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Third-Party Extended Warranties
Whether you purchase a third-party extended warranty, or a manufacturer's extended mechanical warranty, ensure that you read and fully understand the terms and conditions of the warranty agreement.
Like many insurance products, a warranty is purchased to protect you from potential unforeseen expenses. Know what expenses are covered. A warranty does not cover vehicle maintenance, wear and tear, or collision damage. With any warranty, it is critical that you follow the required scheduled maintenance in order to keep your warranty valid. Retain copies of your service records. Prior to approving a claim, proof of completed maintenance may be required. Without documented proof, (even if the scheduled maintenance did not affect that particular failed component), some warranty companies may refuse your claim. In fact, they may void your warranty in its entirety.
An extended warranty can be financed along with the vehicle at the time of your purchase. This allows you to amortize the costs of your extended warranty over the term of your loan, and in today?s market, take advantage of the low new vehicle interest rates. Extended warranties can also be purchased from your New-Car Dealership any time within the manufacturer?s original warranty coverage. However, the cost of your warranty purchase generally increases over time, and must be paid in full, and up front. In most cases, extended warranties for pre-owned vehicles (acquired after the manufacturer?s original warranty has expired) must be purchased at the time of your vehicle purchase.
Most manufacturer extended warranties are transferable, or can be cancelled with a pro-rated refund. Some extended warranties contain additional benefits, such as car rentals or tire hazard warranties.
Today, many New-Car Dealerships offer extended warranties on ?manufacturer certified? pre-owned vehicles. These vehicles have met strict quality criteria; this factory-backed warranty is included in the vehicle purchase price.
You get what you pay for. If it sounds too good to be true, then it probably is. Extended warranty companies are in the business of paying out less in claims than in premiums received. $59.00 warranties cannot possibly provide you with the coverage you might expect.
Some third-party warranties have an activation fee, an inspection fee to confirm the problem, and even an examination fee to verify the work has been completed. Sometimes monthly maintenance fees are required and limits on annual kilometers driven are imposed.
Be aware of claim limits, caps, exclusions, fees and that third-party warranty companies may replace your failed component with a 'used' part.
Ontario laws do not require warranty companies to be insured. For your protection confirm that your third-party warranty is underwritten and insured.
You should look for deductibles (if any) that may be applied, on a per visit (occurrence) basis, rather than on each vehicle component. Determine if the kilometer or time coverage is from the date of your purchase, or the original in-service-date when the vehicle was purchased new.
With most third-party warranties, prior approval, and possibly an inspection by the warranty company may be required before commencing any work on your vehicle. Be aware that some repair facilities may require payment prior to releasing the vehicle back to you, as they may not accept the credit terms of that particular third-party warranty company. As such, some warranty companies will now pay the repair facility for warrantable repairs by credit card. If not, you may have to pay upfront, and then seek reimbursement directly from the warranty company.
The Motor Vehicle Dealers Act currently provides only limited consumer protection. At the present time, should a warranty company ?go out of business", consumers are only entitled to claim against the compensation fund for "unearned premiums".
Note that ?bumper-to-bumper? warranties do not exist. In fact, use of this term in advertising is prohibited in Ontario. A "comprehensive" warranty will cover most components against failure, but not for wear and tear. A power train warranty protects you only against major driveline mechanical failure such as your engine or transmission.
Many New-Car Dealerships offer both third-party extended warranties, and manufacturer-backed extended warranties that provide you with excellent coverage.
Once again, I remind consumers to read all contracts to ensure that the warranty provides the coverage that they expect.
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