HOUSTON—Companies are popping up offering auto repair insurance policies, also known as extended auto warranties.
Many of them can be found on the Internet, but experts warn buyers to beware. ACE Master Certified mechanic Mikey Yu of Midtown Auto Service sees about 20 customers a month with these policies, and he said half the time the claim is denied.
"And then the consumer at that point is helpless, and at that point the consumer will either be disgusted or upset, ‘Why did I buy this extended warranty coverage?’ " Yu said.
Often the customer is under the impression that the policy was for bumper-to-bumper coverage, when in fact it only covered the powertrain. Powertrain includes the engine, transmission and axles, Yu said.
Many times these warranties offer coverage of items that are not likely to break down, Yu said.
A Consumer Reports survey of thousands of policy holders concluded that extended auto warranties are a poor deal that typically preys on fears about repairs that will never be needed.
"(The policies are for) a lot of items that normally, generally don’t break down on people’s vehicles," Yu said. "The things that do normally break down are the obvious things like starter, alternator and timing belts."
Yu said a starter repair job can cost $200 to $400 on an American car and $400 to $800 or even $1,000 on a foreign car.
Yu said if you must buy an extended warranty, purchase one from the dealership after buying a brand-new car. He said good extended warranties pay for themselves, generally after one major auto repair job.
