no such thing as an "Extended WARRANTY". By law Mag/Moss, no retailer or TPA can "extend a warranty". Whether a customer purchases a factory program or a TPA program, they are only buying a "SERVICE" agreement/contract. The industry term of "Warranty" is used in- correctly. And as you know, "Warranties" can not be sold to customers, only "Tie in" service agreements", which by the way are covered and protected under magnusson moss act. Product, or Merchant warranties, offered to customers, in conjunction with buying a, vehicle are at no charge to the customer. As for the "service agreements", these agreements spell out in the defined contract language, all that is covered, all types of parts, limits of liability, what the owner is entitled to for benefit and recourse, what INSURANCE company is backing the obligations of the administrator, and whom, within in their state to contact if claims are not handled according to the service agreement. Now companies of RRG (NWIC) backing do not have any compliance to these laws in which Federally and Nationally filed and approved Insurance programs offer. I have seen GMAC/Chrysler/and Ford use parts replacement with language stating "like, Kind and Quality" = Used or Remanufactured parts. Now I am now discrediting your "expertise", using the term "warranty" incorrectly, and making false statements does not bode well for dealers and Service Contract companies who present/offer/and fulfill their coverage obligations. My credentials are on a national basis, both Federal, State, and International jurisdiction. I work with the Factory Programs, and 9 major Independent Service contract Providers. And By the way...Out of the 24,000+ Franchise dealers in the US, 75% have both Independent and Factory "SERVICE CONTRACTS" being offered by their finance representatives. Again Fact vs. Fiction... Please be honest to the people who use this site for resource purposes. |
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The GMPP, ESP, and DCC warranties are backed by the company that manufactured the vehicle, not an insurance company. Mag-Moss is very specific in that ONLY the company that MANUFACTURED the product can he held liable for its warranty. Any "warranty", other than backed by the manufacturer, cannot be inforced, even if considered "in breach". Please take the hostility out of your postings and I'll do the same. "autoxpert" - how's that? Have you ever been certified by a state or federal court to testify as an automotive expert? I have, 191 times, although I don't come here hanging a name like that in order to brag.
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I personally believe that consumers do not need extended warranties at all. The companies that offer these policies are not in the charity business. They obviously are charging more money for their policies than they have to pay out in repairs on average or they would not be able to remain in business. Having said this, many consumers do enjoy the peace of mind that extended warranties provide. In these cases, I personally always recommend manufacturer-backed extended warranties. Manufacturers are much more likely to stand behind their products to keep their customers happy and loyal than some random third party that has no vested interest in them. I can't tell you the number to stories that I have seen from consumers who have been given the run around by third party warranty companies when trying to have their vehicles repaired. I find it hard to believe that we are even having this discussion when one of the most popular third party extended warranty companies out there, Warranty Gold, is not even paying claims right now. That alone should be enough to scare most people away from non-manufacturer-backed ESPs. Car_man Host Smart Shoppers / FWI Message Boards
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The problem is no outside company can predict the future, only the manufacturer has a good idea of failure rates. These ESP use historical data which doesn't apply when a model changes or a new one is introduced. The acuraries flat out guess what each model will cost. A few wrong guesses and you are out of money...........hoping beyond hope that you can sell more policies before you have to close the doors [bankruptcy]. The real question is will putting $1200 in an interest account [instead of buying an ESP] cover everything?.[Probably not]....Lots of difference in buying a car with a 3/36 vs a 5/50k or a 6-7/70k factory warranty. |
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around 36-42 months. It has been for 15-18 years. The average person out there trades their vehicles that frequently. If you keep a car 10 years and run the miles up, you're the exception to the rule (I'm talking new cars, no used). In that light, as a former F&I guy who was good at selling warranties (factory and aftermarket), it was a hard sell when someone traded cars every 3-4 years. They're in warranty for 90% of the time they'll own the car.... |
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With all due respect "Zues", the statements you are making about the factory backing Warranties are correct, however each factory plan reinsures their obligation by paying an average premium of 1200 per car for the 36/36 B to B. The title of this thread was Extended Warranties,(service contracts) my remarks were regarding the statements that were incorrect regarding these supplemental products purchased after the sale. Magnusson Moss does make mention and gives consumer recourse in "Tie in sale" products. I agree that companies of under reserved/under funded capacity are doing a horrible diservice and fraudulent business practice. In your state, the "smart choice" product has hurt many consumers, dealers, and agents, because of thier lack of business integrity. Just to clear the air, and make a point. Chrysler Service Plans are insured by Zurich. ESP is insured by Travelors, and GMPP is insured by Motors Insurance Inc. The insurance is the financial protection for the performance of the service agreements. I beg to differ about actuarial "guessing". Many companies have 20-30 years of failure experience to properly price products using trending and inflationary methods. And just so you know, the factories DO NOT share failure rates with the Factory endorsed service contract programs. I have an actuary that works at Ford, who can't get information other than what has hit his insurance reports. The person who buys a a vehicle that keeps a car 44 months and 54K miles (national average 2001, source Dept Motor vehcile) then to buy a Service agreement above the 36/36 is beneficial. Not many people in the US have an arbitrary $1200 to put in an account to draw 5% interest. These products offer great value..... These are facts! And by the way, My "self professed screen name is nothing more then what i am considered in my industry. Are you a god in yours...this is joke, try to lighten up! |
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So what exactly are you trying to say, autoxpert? That third party extended warranties are better than manufacturer-backed plans? That definitely is not the case, it never was, and it is even more evident now that a major third party provider like Warranty Gold has ceased paying claims. Quite frankly, one would be much better off taking the money that they would have spend on their extended warranty ant putting it in a bank account. You mentioned that not everyone has $1,000 to just drop into a bank account. Well, if they don't have the money, how are they supposed to buy a $1,000 extended warranty? Sure they could bake it into their finance contract. If that is how they intend to pay for it, they could just take the difference in the payment that the ESP would add and put that aside every month, not only saving the interest that they would have had to pay, but also actually earning interest on it. If one really desires the peace of mind that an extended warranty provides, they should purchase one from a company that is definitely going to stick around, like their vehicle's manufacturer, and not some random unaffiliated company. Car_man Host Smart Shoppers / FWI Message Boards |
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| I think the key issue here is that, although manufacturers reinsure their warranties (i.e. pay Travelers/AIG/whomever $X per car, and then that insurance company reimburses the manufacturer for any warranty claims), the manufacturers _remain liable_ for those warranty costs. If the insurer goes out of business, that's unfortunate for the manufacturer (they're out $X a car, and the manufacturer has to pay the repair bills), but the consumer can still collect from the manufacturer. In the case of a third party "warranty" (not going to get into a semantic war here), if the company backing the warranty goes bust (a la Warranty Gold), the carowner is out of luck. | |
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