26 January 2010
Extended Warranty Secrets Revealed
Just over 5 years ago, we purchased a brand new Hyundai Santa Fe. we loved the fact that it came with a 5-year bumper-to-bumper warranty and a 10-year powertrain warranty. They also offered us oil changes for life, which was a nice perk. The last nail in the coffin was the 0% financing available at the time. We were destined to buy a new car.
After the negotiations were completed, with an air of relief and anticipation, we were prodded on into the financing office to finalize the paperwork. It will become obvious that we were young, impressionable and naive through the following narrative. The financial agent made general small talk and made us feel comfortable as he prepared the paperwork. He asked if we invested and talked a little about how he played around with the stock market. I dabbled as well, so he got his first hook in me. We were putting several thousand dollars down on the car since we had it available. He asked if we had considered putting less down and investing the rest. After all, the loan was interest free. At the time it made sense, so we kept a couple thousand for ourselves for “investing”. I’m not really sure what happened to that “investment”. Net Result: our monthly payment went up a little bit and so did the agent’s commission.
With his first objective complete, he moved on to the extended warranty pitch. I don’t think at that time we had any interest especially since we already had the 5-year/10-year option already, but he was talking about extending the 5-year bumper-to-bumper to 10 years. Looking back, I would have thought that we had zero interest since I had purchased an extended warranty on a previous car and the insurance company went out of business, thus losing me approximately $1,200. We were under the impression that the warranty was being offered through the dealership, so it would just be an extensions of the existing warranty. He assured us that there was no concern of them going out of business. He essentially convinced us that we would be stupid not to get the warranty. What if the transmission went out on the day after 5 years? We would be out at least $2,000 to have it fixed. I don’t remember too many details from that meeting due to the euphoria of buying a new car, but apparently at some point, we signed the dotted line. Our monthly payment went up a little more and the agent’s commission did as well. All-in-all, we ended up with a brand new small SUV and a 60-month, $322 a month payment (AKA $19,000+ in debt).
I’d like to say that we lived happily ever after, which we did for a few years, but the fairy tale is beginning to crumble. During the first five years, we regularly took the car to have the oil changed. It was nice to not have to pay, but the hour long wait was a bit of a pain. Once, we had a light bulb go out, but it was not easily replaceable, so we had to have the dealership take apart the fixture to replace. We figured this was included in the warranty, but we had to pay for this. No big deal. The metallic coating begain peeling on one of the door handles and they repaired this for free under the manufacturer warranty. Then recently we had a couple of malfunctions. The overhead light fixture began blinking randomly and then stopped working altogether. Also, one of the cruise control switch covers broke off. At the last oil change, my wife mentioned the issues, but they said that they didn’t have time to look at it that day.
We didn’t pay much attention to the dates since we purchased the car, but the 5-year period expired at some point. A week ago, we were scheduled for another oil change so we decided to ask about the other issues again since they didn’t seem extremely busy on this day. They said that they would have time to look at it. When they pulled up our account, they noticed that our original warranty had expired and that our extended warranty was with a company named Interstate. This is the first that we remember being notified of this. We were told that we would have to call this company to get an authorization to get a repair done before they would pay for the repairs. I called; I waded through the automated menu; I eventually talked to a person. I asked her about the authorization and was told that the repair shop would have to diagnose the problem and then call for an authorization. I asked if the issues that our car had would be covered. She stated that they were not excluded, but they would have to have a diagnosis before authorizing. The repair shop told us it would cost $100 just to open up the light fixture wiring and diagnose. Neither could tell us if this might be covered by the warranty. Great! We pressed our luck and told them to go ahead and fix the issues, hoping that the warranty would cover it. Several hours later, we called to check on the status and see if they had gotten authoriZation yet. They said that they were still “diagnosing”. A little while later they called to tell us that the repairs will be covered, but wanted to make sure that we knew that there was a $100 deductible. This is another thing that they neglected to point out when they sold us the warranty. So basically at this point, we would be paying $100 to have our items repaired or $100 for the diangosis and to have them put it back together without repairing. We opted for the repair.
I haven’t yet attempted to find our original paperwork, but on Interstate’s website, I found a sample contract which stated that if no deductible was indicated, the default of $100 would apply. I guess it pays to read the fine print.
By the way, just out of curiosity, I plugged the $1,200 premium payment into a calculator and find that if I’d put that in the stock market, by now I would possibly have enough to pay for that $2,000 transmission repair. If we were lucky enough to make it 10 years without a major repair, the account could have almost $4,000. Not a bad start for a new car savings fund…
----------------------------------------------------------------------------
If you like, or can at least stand to read what I write,
make sure you add my RSS Feed to your list so you don't miss a single post.
If you have no idea what I'm talking about, read this.
----------------------------------------------------------------------------