Extended Warranty Companies

[Mario]

Has anybody worked with an extended warranty company before? I dealt with my first one today, and it was not a good experience.

 

I had a customer who bought a 2000 Ford Focus from a used car lot and purchased the extended warranty. The customer did not trust the used car lot mechanic because of some prior history they had with shady repairs/run around stories. They called my shop, I talked to them, and they told me they had an extended warranty program they had purchased. Before they came in, I called the insurance company to make sure it is somebody I could do business with, and everything sounded fine so we scheduled an appointment for two days later.

 

The customer drives the car to the shop at 9AM and it dies on the street and they coast it into the parking lot. I walk outside, grab my battery tester, and it is dead. I charged it for a half hour, fired it up, tested the alternator on the car and it appeared to be the issue. I call up the insurance company to send them an estimate before I do any work. I am told they will have an adjust call me back. An hour later, I get a call back.

 

I had an estimate prepared for the adjuster, I charged the same I would for any customer. My labor guide stated that an alternator would take 2.3hrs. I priced an alternator ($175 my cost, $227.50 with a 30% markup), added the diagnostic fee (1/2 hr, $30), and presented my estimate to the adjuster over the phone.

 

I was told the warranty company would only pay an hour for labor ($60 vs $138) and that they could find an alternator for $133, so that is all they are willing to pay. I had never heard of the supplier or manufacture for the alternator, it would have to be shipped which would take a day. The customer was responsible for paying the diagnostics, the tax, a $100 deductible, and any extra cost that exceeded what they would pay. The adjuster was very rude, told me their is nothing to discuss, and that is what it is. Needless to say I had to turn down the job because I couldn't absorb any of the cost (nor should I have to), and the customer (rightfully) didn't want to pay anymore then the $100 deductible they thought they should pay. As a courtesy I waived the diagnostic for the customer and returned their deposit.

 

I explained the situation to the customer and they understood. I gave them a 10% off labor coupon for their next visit and hope they return, but this particular extended warranty company really could have damaged my image with the customer.

Edited May 17, 2012 by Mario

[xrac]

Some of the extended warranty companies are nothing but rip off outfits. I have dealt with those like this one. It seems that a lot of the bad companies are headquarter in PA. However, there are some really good extended warranties like AUL, GE, GM, Toyota, etc.

[Joe Marconi]

I have been down this road all too often! There are some good companies and very, very bad companies. I am doing a transmission for a customer right now and dealing with the warranty company, Geico.

 

From the start I informed the customer that the warranty company may or may not pay the full amount, so beware. The warranty company wanted to beat me down on labor and ship me a used transmission. I told the company NO. This is my customer and my business, I don't work for you nor do I take orders from you. The customer will pay the difference for whatever you don't pay.

 

The rep was not happy, especially when I told him I would be calling the customer. In the end, I installed my transmission at my labor rate. The warranty company paid $1900 on a $4000 repair. But I got the job.

 

The key thing is to inform the customer beforehand that these warranty companies may not cover the entire bill. And that you will work hard to get as much money from them, but they will be responsible for the balance of the repair.

 

I have been extremely successful with this approach. Hope this helps.

[Gonzo]

I just start to snarl like a junk yard dog when a customer tells me they have an extended warranty. Some are good, some are a real pain to deal with. The biggest issue is always "whats covered" a lot of times the thing that is wrong with the car isn't covered.

 

The last one was a guy who bought a van about seven months ago and the motor mounts were ripped apart. I priced everything out and called the company. Oops, not covered... they're concidered "wearable items" I laughed at this jerk on the phone... Like, dude... EVERYTHING is wearable... some are just more so than others. But, it seemed to be their way of getting out of paying for it. go figure

[Joe Marconi]

I just start to snarl like a junk yard dog when a customer tells me they have an extended warranty. Some are good, some are a real pain to deal with. The biggest issue is always "whats covered" a lot of times the thing that is wrong with the car isn't covered.

