Making Sense of New-Car Warranties

All new cars come with warranties, from comprehensive bumper-to-bumper policies to those that cover specific components like seat belts or catalytic converters. In all, a car can leave the dealership with 10 or more warranties — which can be a mess for its new owner to wade through. Fortunately, most of these programs cover similar components. To find the most common ones, we scoured owners' manuals and online policies for dozens of cars and trucks. We also consulted several experts — Lemuel Dowdy, a senior attorney at the Federal Trade Commission; Rob Gentile, director of auto pricing at Consumer Reports; Mark Pierret, director of warranty management at automotive consultancy MSX International; and Brett Smith, an industry analyst at the Center for Automotive Research. Here are 12 common warranties we found. Read about used-car warranties. Bumper-to-bumper Powertrain Extended-length Roadside assistance Tires Rust perforation Emissions Factory accessories Batteries Hybrid components Seat belts and airbags Third-party components Bumper-to-bumper: Often called a basic warranty or new-vehicle warranty, a bumper-to-bumper policy covers components like air conditioning, audio systems, vehicle sensors, fuel systems and major electrical components. Most policies exclude regular maintenance, like fluid top-offs and oil changes, but a few luxury brands — most notably BMW and Saab — have separate free-maintenance provisions. Bumper-to-bumper warranties usually expire faster than powertrain warranties. Powertrain: Don't be misled — a 10-year or 100,000-mile powertrain warranty doesn't promise a decade of free repairs for your car. It typically covers just the engine and transmission, along with any other moving parts that lead to the wheels, like the driveshaft and CV joints. Some automakers also bundle seat belts and airbags into their powertrain warranties. With a few exceptions, powertrain warranties don't cover regular maintenance like engine tune-ups and tire rotations. Extended-length: When you buy a new car, most dealerships will offer to sell you a supplemental contract that extends beyond the standard powertrain and bumper-to-bumper policies. Programs vary: An entry-level policy might carry a deductible and cover only the engine and transmission, while a deluxe package could drop the deductible and include all the trimmings of a full bumper-to-bumper warranty. Most programs are backed by automakers, though it's not uncommon for third parties, including rival automakers, to offer their own policies. Many policies can be purchased months or even years after you buy your car. Most of these policies can be transferred to future owners, which can increase your car's resale value. Roadside assistance: Some automakers include roadside assistance with their bumper-to-bumper or powertrain warranties, while others have separate policies. These programs cover anything from flat-tire changes and locksmith services to jump starts and towing. Few reimburse incidental costs, like motel rooms (for when you have to wait for repairs) or telephone charges. Tires: Like replacement tires, new-car tires are covered by their manufacturers. Depending on the type of tire, most warranties have a set number of years or mileage limits, whichever comes first. Generally, tires are eligible for warranty replacement if the treadwear indicators, which signal the final 1.6 millimeters of usable tread, become visible prematurely. That doesn't always mean a free set of tires — most tiremakers charge a portion of the new-tire cost based on premature wear, meaning you only get reimbursed for the remainder of how long the tire should have lasted. Be sure to have your tires rotated regularly, as improper rotation, inflation or balancing can become grounds for warranty dismissal. Unless a special policy has been purchased, basic tire warranties don't cover puncture or collision repairs. Rust perforation: Rust coverage covers body panels that have rusted through. Such policies generally last five to six years and have no mileage limits. They only cover complete perforation — a relatively rare occurrence with today's rust-proofing — so you'll probably be denied a claim for sheet metal that's only partially rusted. Most policies don't provide coverage for rust caused by rock chips, hail or acid rain. Emissions: Since 1972, the government has required all cars to have emissions controls like oxygen sensors and catalytic converters. Two types of warranties exist: performance warranties and design and defect warranties. Performance warranties require automakers to repair or adjust emissions controls for at least two years or 24,000 miles if the car fails an emissions test. If emissions controls fail independent of a test, the design and defect warranty covers them for at least two years or 24,000 miles. Major components like catalytic converters and engine control modules are covered for performance and defects for eight years or 80,000 miles. On some items, California residents are eligible for additional coverage. Factory accessories: Factory accessories include everything from a fancier audio system to an engine modification from a manufacturer's performance wing, like Toyota Racing Development or Ford Racing. Most automakers cover accessories for one to three years or the remainder of the bumper-to-bumper warranty, whichever is shorter. Be sure to check out all the specifics — modifying the accessories after they've been installed can void your coverage. Batteries: If it's not covered in the bumper-to-bumper policy, a car's conventional 12-volt battery sometimes gets its own warranty. Battery warranties usually range from two to three years; they cover defective batteries on a pro rata basis, so you'll be compensated only for the remaining battery life you lost. Battery warranties rarely accommodate maintenance or misuse. Hybrid components: Components in the hybrid drivetrain include the high-voltage battery pack — distinct from the car's conventional 12-volt battery — along with the hybrid assist motor and all the electrical connections in between. Such components may be prohibitively expensive to repair or replace, so automakers offer generous warranties, in most cases eight years and from 80,000 to 100,000 miles, whichever comes first. Seat belts and airbags: A lot of carmakers include seat belts and airbags with powertrain or bumper-to-bumper warranties. Others make separate provisions, and the warranties sometimes carry no expiration date. Seat belts are generally covered for operating usability only, so don't expect a replacement for discoloration or other cosmetic defects. Third-party components: Sometimes equipment made by other companies, like a DVD player or wireless headphones for backseat passengers, carries a dedicated warranty from its manufacturer. Pay attention to these: They may be shorter than the bumper-to-bumper warranty for the car.

