Nav & Tech 005So, what exactly is an extended warranty? It is a warranty on a portion or all of a product that starts when the original manufacturer’s warranty expires.  It, as in the original, has a term, usually stated in months.  Additionally there may be other qualifying components such as a maximum mileage or operating hours.  Like the original warranty, it covers repairs or replacements of items that fail, but excludes normal wear, abuse or failure due to lack of maintenance.

Extended warranties are offered now on many consumer purchases on vehicles worth hundreds of thousands of dollars to a seven dollar electronic accessory.  There are manufacturer, dealer and independent extended warranties available.   These additional warranties, however, come with a price.  Is this extra cost worth it?

Well, of course there is no simple answer to this.  While there are many variables, even the same item may support such a need for one person’s application, but not for another’s.  However, making the right choice requires more than just knowing the cost.  You have to know what the service contract includes in full detail.

First, who is the company that is offering this?  Generally they would fall into one of the three categories below.

Manufacturer: While this is probably the best warranty package, it is generally the most expensive.  Service is usually throughout the country using their dealer network.

Dealer: Normally more price competitive, but may be limited to a single point of service.  You must also feel comfortable with their level of service and their reputation.  Additional risk may be the exposure of the dealer becoming insolvent and shutting down.

Independent: Most of these warranty offerings are by a company that may only sell such contracts.  Repairs are carried out by qualified repair shops and paid by them.  This can provide nation-wide service.

Now, before writing a check for this, let’s look at more.  Is there a deductible, is road service included, where can it be repaired, what are their replacement part policies, can the warranty be purchased later, are there other price options, etc.  If this is for an RV it is pretty pricey.  Don’t make a quick decision.  You need all the information to properly understand what you are getting and to make a qualified decision.

So, what is the take rate on these extended warranties? Well the only good measure can be seen in the automotive industry.  Roughly 30% of buyers of new automobiles elect to purchase these service contracts, and that number is up from previous years.  I would think the RV industry would be somewhat higher than that, but, due to the number of independent service policy companies, that figure is difficult to calculate.

Keep in mind, these extended warranty policies are a money making business for those selling them. Therefore, for the average buyer, they more than likely will not be cost affective.  This is not to say that you will not be one of the few that such contracts have saved them tenfold.  Essentially it is a risk whether you buy or not.  If you buy an extended warranty, you only win if repairs are required, at or above the cost of the contract.  If you don’t purchase the warranty you only win if your repairs are below that of the contract cost.  In general, the odds are in your favor to not purchase such a guarantee.

Of course there is the peace of mind that having an extended warranty may bring.  It’s really like insurance.  We all pay it, and hope we never need it.  But, that still does not make it cost affective.  It’s a decision each must make for themselves, for their application and risk tolerance.

Next week we will look at the pit falls of warranties.

Rolling The Dice on Warranty Service   –   Lug_Nut    –     Peter Mercer

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  2. James Wyrick

    I would not have an RV without an extended warranty. I have had nothing but good dealings with three different companies. They do differ in price, but the coverage was excellent. From $400 per year to $2000 per year, my current warranty is the $400 premium, and has been the best of the best for customer service. Talk about peace of mind, it makes ownership a pleasure, whether it is replacing the ice maker, to rebuilding the engine. I have experienced both, oh yes, I forgot to menton that I have a $100 deductible!!!!! Service is a phone call away, as is my repairshop, Brazel’s Performance RV in Centralia , Washington, providing me with a worry free trip.

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  6. Fritz, Great that the extended warranty has work well for you. Great advice on regular servicing of your rig. You can pay for it now or pay muuch more later. Thank you for your great input.

  7. Interesting sides to yes and no. I’ve had ext warr’s on my last two vehicles and now on the motorhome. I’ve yet to loose money on any of them. I wish I could replace my diesel engine for $4000.00, it’s about $20,000 is what I’ve been told. Yes, my warranty would cover this. For stupid people there is no extended warranty if you abuse your coach. Buy what you can afford, new or used, Service and regular maint. goes a long way…..

  8. Richard Lavigne, I agree. I think this is the reason many will not buy another extended warranty after having a similar issue. Thank you for stating your mind and for your participation.

  9. Richard Lavigne

    I must agree that an extended warranty gives you peace of mind, but if repairs are needed try to get them to pay. As far as I am concerned it’s not worth the hassle they put you through when its time to collect.

  10. GMAs, Your point is echoed by many and may well be the right choice. There is no question that for most it would not pay. Thank you for your great input.

  11. Larry, There are certainly two sides on this question. Yours is a great choice and does provide a no worry ownership. Thank you for sharing your thoughts with us.

  12. GMAs

    No matter what you have… its your fault … and you are responsable for it… extended warr’s are not worth the paper they are written on… and if you do get it.. read the fine print at least 6 times …. then ask questions…

    For the cost of the Extend War… it cost 6,000… to replace the engine is only 4,000 so where is the savings… sleep better at night knowing your money is in your pocket. They don’t offer a extend war without the ability to MAKE MONEY… and guess who gives it to ’em. The Bux stops at your wallet. YOU ARE responsable for anything that happens. Some took as much as 2 years to get their payment for damages or equipment failures. (some never did as the company went out of bus and left town with the money.. leaving the investors holding the towel so to speak anyway)

  13. Larry

    Yes…Extended Warrantys are worth it! Protection…Peace of mind.
    If you don’t need it…one of the benefits is a full credit or cash refund.

  14. Mike Butts, Thanks for passing on the link to the article. We can not however tar every extended warranty with this. There are services sold out there that are reseonablely good. But, great input, thank you.

  15. Ken Derleth, Very goos point, Ken, which actually supports the side of those apposed to purchasing such a warranty. Thank you for your very good comment.

  16. Ken Derleth

    An extended warranty is only as good as the diagnosing technician and his ability to put that diagnosis on paper using the proper “buzz words” that will ensure that the warranty claim is approved. Otherwise the claim gets rejected.