 

The last one was a guy who bought a van about seven months ago and the motor mounts were ripped apart. I priced everything out and called the company. Oops, not covered... they're concidered "wearable items" I laughed at this jerk on the phone... Like, dude... EVERYTHING is wearable... some are just more so than others. But, it seemed to be their way of getting out of paying for it. go figure

 

Gonzo, this is a very important point, thanks for bringing this up. These policies are usually termed "Mechanical Breakdown". So although the extended warranty lists every component of the car known to man, if the listed part wears out, you are out of luck. SO, if a ball joint is covered, and it "wears out", no coverage.

 

Be very careful how you word things when speaking to these companies.

[xrac]

Gonzo, this is a very important point, thanks for bringing this up. These policies are usually termed "Mechanical Breakdown". So although the extended warranty lists every component of the car known to man, if the listed part wears out, you are out of luck. SO, if a ball joint is covered, and it "wears out", no coverage.

 

Be very careful how you word things when speaking to these companies.

 

 

I just did one on a Dodge Charger. On the coolant system the radiator, thermostat, and quite a few components were named. However, this car had a plastic coolant outlet that runs underneath the upper intake leaking. Guess what, since the coolant outlet wasn't named it wasn't covered. Most car may not even have coolant outlets like thjis but these warranties are written to cover ever make of vehicle. Truth is a good warranty would have covered this problem because it was definitely a defect and failure in the coolant system but it was not covered,

[Gonzo]

for a few years I was running across the Chrysler Lebaron convertibles with extended warranties. The top motor was covered on one policy, then when the next one came in I immediately said, "Oh, it was covered under the one I did last week, and you've got the same extended warranty company." Ah, NOT... this policy only covered the hydraulic side and not the electric motor... seemed every car after that the rules changed to suit the need... like if these extended warranty companies had some magic decoder ring that could tell which car was going to have which kind of failure and make sure they didn't cover that component. LOL

 

Extended warranties are still not a bad idea for large part failures... it's when it involves the smaller parts that the issues seem to get involved. Outlet hoses, window switches, convertible top motors etc...

 

I just did one on a Dodge Charger. On the coolant system the radiator, thermostat, and quite a few components were named. However, this car had a plastic coolant outlet that runs underneath the upper intake leaking. Guess what, since the coolant outlet wasn't named it wasn't covered. Most car may not even have coolant outlets like thjis but these warranties are written to cover ever make of vehicle. Truth is a good warranty would have covered this problem because it was definitely a defect and failure in the coolant system but it was not covered,

[TheTrustedMechanic]

Has anybody worked with an extended warranty company before? I dealt with my first one today, and it was not a good experience.

 

I had a customer who bought a 2000 Ford Focus from a used car lot and purchased the extended warranty. The customer did not trust the used car lot mechanic because of some prior history they had with shady repairs/run around stories. They called my shop, I talked to them, and they told me they had an extended warranty program they had purchased. Before they came in, I called the insurance company to make sure it is somebody I could do business with, and everything sounded fine so we scheduled an appointment for two days later.

 

The customer drives the car to the shop at 9AM and it dies on the street and they coast it into the parking lot. I walk outside, grab my battery tester, and it is dead. I charged it for a half hour, fired it up, tested the alternator on the car and it appeared to be the issue. I call up the insurance company to send them an estimate before I do any work. I am told they will have an adjust call me back. An hour later, I get a call back.

 

I had an estimate prepared for the adjuster, I charged the same I would for any customer. My labor guide stated that an alternator would take 2.3hrs. I priced an alternator ($175 my cost, $227.50 with a 30% markup), added the diagnostic fee (1/2 hr, $30), and presented my estimate to the adjuster over the phone.

 

I was told the warranty company would only pay an hour for labor ($60 vs $138) and that they could find an alternator for $133, so that is all they are willing to pay. I had never heard of the supplier or manufacture for the alternator, it would have to be shipped which would take a day. The customer was responsible for paying the diagnostics, the tax, a $100 deductible, and any extra cost that exceeded what they would pay. The adjuster was very rude, told me their is nothing to discuss, and that is what it is. Needless to say I had to turn down the job because I couldn't absorb any of the cost (nor should I have to), and the customer (rightfully) didn't want to pay anymore then the $100 deductible they thought they should pay. As a courtesy I waived the diagnostic for the customer and returned their deposit.