Kelly Blue Book - Used Car Values to Rise 5% before March

If you're looking to buy a used car in the near future, you should consider grabbing one now, before prices rise. That's according to Kelley Blue Book, which expects to see used car values jump as much as 5% before March and remain high for the rest of 2012. January is often a so-so month for auto sales, as many consumers give their bank accounts a chance to recover from holiday spending. As a result, used-car values tend to remain flat, heating up around the same time as the weather. MORE AT HIGH GEAR MEDIA » Dealers Warn Fuel Rules Will Boost Car Costs By $5000: We Break It Down » 2013 Ford Mustang Shelby GT500 Prototype Sells for $300,000 » Five Cars That Regularly Beat Their EPA Gas Mileage Ratings » 2012 Toyota Prius C Manual Leaked: Here’s What It Tells Us But KBB is already seeing some upward movement in on-the-lot pricing. The biggest jump has been in passenger cars -- particularly mid-size, hybrid, and full-size rides, the average values of which rose $107, $86, and $85, respectively, between January 6 and January 13. Compact crossover and compact car values were up $78 and $61, respectively, during the same period. Not surprisingly, the costliest used cars are those that have recently been refreshed. If you're hoping for a 2011 Chevrolet Cruze or Kia Optima, expect to dole out a sum closer to the original sticker price than if you went for a 2011 Toyota Corolla or Honda Accord. (The one exception to that rule might be the revamped 2012 Honda Civic, which was heavily panned by critics from the moment it arrived in showrooms last April -- so much so that executives ordered an early re-do.) KBB expects used-car prices to remain on an upward trend for the rest of the year, and given other analysts' predictions, we tend to agree. As we saw yesterday, Americans' vehicles are aging fast, meaning that more consumers will probably be in the market for a new car soon. Add that to the recovering auto industry, and you've got a recipe for high demand -- and high prices. Get the ball rolling on your next car purchase and be sure to contact ACWII/Extendedwarrantyhub for your warranty coverage!!!

