ericthehalfbee
10-22-2009, 06:09 AM
Extended warranties are very popular, especially with higher end cars like BMW & Mercedes simply because people have a perception that these cars are very expensive to repair if something goes wrong. So they're an easy sell for the dealers. Here are experiences with two of our customers (I intentionally changed some details as a lawsuit is pending and I don't want to do anything that would hurt our customers case).
Customer #1 had a problem with their car that would be about $1,000 to repair. Reading the fine print the repairs are covered under the warranty. The warranty company wanted to see the copies of the service records to make sure the vehicle was being serviced regularly. Customer sent them in and the warranty was denied. Why? Because in the fine print the warranty states you need to have your car serviced (and oil changed) regularly. What do they mean by regularly? 4 months or 5,000km. Never mind that according to the manufacturer of this vehicle you can wait much longer than 4 months/5,000km for service. So no warranty because the customer was following the manufacturer's recommendations on service intervals which were longer than what the warranty company required.
Customer #2 is worse. They had a serious mechanical problem with their engine. It will cost $7,000 to repair the damaged engine. Again, warranty company wanted to see service records. Again customer was denied warranty because they waited too long between service. This particular customer was actually changing their oil more often than what the manufacturer recommends, but it was still not often enough.
If you look at BMW, Mercedes and Audi (for example) oil changes can be anywhere from 7,500km up to 15,000km depending on the conditions under which the vehicle is driven. This is because the vehicles use synthetic oil (which lasts longer) and because modern engines are so efficient and clean that oil doesn't get dirty like it used to in old engines. So right away you're way over the requirements of the extended warranty companies who required service much more often. Even changing at the minimum (7,500 km) still puts you over.
What's worse, these customers essentially have their warranties cancelled. Since they have sent in their records the warranty company now knows they haven't been serviced according to the "fine print". So any future warranties will be denied for the same reasons these claims were denied. So by being diligent and keeping records, and by following the manufacturer sevice intervals, they have screwed themselves out of getting any future repairs.
Now you are probably thinking "what if something else failed, besides the engine? surely engine oil has nothing to do with electronics or other systems." Well, customer #1 had a failure of something else on their car. The warranty company's excuse for denying warranty? If the car was serviced when it should have been, there's a good chance the problem could have been spotted and the problem resolved before it caused the damage it did. So not only are you supposed to service your vehicle more often than what the manufacturer says, but the people servicing your car are supposed to be able to predict future failures just by looking over your car.
To be fair, Customer #1 did have an electronic module go down several months after the first claim was denied, and they had purchased the optional extra coverage for electronics (which is never covered under standard extended warranties and is always an extra cost option). The warranty company still complained about her service intervals, but after threats of legal action from the customer they caved and covered it. But they are still screwed if their engine or other major mechanical parts fail.
Bottom line, don't buy an extended warranty. Better yet, if you're buying a car and the dealer is selling you an extended warranty, specifically ask to see the fine print on service intervals in the warranty and compare that to what the manufacturer recommends for your vehicle. If the extended warranty interval is much shorter, don't buy the warranty and make sure to tell the dealership why (and tell them about our customer who had to fork out $7,000 for engine repairs).
I persoanlly think this is going to open up a huge can of worms if any RS'ers buying a car with an extended warranty ask this simple question. Dealers sell warranties like crazy, and I wonder if they are even aware of this issue with service intervals. Imagine if everyone buying a car knew about this? Do you think a dealer could ever sell an extended warranty again if customers knew about this? I doubt it.
Customer #1 had a problem with their car that would be about $1,000 to repair. Reading the fine print the repairs are covered under the warranty. The warranty company wanted to see the copies of the service records to make sure the vehicle was being serviced regularly. Customer sent them in and the warranty was denied. Why? Because in the fine print the warranty states you need to have your car serviced (and oil changed) regularly. What do they mean by regularly? 4 months or 5,000km. Never mind that according to the manufacturer of this vehicle you can wait much longer than 4 months/5,000km for service. So no warranty because the customer was following the manufacturer's recommendations on service intervals which were longer than what the warranty company required.
Customer #2 is worse. They had a serious mechanical problem with their engine. It will cost $7,000 to repair the damaged engine. Again, warranty company wanted to see service records. Again customer was denied warranty because they waited too long between service. This particular customer was actually changing their oil more often than what the manufacturer recommends, but it was still not often enough.
If you look at BMW, Mercedes and Audi (for example) oil changes can be anywhere from 7,500km up to 15,000km depending on the conditions under which the vehicle is driven. This is because the vehicles use synthetic oil (which lasts longer) and because modern engines are so efficient and clean that oil doesn't get dirty like it used to in old engines. So right away you're way over the requirements of the extended warranty companies who required service much more often. Even changing at the minimum (7,500 km) still puts you over.
What's worse, these customers essentially have their warranties cancelled. Since they have sent in their records the warranty company now knows they haven't been serviced according to the "fine print". So any future warranties will be denied for the same reasons these claims were denied. So by being diligent and keeping records, and by following the manufacturer sevice intervals, they have screwed themselves out of getting any future repairs.
Now you are probably thinking "what if something else failed, besides the engine? surely engine oil has nothing to do with electronics or other systems." Well, customer #1 had a failure of something else on their car. The warranty company's excuse for denying warranty? If the car was serviced when it should have been, there's a good chance the problem could have been spotted and the problem resolved before it caused the damage it did. So not only are you supposed to service your vehicle more often than what the manufacturer says, but the people servicing your car are supposed to be able to predict future failures just by looking over your car.
To be fair, Customer #1 did have an electronic module go down several months after the first claim was denied, and they had purchased the optional extra coverage for electronics (which is never covered under standard extended warranties and is always an extra cost option). The warranty company still complained about her service intervals, but after threats of legal action from the customer they caved and covered it. But they are still screwed if their engine or other major mechanical parts fail.
Bottom line, don't buy an extended warranty. Better yet, if you're buying a car and the dealer is selling you an extended warranty, specifically ask to see the fine print on service intervals in the warranty and compare that to what the manufacturer recommends for your vehicle. If the extended warranty interval is much shorter, don't buy the warranty and make sure to tell the dealership why (and tell them about our customer who had to fork out $7,000 for engine repairs).
I persoanlly think this is going to open up a huge can of worms if any RS'ers buying a car with an extended warranty ask this simple question. Dealers sell warranties like crazy, and I wonder if they are even aware of this issue with service intervals. Imagine if everyone buying a car knew about this? Do you think a dealer could ever sell an extended warranty again if customers knew about this? I doubt it.