INDEPENDENCE: Helen, as a seasoned loan officer you have had a great deal of experience with extended auto warranties. Can you tell us more about these types of warranties?
H. JOHNSON: Of course. I like to think of a ‘warranty’ as an additional layer of protection against the unexpected cost of mechanical breakdowns on your vehicle.
INDEPENDENCE: On the purchase of a new car should an extended warranty be considered?
H. JOHNSON: In the case of new vehicles, they traditionally do not require additional coverage. New autos come equipped with factory warranties, which provide protection for an initial set of years and/or miles.
INDEPENDENCE: What are your thoughts on extended warranties for used vehicles?
H. JOHNSON: A large number of the loans I handle are auto loans and a good portion of those are used or pre–owed vehicles. I feel this is when it is most important to have a discussion about an extended warranty.
INDEPENDENCE: In your experience, which used vehicles are the best candidates for an extended warranty?
H. JOHNSON: I find there are three instances where an extended warranty may be worth the investment. The first are high mileage vehicles. These autos may be in very good condition, but the high mileage may increase your chances of a major repair. The second are vehicles with expired factory warranties. Again, due to number of miles or the age of the vehicle, the factory warranty is no longer valid. The third are vehicles which have a history of mechanical issues. In some cases, certain makes and models or production year, may have a record of breakdowns and/or recalls.
INDEPENDENCE: What features should a good extended warranty product offer?
H. JOHNSON: Having purchased a number of different warranties myself, I find Route 66 Warranty is a product I feel offers solid and affordable coverage. I particularly like the fact their warranty is available even if the auto loan is not with Dakotaland. I also appreciate the zero deductible, the plan is transferable if the car is sold, it comes with emergency road side assistance and it has a total loss refund so if the auto is totaled the loan is paid off and the premium is refunded. In addition, I have gotten comments from the repair shops stating how easy this company is to work with, which is a very important component.
INDEPENDENCE: What should someone expect to pay for an extended warranty?
H. JOHNSON: Most warranty companies have various levels of coverage with different price points. For example, with Route 66 you can expect to pay $1,800 for a basic plan of mechanical breakdown coverage for three years or 36,000 miles. As with any warranty, you need to weigh the risk against the cost, but I can assure you an extended warranty could turn out to be a minor investment if faced with replacing a motor or transmission at $3,000 to $6,000 by a certified mechanic shop.