Smart Decisions for Vehicle Refinancing

You're looking for some extra cash, and you see the ad on TV: Refinance your car and save money, or just lower your monthly payment by extending the length of your loan. Question is, is it really a good idea? Before you refinance, it's important to understand that a positive tool like refinancing can be used in shortsighted and reckless ways. Refinancing involves transferring your car's title — official ownership — from one creditor to another. The assumption when you sign up for a car loan is "that's it," said John Ulzheimer, president of consumer education at Credit.com, but as long as you're still paying for your car loan, you can refinance it. "If your credit score improves, even by just 50 points, you should ... refinance the auto loan," Ulzheimer said. Likewise, if interest rates were high when you purchased your car but have since come down, refinancing is a prudent option, said LendingTree.com spokeswoman Allison Vail. "If you see a better auto interest rate than you currently have, you should refinance," she said; even if it would only reduce your annual interest payments by around 1 percent, refinancing is worth a look. To find a better rate, though, you'll need to shop around. There are plenty of websites that can help: LendingTree.com, Eloan.com, Bankrate.com and Credit.com are all good places to shop for rates. Capital One Auto Finance is also one of the biggest online lenders, with attractive rates for qualified borrowers. If you're approved for refinancing, the process itself is fairly simple. You get a check from your new lender, which you use to pay off the old loan. From there, you start paying your new lender monthly. The potential advantages of refinancing are twofold: It can reduce your monthly payments and lower the overall cost of your car. For instance, say you're two years into paying off a $35,000 car that you originally financed using a six-year loan at 8.5 percent interest ($622 a month). Another refinancing strategy — if you can afford it — is to secure a lower interest rate and its resulting lower monthly payments, but keep paying the same amount you were paying before. What that will do is effectively shorten your loan because your total financed cost would have been reduced when you refinanced at a lower interest rate. For instance, using the example above, if you continued to pay $622 a month after refinancing the loan, you would have your car paid off after about 45 months, rather than 48 months. Of course, there are also borrowers who will seek to lower their monthly payments when refinancing. This can be done by lengthening the loan term for the vehicle and could be an acceptable compromise for someone who needs to cut their monthly payments in order to keep their car. It is not, however, for people looking to save money in the long run, because it increases the overall cost of the loan. "If you are turning a four-year loan into a nine-year loan, that's not really a good idea," Ulzheimer said. Also, creditors may limit refinancing options on aging vehicles because the collateral (your aging car) won't have enough resale value. In general, it's best to refinance toward the beginning of a car loan, not the end. "Interest is front-end, or front-loaded," Ulzheimer said. "It's more advantageous to refinance at the beginning because that's when you're paying the most interest." There may also be prepayment penalties in your original loan agreement that can make refinancing a costly option. Some lenders can make you pay a portion of the remaining interest when you refinance, not just what's left on your principal. One such penalty is contained in what's called a "pre-computed loan." In a pre-computed loan, you're obligated to pay the principal plus the total interest, even in the event of an early payout. These loans are less common, but make sure to check if this is what you've signed up for. If you did, the benefit of refinancing to save on total financed cost is lost. Typical fees for refinancing include a lien-holder fee, which LendingTree.com estimates at around $5-$10, and state re-registration fees, which can range from $5 to $75. These fees shouldn't significantly impact the monetary benefit of refinancing. Other considerations include opting for a home equity line of credit over auto refinancing. A HELOC could give you a lower monthly payment than refinancing because it's a longer-term loan (usually 10-15 years), while vehicle refinancing is usually structured in two-year to four-year periods. Ulzheimer said home equity loans are a smart option if you're financially responsible because rates are good and the interest you pay is tax deductible. With the drop in housing values and tightened credit, however, it's more difficult to secure a home-equity loan now than it has been in the past few years. Also, it's important to understand that refinancing your car through a home equity loan secures your auto loan with your home. "If you stop making payments on your auto loan, you could lose your home."

Demand for extended warranties set to stay strong, says RAC Warranty

Read more: Latest Fleet NewsFleet Industry NewsManufacturer NewsPeople NewsTax and Legislation NewsEnvironment News Used car buyer confidence is unlikely to see an increase in 2012 and may even decline, meaning that demand for ‘safety net’ products such as extended warranties will remain strong, says RAC Warranty. Macroeconomic factors such as a possible double dip recession, continued Eurozone instability and ongoing high levels of unemployment mean that used car warranties are still being enhanced at very high levels measured by both length of time and depth of cover. Ian Simpson, sales and marketing director, said: “A used car is one of the single biggest purchases that a buyer makes and it is understandable in the current economic climate that spending such a large sum fills them with a high level of doubt. “Customers continue to upgrade warranties at an elevated rate in order to create as high a level of peace of mind about their motoring costs as possible. In fact, the enhancement rates that we currently see bear comparison with the worst parts of the last recession. “As far as the mood of buyers is concerned, it is difficult to foresee any improvement during the whole of 2012.” Simpson added that the dealers who had enjoyed the best performance in the last 12 months were often the ones who showed the best appreciation of the mood of the buyer. He explained: “It does not take a psychologist to recognise that used car buyers at this time want a highly credible offering in order to feel secure – they want to buy from an established dealer, to be talked in detail through a full service history and to have the whole sales proposition underpinned by a comprehensive warranty from a recognised provider. “In almost all parts of the market, the dealers who are familiar with these needs and work to meet them will be the ones who have the best 2012.” Author Fleet News 01733 468655

