Who really owns your warranty? Who really has your money?

You need to know about the "transfer of risk" associated with warranties. A transfer of risk is when the dealer pays money to an administrator that sets up "reserves." These reserves are used to pay for repairs. Why is this important?

Why should I care about Vehicle Breakdown versus Wear and Tear?

You should care because you may be covered for one (breakdown) failure and not for another (Wear and Tear) failure with your current warranty.

A breakdown failure occurs when a component or part BREAKS. A wear and tear failure occurs when a component breaks AND/OR fails to perform up to manufacturer's specifications.

For example, piston rings do not break. They wear out. This is wear and tear failure, not breakdown failure.

Another example: Suspension items normally do not break. They wear out. This is wear and tear failure, not breakdown failure.

This is a critical distinction because many manufacturer's warranties and after market warranties DO NOT COVER WEAR AND TEAR FAILURES.

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Is your vehicle covered for overheating?

A little known section of the fine print in most manufacturer's and after-market warranties is an exclusion that reads something like this: "This contract does not cover overheating regardless of the cause."

Most people have seen steaming and smoking vehicles at the side of the road due to city traffic, heavy snow, or extreme heat. Your current warranty may not cover this situation. It probably has an "overheating exclusion." This is a VERY expensive repair and is specifically excluded in most service contracts.

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With my current warranty, can I go anywhere for repairs?

Probably not. Many factory plans require you to go to factory shops.

For example, as of 1999, with a Chrysler warranty you must go to a Chrysler facility.

Many dealer service contract programs (which are different from the manufacturer's warranty), have an unbelievable exclusion: They make it uniniviting for non-dealer repair facilities to honor their vehicle service contracts, which means that you end up having the vehicle repaired AT YOUR DEALER'S REPAIR FACILITIES!

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Double Dippers - How Dealers get paid twice from one repair.

Occasionally manufacturers will make exceptions in their warranties to cover special problems or defects with their products. Such exceptions are referred to as "hidden warranties" (as opposed to vehicle "recalls" which are items that relate directly to the safety of a vehicle). An unethical repair facility may charge both the customer AND the manufacturer when repairing a defect covered by a "hidden warranty."

For example, a consumer may find a problem with their vehicle, bring it into a dealership for repairs, pay for that repair, and NEVER know that the problem was actually being paid for by the manufacturer of their vehicle at the same time.

One reason this happens is because it is not mandatory in most states that a manufacturer reveal to consumers that their vehicle has additional "hidden warranties" not expressed in their original manufacturer's warranty. The manufacturers know that service facilities "double dip" on occasion. They do little or nothing about this practice because it is in their best interest not to disclose defects, newly covered items, or get repairs done at their expense.

Many service facilities know that consumers are unaware of "hidden warranties" and can take advantage of consumers that have a real defect in their vehicles. A consumer can read their manufacturer's warranty countless times but it will never reveal the "hidden warranties."

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