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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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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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Not saying that all TPA's are better than the factory, but I know for a fact there are a few that are better and offer more benefit. Don't be fooled by the fact that "Mitsubishi, Kia, or Mazda" is at the top of the contract, 99% of the times, the administration and claims adjudication is done by a contracted 3rd party. They just answer the phones on behalf of the factory! Warranty Gold is backed by a Risk Retention Group. These companies are not regulated by any government agency....NONE. That is what NWIC is, a Risk Retention Company. The majority of dealers use Reputable companies, (CNA, JM&A, Protective, Universal Underwriters, APCO) these companies have Fully insured liability policies backing the obligations of the agreement. EXACTLY like the factory plans. These programs have to be filed and approved by each state department of insurance. They all have federally protected "Guaranty Funds" if they become insolvent, which pays all claims for the consumer. (Example, Reliance insurance 1998) You keep quoting the example of Warranty Gold/Capital Assurance, these companies have no liability policies backing performance, they have stop loss or excess of loss protection, which means the TPA not the insurance company is holding the funds for future claims. The bottom line, many manufacturer plans, and reputable insurance products exist, the customers should research these products and find out about the company they are being presented. The examples I used above all have AM BEST ratings of A- or Better, and are endorsed by GM,FORD, and Chrysler Financial Corporations. NWIC lost its endorsement in NOV because of it's insolvency. People who finance car loans and supplemental products are actually smart! Why would you not borrow 1000-$2000 at 0% interest rather than take $1000 of your hard earned money and set it aside for 5 years and ABSOLUTELY NOT TOUCH IT. Most people on a budget can't do it or afford to do it, that's why it makes sense! $1000 at 5% for 5 years is only $1276. Most major repairs occur past 36/36 (ie. A/C, engine, trans, or drive axles) and average $1800 - $2600, and that's using today's money! It doesn't make sense! You can make an argument that the "warranty gold's" of the world ruin this type of product and everyone should run for the hills. Truth is, the majority of people who buy New and Used cars need some form of protection when the Factory warranty runs out. Last year nearly 7 million service agreements/contracts were sold in the US. This is spread both between Factory and Independents.... If these products are so unscrupulous and always screw the customers, why has the federal/State/and local governments allowed them to be sold for nearly 30 years? My advice to a conusmer would be to research the company that backs/insures the product. Only buy coverage and terms that will suit your personal needs. Shop around to get the best deal! Most often, its at the dealer you buy from, they have millions of dollars riding on their reputation, and future viability because of CSI. The likelihood of a customer getting screwed is less and less because of resources like this chat room and websites....
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Why not just buy Toyota quality and forget about extended warranties? Will the many lengthy extended warranties bankrupt Kia, Hyundai, Dodge, Jeep, and Chrysler when their vehicles fall apart long before the 100,000 or 70,000 miles? One possible scenario is that the disgruntled owners will get too annoyed with the frequent trips in to get one of these vehicles repaired that they will decide to dump the unreliable brand and get a Toyota where they do not need the extended warranty. Of what value is an extended warranty if a person is spending too many valuable hours taking their vehicle to the dealer to get it fixed?
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your enthusiasm for Toyota products, and hope you've never had any trouble with yours, bear in mind that Toyota is the brand I see more (in my lemon law cases) than any other Japanese brand. autoxpert - my screen name is zueslewis, taken from my first e-mail address (ever), which was named after my German Shepard (now passed), my best buddy for 12 years. I, unlike you, have no "God" complex. I deal with warranty/manufacturer liabilty every day. I could care less if the GMPP CEO writes checks out of his own account to cover repairs, my issue is who is liable, not who is backing the money. Only the manufacturer can be held liable for any aspects of warranty (in legal terms) on a vehicle. With a private company sponsoring a service contract, they have NO liability under the law to honor the "warranty" of the actual vehicle, which is described as "warranty of merchantability" - that is the concept under which breach of warranty cases are prosecuted - as violations of both the Uniform Commercial Code and the Unfair Trade Practices Act. Aside from the legal issues pertaining to private service contracts, there are many more issues that should sway an educated consumer away from private companies, like pre-authorization requirements, pre-payment for repairs in many cases, a week or more waiting on a adjuster to inspect the vehicle before parts can even be ordered, etc. There are several more disadvantages, if you'd like me to explain further. If it is your sole purpose to come here a try to sell private warranties like a travelling vacuum cleaner salesman, this is not the place to do it. Also, there is no need to attempt to discredit me or anyone else. I've sold over 7,000 extended service contracts (factory and private), administered them as a service manager, and now I've investigated their breaches as a consumer fraud investigator. Your facts are very skewed, and your attitude is hostile - both are unnecessary. |
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Do you see more Toyotas than any other Japanese brands because there are so many more Toyota vehicles sold in the USA than any other Japanese brand? Which Toyota models seem to be more prone to have a lemon (Tundra, ECHO, Tacoma, etc )? Do Toyota problems tend to be major mechanical like engine / transmission or accessories like power windows, power door locks, radios, etc.? Thanks for your assistance. |
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