Consumer Reports - How to Buy Extended Warranties:

Step One: Read the contract. Research the terms and conditions of the service contract while you compare the prices and features of the products themselves. Then use your common sense and Google to decide if the extended warranty offer is a deal worth adding, or if you should shop elsewhere. A freelance reporter recently called, asking your editor for advice on when to buy and when not to buy an extended warranty. What should a consumer look out for, what should they avoid, and what should be in an extended warranty offer? Oh no, not another one of those articles. They usually end up slamming the entire concept, trashing the whole industry, and advising consumers to avoid extended warranties altogether, except in some very narrow instances. Well, it's not that easy. It's a bit like asking who needs earthquake insurance, or who needs hurricane insurance. Last week, many people might have given a very different answer than they'd give now. The statistics tell you one thing, but real life tells you otherwise. The real simple advice was this: ask to read the contract. That advice, however, turned out to be too simple. Her editor was looking for an article on how to spot scams and rip-offs. Her editor wanted a list of good and bad extended warranty underwriters, administrators, and selling agents. Her editor wanted a black and white picture of an industry filled with gray areas. Reading Contracts Before Signing Them? The reporter asked, incredulously, "You don't mean to tell me you expect shoppers to ask the cashier at Target to let them read the contract, do you?" Well, no. By then it's far too late to begin your research on extended warranties. Consumers should have read the terms and conditions of the service contract long before they leave home. They should read it while they're still researching the product's price and features. In other words, if a consumer should happen upon this week's newsletter before they go shopping, they're doing a good job. If they Google it after their product breaks, while they're wondering where they put the contract they never read that contained the phone numbers they thought they'd never need, then they can stop reading here. It's too late. The reporter was incredulous. Best Buy is going to email me a copy of the contract? Will the guy who answers the phone at Wal-Mart even understand what I'm asking to see? Why wouldn't they? In fact, Sears Roebuck has a nifty automated system that sends copies of user manuals, warranties and service contracts in reply to emails containing just a model number. Federal Warranty Law In fact, there's actually a U.S. federal law called the Magnuson-Moss Warranty Act that requires retailers to keep copies of all warranties handy for pre-sale inspection by customers. Though that's not also required for service contracts, it's a common courtesy to allow customers to read a contract before asking them to sign it. So why read a contract? Isn't it filled with fancy judicial phrases, fine print and big words that mean little outside the legal profession? Well, yes. But it contains a few items that will quickly help a consumer decide whether or not this particular extended warranty is worth purchasing. First, it will establish whether or not there is an insurance underwriter involved. Second, it will establish what company will administer and process the claim. And third, it will outline the process and policies themselves. Let's take a look at each of these in turn. The reporter asked how a consumer is supposed to evaluate one underwriter versus another. That's not really necessary. Basically, it's more a question of whether or not there is an underwriter. If there is, the underwriter is probably rated A- or better by the insurance industry's leading ratings agency, A.M. Best. That's denoted as an "Excellent" rating by the company, as is a plain A, while an A+ or the elusive A++ are designated as "Superior." Comparing Underwriters? So how is an A- different from a plain A or an A+? It really doesn't matter to the average consumer. The more relevant question is whether there is or isn't an underwriter involved. If there is, chances are that it's a good one. If there isn't, chances are that the seller doesn't have a clue about extended warranty financing. When Warranty Week calculated the A.M. Best financial strength ratings of the underwriters involved in the vehicle service contract industry (newsletter of September 9, 2010), we found that 80% of the contracts were backed by an underwriter with an A- or better. Only 14.4% had a B++ or lower, but most of those were underwritten by insurance agencies linked to Ford, General Motors, Toyota, and other OEMs who at the time were pretty down on their luck. And the vast majority of them had a B++, which A.M. Best classifies as "Good." In other words, 94% of the vehicle service contracts were backed by carriers rated "Good" or better. And what we're saying is that "Good" is good enough; and is certainly better than "None." Ironically, at the time some of those OEM insurance companies still had a B++ rating (they've been upgraded since) they were still majority owned by the U.S. Department of the Treasury following the auto bailouts of 2009. Essentially, this meant that A.M. Best was assigning lower grades to wards of the state than they were to