 

I explained the situation to the customer and they understood. I gave them a 10% off labor coupon for their next visit and hope they return, but this particular extended warranty company really could have damaged my image with the customer.

Sounds like you were dealing with CARS, and it is nothing but a rip-off. If you do an internet search they have had many lawsuits.

 

There are some decent extended warranty companies out there. Just bear in mind that they are nothing more than an insurance company. Accordingly they have their rules and stick very strictly to them. Most extended warranty companies won't pay for diagnosis, shop supplies or fluids. In addition they will pay up to the OE list price. ALWAYS make your customer aware that the warranty company likely will not pay for everything beyond their deductible and they will be responsible for the difference but you will work to get everything covered that you can.

 

There are some extended warranty companies, like insurance companies, that care about honoring their obligation and taking care of your mutual customer. There are some very good companies and some, like your experience that are little more than money grabs.

[Mario]

Yes, it was CARS.

[TheTrustedMechanic]

Yes, it was CARS.

Yep from what you wrote I knew exactly who you were dealing with. I had two customers with that money sucking company. One they claimed the failure occurred before they accepted the policy, two weeks after he purchased the van. One needed a wheel bearing and they wouldn't even pay half my COST of the economy bearing. They'd ship me their part but then I had to provide the warranty. And their allowed labor time did not match Alldata or Mitchell, who know where they got it. I assure you I will not be accepting any work where I have to wait for a check or a credit card from CARS. The one I did do I insisted they pay the customer, not me.

 

But don't refuse to work with extended warranty companies just because of this company. Not all are this bad, in fact almost all I have worked with were very decent to deal with. You just have to remember, it is a contract and they will not willingly go beyond what the contract specifically obligates them to do. And you don't have to accept what the first adjuster you talk to says they will cover. My dad had a warranty with a different national company and for one of his covered repairs the adjuster refused my labor rate because, even though it was the same as 6 months before, it was "higher than their local average." He also questioned my diagnosis and why it needed all that I wanted to do. What really whizzed in my Wheaties was when he made the connection between last names, stated "Oh, Moore, he must be your brother then," and insinuated it was a collaborative effort to defraud them. I denied, truthfully and demanded to talk to his supervisor. He refused and hung up. I called back, spoke to another rep and finally got to talk with a supervisor who agreed with me that although their customer was my dad, he was still their customer and I still had the obligation to do do the work and warrant it. Ans since they had the right to send an adjuster, I surely wouldn't be recommending phantom work. I also pointed out that in our local phone book there was 2.5 columns of Moore residences listed so there were a few that I was not related too. In the end, the supervisor authorized the repairs that were covered, at my labor rate as of the date of the last claim (same rate). And I was told that the original claims rep would be "dealt with" regarding his very unprofessional behavior.

 

Like I wrote, don't run away because of one bad company. But like has been mentioned many times, just make sure your customer knows that you will work hard to make sure as much gets covered as possible, but it is likely that the company won't cover it all and the customer will be responsible for the rest. You did not build it, buy it or break it. You are not obligated to underwrite your customer's decision to entrust their mechanical repairs to an extended warranty company. As long as your prices are in line and the work you propose is legitimate, the customer is still responsible to pay you your full invoice, they simply are paying you in part with the extended warranty. Similar to when they pay part with credit card (think warranty company) and part with check (think customer obligation for the balance). For example, if you are adhering to the labor guide and list prices, if your labor is $100.00 and your parts are $125.00 but the warranty company will only pay a total of $190.00 then your customer should be responsible for the remaining $35.00. That said when I deal with a warranty company I forgo shop supplies because I haven't dealt with a warranty company yet that pays shop supplies but I also have a higher labor rate for extended warranty work, just like doctors have a higher rate for insurance vs cash the day of your visit. I also look up dealer MSRP because that is the max most warranty companies will pay.