Consider the following scenario – You walk into the car dealer of your choice in order to purchase the car of your dreams and you are met with this jolly smiling chap who proceeds to the display to give you a tour.

You take a look at the vehicle and all those childhood memories of one day owning that model come back in an instant. You take a tour of the features and after some quiet deliberation, head on to the office to sign the paperwork. Once done, the jolly chap looks up from the other side of the table and proceeds to ask the following unsettling statement – “Sir, do you want an extended warranty with your purchase?”.

Now you know a bit about cars, enough to understand that value-added services like warranties are quite important when investing large sums of money but you just can’t remember whether a normal warranty / extended warranty will suffice in its place. These are the moments you wish you would have googled beforehand but don’t worry, you are not the only one facing such decisions.

After conducting some basic research, we found out that a lot of our customers tend to fall for this ‘extended warranty’ trap without even knowing what it is. After all, getting a certain service and not paying for it has a good ring to it and perhaps that is the reason most choose to go for it.

There are some others who are quite protective of their vehicles and tend to buy the service ‘just in case’. They fear that not having the service would be negative in case of a mishap. After witnessing many cases where users paid for a full service and received only a fraction in terms of service, we decided to put together this article just to highlight the importance (or lack thereof) of extended warranty services.

What is an extended car warranty?

An extended warranty is an optional plan that will help you cover the cost of repairs that you may need additionally, on your own and not because of any external damage caused. Each warranty type differs from the other on the extent of services covered differentiating on routine maintenance and specific repairs.

Extended Warranty vs. Insurance

In order to properly understand the viability of extended warranty services, one must first understand the difference between extended warranty services and insurance policies. Though the terms might sound similar, one does not definitely cover the other.

Let’s consider a simple example in order to understand the exact meaning of these terms – Your car’s transmission is not functioning properly and you take it to the relevant garage in order to get it fixed. If the issue is due to natural causes and does not involve external elements, then the extended warranty for your vehicle should cover it but not your insurance. However, if the problem was due to an accident, then do not expect your extended warranty to cover it but in this case, your insurance will.

In other words, if the damage caused is due to natural means and not because of any untoward incidents, then your extended warranty (service agreement) should cover it. However, if you are facing any issues due to an accident then your insurance should cover it.

The Truth

So now that you understand what an extended warranty is, should you go ahead and buy it? There are a lot of things to consider before going for an extended warranty and most of it comes from prior practice and experience. Experienced users tend to push their cars to the limits resulting in a lot of wear and tear of the various parts of the car and hence, many might even suggest taking an extended warranty since it is helpful for them.

However, if you use your car rarely or for basic commute, then chances are you don’t actually need an extended warranty for your car. This is something one needs to understand for themselves depending on their usage statistics. However, if you are still unsure whether you actually need it or not, then definitely go ahead and skip it.

Our advice would be to never buy a service that you are not sure about. Most cars will come with a basic warranty and we suggest making the most out of it when starting out. Once you understand and analyze your usage data over time, it shall provide you with critical insights into the needs and wants of your car. At the end of the basic warranty period, you will probably have a good understanding of your usage statistics allowing you to make these decisions appropriately. If you do feel that you need such services at the end of the basic warranty period, you can go ahead and sign up with any of the numerous 3rd party services available on the market today.

Now let’s consider the situation of an experienced user who understands his or her usage statistics but is still unsure whether to purchase such a service or not. In such a case, asking yourself the following questions can definitely help:

• What’s covered? What’s not covered?
• Who backs the warranty?
• How much is the deductible?
• Do I have to pay upfront for repairs? If so, how long will I have to wait for reimbursement?

Nowadays, there are several 3rd party extended warranty service providers that are both reliable and viable in a modern context. However, there are many more that are just trying to rip you off and make a quick buck or two. This is understandable through their eagerness to push such plans in front of potential customers. Let’s get one thing straight – a salesman will NEVER push a product if that does not mean profit for them!

Studies have shown that extended warranty services are one of the most profitable sectors for car service and maintenance providers and hence, they tend to treat these like cash cows. They understand the vulnerability of the common customer and therefore, devise their strategies so as to make the most out of human emotions. Do not fall for it. If you are noticing that the salesman is continuously trying to push the service, take a firm stance and just refuse with authority.

Now let’s consider the situation where one actually does need an extended warranty, perhaps because they are a heavy user of their cars or have faced issues in the past due to high maintenance bills. In any case, chances are that the person who actually requires such services will not wait for the pitch from the salesman. They will most likely come out ahead and demand these services themselves since they have an active requirement for it. If you belong to this group or you have assessed the need for such services, then remember to follow these guidelines:

• Coverage:

  Always know what’s covered and what’s not! You don’t want to be in a situation where you pay a lump sum amount for a service only to find out later that your actual requirements aren’t covered. Make sure you know the details before leaving the garage.

• Deductibles:

  Many service providers tend to calculate their deductibles on a ‘per-repair’ basis rather than a ‘per-visit’ basis. For eg, perhaps the deductible is AED 200. In case of a per-visit basis, you only need to pay AED 200 for the entire service. However, if it’s on a per-repair basis then you will end up paying AED 200 for each part repaired. This is an extremely important point to consider before buying an extended warranty.

• Effective Date:

  This is a very common scam in the industry and is mainly targeted towards amateur users. For eg, the service provider promises an extremely attractive offer like a complete 5 year extended warranty coverage for just AED 2000, an offer that is next to impossible. Now what they tend to forget to mention is that the first 3 years that are already covered by your manufacturer’s insurance are included in the deal. That means you are actually paying the entire amount for just two years worth of warranty, which is definitely a loss. Make sure you understand the terms of the deal before actually investing in such services.

• Service Provider:

  This is also a factor to consider before investing in an appropriate extended warranty. You need to conduct some basic research into the company that is actually providing the service. If it is provided by the manufacturer of your car, then chances are that the service is expensive but also reliable and trustworthy. However, if it is provided by a 3rd party service provider then chances are that it is not that extensive but also is comparatively cheap.

• Transferability:

  Investing in a proper extended warranty service is a long term affair. There are chances that the company providing the service may get dissolved before the closure of your term, thus rendering it useless. Make sure that the company supports transfers or refunds in such cases.

Hopefully, now you have a basic idea about extended warranty services and how they can create a dent in your pocket. We are not huge fans of such services as they do not empower regular users and only act as a cash cow for the company providing it. However, we also do understand that they can be quite profitable in some cases, especially those availing these services after conducting relevant research.

If you are still unsure whether you require such services or not, then perhaps you should not go for it. Instead, try to maintain and service your car at regular intervals in order to ensure it’s proper running condition and reduce overall costs. You can also click here to download our app now to instantly get connected with our trusted and qualified service providers that can help you with your maintenance schedules. Our intuitive app provides you with all the necessary information related to your car and also creates an active profile for it for easy accessibility. It also alerts you about potential problems with your car and reminds you when maintenance is due thus cutting out most of the hassle. The app also provides you with extensive reviews from other users and transparent quotes from all service providers so that you, the user, can make an educated choice! So what are you waiting for? We can, with Carcility!