private companies. And the state can collect taxes and print money -- two things private insurance companies merely wish they could do. Lagging Indicators But we're not here to defend A.M. Best ratings. In fact, they're always reactive, in that they can tell you where an underwriter's been but not where they're going. And they're not even very good at reacting quickly to the news. For instance, back in June 2003, the National Warranty Insurance Risk Retention Group was at the center of one of the most spectacular flame-outs in extended warranty history, when it was placed into bankruptcy proceedings in the Cayman Islands. As late as February 2003, however, A.M. Best had NWIG rated an A-. Until late May, it had a B++ rating. And then, on June 10, six days after NWIG went into liquidation, A.M. Best downgraded NWIG to a C- (Weak). Administrators who relied on NWIG for their underwriting were taken by surprise. Some had to declare bankruptcy themselves. And these were experienced administrators -- seasoned professionals in their field. If they didn't see it coming, then how can an average consumer be expected to evaluate the goodness or the weakness of a given administrator's underwriter literally years before they're likely to make a claim? Fortunately, there aren't many NWIGs. So what we're suggesting is that since 8 out of 10 vehicle service contracts have an "Excellent" underwriter, and 1 out of ten are merely "Good," turning the complex ratings research into a simple yes/no question (Is there an underwriter?) will turn out to be good enough 9 out of 10 times. The Benefits of Insurance But why is an underwriter so important? To answer that, we need look no further than the home electronics industry, where in 1989 the chain known as Crazy Eddie filed for bankruptcy, taking all of its service contracts with it to the bottom. There was no underwriter. Crazy Eddie sold them. Crazy Eddie administered them. And when the money ran out, they were worthless. Compare and contrast that to the collapse of Circuit City Stores in 2008-2009. After the company declared bankruptcy and shut its stores, consumers who bought its extended warranties were directed to contact the underwriter, Assurant Solutions, which has continued to arrange for repairs and to pay claims until all the remaining extended warranties expire. That's not a unique case. Assurant Solutions (a longtime sponsor of Warranty Week) also had to step in for CompUSA Inc. when they shut their doors. Other underwriters have also had to step in when their administrators or retailers collapsed. It doesn't make much news, because by and large the underwriters always do the right thing: they step in and clean up the mess. It's when there's no underwriter that consumers find they are on their own, should there be a bankruptcy. That's when it's time to call your local attorney general's office or your city or state's department of consumer affairs, to find out how to get your name onto a list of unsecured creditors that will be dealt with by the bankruptcy court. It can take years, but eventually at least a partial refund is likely. Who Is the Administrator? The second reason for asking to read the contract is to find out what company is contracted to process the claim and to decide whether to repair or replace the covered product. And again, this information in and of itself isn't very useful to a consumer. But it could prove to be quite valuable if they're near a web browser. Not only can they look to see what a company says about itself on its website, but they can also Google the name to see what others say about the administrator. Granted, every administrator is going to have a great-looking website. And every administrator is going to have at least a few disgruntled customers who are adept at posting reviews. So it's never going to come down to a simple yes/no answer. It will always be a matter of weighing the good against the bad reviews. Even in the case of bad reviews, consumers can look to see how the administrator responded. You can't please everyone. But you can at least try. You can make an attempt to put things right -- to ask the consumer for more details or for another chance to impress them. Or you can ignore your online reputation altogether, hoping that most consumers will never bother to Google your name because they won't know it until after they've taken home a copy of the contract they signed without first reading it because you pressured them into signing it quickly. That business plan may have worked in the past. It might still work now. But increasingly in the future, consumers will research not only the brand name, price and features of the product, but also the reputation of the sellers and servicers. It will all be one Google page away. And given Google's plans to acquire Motorola Mobility, shopping assistants will likely all soon be in an app for a hand-held smartphone that can help a consumer do their research right in your store, right while you're talking to them about the benefits of your extended warranties. Consumer Reports Says No Almost every advice column they read will be telling them not to buy extended warranties. One of the most notorious was published by Consumer Reports towards the end of 2006, which was augmented by an advertising campaign that placed the following full-page ad in newspapers such as USA Today:

