Understand terms before extending your car warranty

Federal regulators' efforts to shut down illegal "robocalls" pitching bogus automobile warranties highlight the need for consumers to be alert to these scams. It also shows the need for car buyers to understand how to evaluate properly what's a good extended warranty and what's not.

The issue of warranties has been a key question in the minds of consumers as Chrysler LLC and General Motors Corp. struggle to survive. The federal government has said it will back those companies' new-car warranties during the firms' restructuring period.

The standard automaker's factory warranty provides bumper-to-bumper coverage for three years, or until the car's mileage tops 36,000. In addition, you can buy an extended warranty, or service contract, that lengthens the period your car is covered.

"Every car comes with a warranty, and usually there's a power train warranty on top of that," said Philip Reed, consumer advice editor at Edmunds.com. "The extended warranty, which is usually sold in car dealerships, merely extends the warranty, and you might have up to five years/60,000 miles."

The Federal Trade Commission recently obtained two restraining orders designed to stop what officials describe as a wave of deceptive recorded calls warning people that their auto warranties are expiring and offering to sell them new service plans.

If you get mail or phone calls about renewing your vehicle warranty, don't take the information at face value. Your vehicle's warranty may be far from expiring - or it may have expired already.

If you have a question about your warranty, check your owner's manual, call the dealer who sold you the car or contact the vehicle manufacturer.

"The companies behind the mail and calls may give the impression they represent your car dealer or manufacturer," the FTC said. "With phrases like 'Motor Vehicle Notification,' 'Final Warranty Notice,' or 'Notice of Interruption,' they are trying to make the offer seem urgent - and to get you to call a toll-free number for more information."

After you call, they try to pump you for sensitive information, such as your bank account, credit card or Social Security numbers.

But you should never give out personal financial information - not even your driver's license number or Vehicle Identification Number - unless you know whom you're dealing with. Scam artists use this information to commit other fraud against you.

When it comes to service contracts, you can buy one offered by your car's manufacturer or through an independent company.

CONTRACT OPTIONS

With a manufacturer's extended warranty, Reed said, "you have the dealership and the manufacturer standing behind the parts and service with guarantees.

"Once you step outside of that fairly formalized process, you're paying a lot less, but the coverage may not be as great as a factory warranty."

Not necessarily, said Jerry Reynolds, a former Ford dealer who hosts an auto advice show on Saturdays in Dallas and tracks the local auto industry. Most dealerships sell both a manufacturer's extended warranty and one offered by an independent firm, he said.

"A third-party contract is usually cheaper, and in many cases the coverage is actually better," Reynolds said. "They write policies on all makes and models of cars. In some cases, they write a broader policy than the manufacturers."

THINK IT THROUGH

Whether you're buying a manufacturer's warranty or one from a non-manufacturer, make sure you understand the terms and conditions. Things you should know include:

- What's your driving pattern? "If you drive a car for three years and turn it back in, then you probably don't need an extended warranty," said Drew Campbell, president of the New Car Dealers Association of Metropolitan Dallas.

- What's the reliability record of your car? "Though this is by no means a fail-safe way of predicting what your repair bill will look like, it does give you an idea of what you may be in for service-wise," said Edmunds.com.

- Who backs the extended warranty? Ask who pays for repairs under the terms of the service contract.

- What's covered and not covered by the warranty? There may be several levels of coverage you can purchase. The more extensive the list of components covered, the more you'll pay.

- How does the deductible work? Consider not only its amount, but also whether it's per visit or per repair.

- Is the warranty transferable? "Some extended warranties end when the person who bought the warranty sells the car," Edmunds.com said. "A warranty that allows you to transfer it to a new buyer is preferable."

- Can repairs be performed at any repair shop or do they have to be performed at the dealership where the warranty was purchased? You want to know this in case your vehicle needs service while you're on a road trip.

- What happens if the dealership goes out of business? If you hold a manufacturer's extended warranty, "any dealer anywhere in the country selling the same brand of car" will honor and perform the exact same repairs, Reynolds said.

There also should be no interruption of coverage with a third-party contract if the dealership you bought it from goes under, he said.

"The biggest fear is the warranty company going out of business," Reynolds said. "If they go out of business, the consumer's in trouble."

So if you're considering a service contract from an independent company, buy one from a reputable dealership, he said.

"If you're dealing with a reputable dealer, they're going to know where their warranty company stands," Reynolds said. "If they sense trouble, they'll change companies to one that's more stable."

These days, buying the proper extended warranty is particularly important because consumers are keeping their cars longer

COMPARING WARRANTIES

We priced a five-year, 60,000-mile extended warranty for a 2007 Toyota Camry with 30,000 miles.

TOYOTA OF RICHARDSON
Platinum coverage

Toyota agreements are sold through dealerships, and prices vary.

Covers: Air-conditioning compressor, cooler unit, evaporator; automatic transmission and virtually every other component group in the vehicle.

Doesn't cover: Accessory drive belts, batteries, body panels, brake linings, pads and shoes, bumpers, door trim and handles, and other parts.

Cost: $1,230

WARRANTY DIRECT
SecureCare

Sold direct to consumers and through manufacturers, dealerships, banks and credit unions.

Covers: Air-conditioning system except rubber hoses, mechanical system, such as the engine, drive train, transmission and suspension; normal wear and tear.

Doesn't cover: Battery, shock absorbers, safety restraint systems, exhaust system.

Cost: $1,025 to $1,375, depending on deductibles

WHAT TO LOOK FOR

A good extended warranty should cover the power train - engine, transmission and differential.

It also should cover related high-cost items such as the air-conditioning compressor, the evaporator and the engine's cooling system, including the water pump.

Most are not going to cover items such as suspension pieces, brakes, interior items and any exterior pieces because those always suffer wear, and negligent owners will be even harder on them.

- Terry Box

Source: Dallas Morning News research; the companies

(c) 2009, The Dallas Morning News.

Distributed by McClatchy-Tribune Information Services.