Before You Buy a Vehicle Warranty: What Car Owners Should Know When Buying a Third-Party Coverage

You have probably seen the commercials: Protect yourself from expensive auto repairs with a vehicle service contract.

It sounds like a great idea. Pay a monthly fee now and avoid a huge repair bill later.

Unfortunately, it may not always work that way.

At Advantage Automotive we believe vehicle owners should understand exactly what they are buying before spending money on an extended vehicle warranty or vehicle service contract. Some repair shops are reluctant to work with these companies because of concerns involving claim approvals, payment procedures, labor rates, parts requirements, and what is actually covered.

Before signing up, read the fine print and ask plenty of questions.

They are different from Your Factory Warranty

One of the first things consumers should understand is that products commonly advertised as "extended warranties" may actually be vehicle service contracts.

That distinction matters.

A manufacturer's factory warranty generally covers specific repairs during a certain period or mileage limit. Third-party vehicle service contracts have their own terms, exclusions, deductibles, authorization procedures, and limits.

The Federal Trade Commission has specifically warned consumers about misleading claims involving vehicle service contracts. In 2024, the FTC announced a settlement with Car Shield and stated that many consumers found repairs they believed would be covered were not covered.

That does not mean every Car Shield customer will have the same experience. It does mean you should carefully investigate the coverage before buying it.

Why Some Auto Repair Shops Don't Want to Deal with Them

From a repair shop's perspective, fixing the vehicle is only part of the process when a third-party service contract is involved.

The shop may have to contact the administrator, explain the diagnosis, provide documentation, wait for authorization, negotiate labor and parts costs, and sometimes wait for an inspector.

That can turn a straightforward repair into a much more complicated process.

1.     Labor Rate Differences

Professional automotive repair shops establish labor rates based on the cost of employing qualified technicians, purchasing equipment, maintaining diagnostic technology, insurance, training, and operating a professional facility.

 

A vehicle service contract administrator may authorize a labor rate that is lower than the repair facility normally charges.

 

When that happens, an important question remains:

 

Who pays the difference?

 

Depending on the contract and situation, the customer could be responsible for costs the service contract does not authorize.

 

This is why "covered" does not necessarily mean the repair will cost you nothing.

 

2.     Parts Can Become an Issue

 

The quality of the replacement part matters.

 

Some service contract claims may specify aftermarket, remanufactured, used, or otherwise lower-cost replacement parts rather than the parts a repair facility normally recommends.

 

For a professional repair shop, this can create a problem.

 

We want to install parts that we believe are appropriate for your vehicle and that allow us to stand behind our work. Saving money on the initial part is not much of a bargain if the component does not provide the reliability you expected.

 

Always ask your warranty company:

 

What type of replacement parts will you pay for?

 

Do not wait until your vehicle is apart in a repair shop to find out.

 

3.     A Claim Can Be Denied

 

Having a vehicle service contract does not automatically mean every breakdown is covered. Contracts can contain exclusions involving maintenance, pre-existing conditions, wear items, modifications, specific components, diagnostic procedures, and other circumstances.

 

There may also be requirements regarding maintenance records or authorization before repairs begin.

 

A customer can believe, "I bought a warranty, so this repair should be covered," only to discover that the contract excludes the particular failure.

 

That puts both the vehicle owner and repair facility in a frustrating position.

 

4.     Diagnostic Testing May Not Be Fully Covered

 

Modern vehicles are complicated.

 

A check engine light, overheating problems, transmission concern, electrical failure, or engine noise cannot always be diagnosed by simply plugging in a scanner.

 

Professional diagnosis takes technician time.

 

Testing may require electrical measurements, pressure tests, computer diagnostics, component removal, or additional inspection before anyone can determine exactly what failed.

 

Your service contract may not necessarily pay the full cost of that diagnostic work.

 

Ask specifically:

 

Does my plan cover diagnostic and teardown charges, even if the final repair is not approved?

 

That answer could save you an unpleasant surprise.

 

5.     Authorization Can Slow Down Repairs

 

When you pay for a repair yourself, you can authorize the work directly with the repair facility.

 

A third-party service contract adds another party to the process.

 

The repair shop may need approval before beginning certain repairs. Additional documentation or an inspection could also be required.

 

That can potentially mean more phone calls, paperwork, and waiting before your vehicle can be repaired.

 

If your vehicle is your transportation to work, school, medical appointments, or family responsibilities, delays matter.

 

Do the Math Before You Buy

 

Before purchasing a vehicle service contract, calculate what you will actually spend.

 

Consider the monthly payment, deductible, length of the agreement, maximum benefit, exclusions, cancellation terms, and expenses that remain your responsibility.

 

Then ask yourself another question:

 

Would I be better off putting that same amount into a vehicle repair savings account every month?

 

For some drivers, building an emergency repair fund may provide more control over how their money is spent.

 

For others, a service contract may provide peace of mind.

 

The important thing is making an informed decision rather than assuming a commercial means everything on your vehicle will be covered.

 

Questions to Ask Before Buying Any Vehicle Service Contract

 

Before signing anything, ask:

 

• Is this a warranty or a vehicle service contract?

• Who administers and pays the claims?

• Can I use my preferred repair shop?

• What labor rate will the plan pay?

• Will I have to pay the difference?

• Are diagnostic charges covered?

• Are teardown charges covered?

• What parts will be authorized: new, OEM, aftermarket, remanufactured, or used?

• What repairs and components are specifically excluded?

• Are maintenance records required?

• What is my deductible?

• Is there a maximum amount the company will pay?

• What happens if the repair costs more than the authorized amount?

• Can I cancel, and what is the refund policy?

• Does my regular repair shop accept this company?

 

That last question is especially important.

 

Call your trusted repair shop before purchasing the coverage.

 

You do not want to discover after your vehicle breaks down that your preferred repair facility does not work with your service contract provider.

 

Do not Let a Commercial Make a Decision for You

 

Major automotive repairs can be expensive, so wanting protection is understandable.

 

But buying a vehicle service contract should never replace proper maintenance, regular inspections, and having a relationship with a repair facility you trust.

 

At Advantage Automotive, we believe our job is to accurately diagnose your vehicle, explain what we find, recommend quality repairs, and help you make an informed decision.

 

We do not believe in or honor any of the extended warranty plans from any company.

 

** Advantage Automotive will not accept any extended warranties **

 

Before spending hundreds or thousands of dollars on vehicle warranty coverage, read the contract, not just the advertisement.

 

Know what is covered.

Know what is not.

Know what labor rate they pay.

Know what parts they authorize.

Know what happens when a claim is denied.

 

And most importantly, know whether the repair shop you trust is willing to work with the company.

 

Need Help With Your Vehicle?

 

If your vehicle is having a problem, do not wait for a breakdown to become more expensive.

 

Call Advantage Automotive to schedule an appointment and let our team help you make the right decision for your vehicle.

 

Consumer resource: Federal Trade Commission, "FTC says Car Shield didn't cover car repairs as advertised," July 31, 2024.

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