Texas Attorney General Blasts Fraudulent Auto Warranty Telemarketer

AUSTIN – Texas Attorney General Greg Abbott today charged a California-based telemarketing firm and its owner with unlawfully selling fraudulent automobile vehicle warranties and violating state and federal “do not call” laws. The State’s enforcement action charges Credexx Corp. – which also does business as Auto One Warranty – and its owner, David J. Tabb with illegally contacting Texans whose telephone numbers are on the national Do Not Call Registry or the Texas No Call List. According to investigators with the Texas Attorney General’s Office, the defendants marketed their automobile coverage services by making thousands of unsolicited calls to Texas residents. The defendants’ marketing scheme also relied upon fraudulent direct mail solicitations that failed to disclose material details about the limitations and exclusions of their service contracts. Further, although the defendants claimed they were selling extended vehicle warranties, those purported warranties were actually nothing more than costly vehicle service contracts. In a direct mail solicitation obtained by the State, the defendants claimed that their service would provide vehicle owners “peace of mind” and coverage “up to 250,000 miles.” However, Credexx’s mailers failed to disclose that any claim paid under the contracts for repair could not exceed the cash value of the vehicle. This type of disclosure is important because used vehicle owners purchase the coverage to extend the vehicle’s economic viability by ensuring that repairs are made at a reasonable, affordable cost. Without the disclosure, vehicle owners are not given the necessary information to help them determine if investing in the vehicle service contract is worthwhile to them. According to the State’s enforcement action, the defendants employed unlawful and fraudulent sales tactics to sell their products. For example, the defendants’ sales personnel assured purchasers that their contract could be readily cancelled – and that cancelled contracts would be granted quick refunds. However, State investigators revealed that the defendants’ customers found it was extremely difficult, if not impossible, to actually obtain refunds. Documents filed in federal court by the Attorney General charge the defendants with multiple violations of the Telephone Consumer Protection Act and the Texas Telemarketing Disclosure and Privacy Act. The State also charged the defendants with violating the Texas Deceptive Trade Practices Act and is seeking penalties of up to $20,000 per violation of this law, plus attorneys’ fees. Texans who believe telemarketers are violating the Texas No Call law are encouraged to call the Office of the Attorney General’s toll-free complaint line at (800) 252-8011 or file a complaint online at www.texasattorneygeneral.gov.

SERVICE CONTRACTS VALUABLE? HHHMMMM?

I thought I had a heck of a story earlier this month, at least within the narrow world of extended-service contracts. Service plan provider N.E.W. Customer Service Companies sent around a press release claiming that Consumer Reports, which had "led a charge against the extended warranty industry," had experienced a change of heart. Well, no -- on a couple of counts. First, the Consumer Reports' article cited by N.E.W. was about appliances and consumer electronics and didn't apply to cars. Not only that, the article specifically states: "Extended warranties don't deliver." (I know, I know, "extended warranty" is not the correct name.) What N.E.W. was driving at was that the Consumer Reports article noted "high product failure rates and shrinking manufacturers' warranties." That's true enough. However, it was N.E.W., not Consumer Reports, that said those factors make extended-service contracts a good idea. In fact, Consumer Reports told me that the magazine's advice on extended-service contracts on cars remains lukewarm at best: "We counsel consumers to buy reliable cars," said spokesman Doug Love. "If someone has their heart set on something that has a poor reliability record, then we suggest putting money aside in a repair fund that you can access if needed -- or pocket if it turns out the vehicle didn't need any big repairs," Love said. "If you still want the warranty, then we counsel folks to be sure to read the fine print and know what you're getting for the price paid, and know where you can take your vehicle for repairs." Not what you'd call a ringing endorsement for extended-service contracts. Read more: http://www.autonews.com/article/20110831/BLOG13/309019999#ixzz1jvBzlp9G