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The Fine Print

Auto Warranties

Why Longer Isn't Always Better

Once a simple detail of the car-buying experience, warranties have become more complex. They’re being used to help boost car sales, but longer warranties might not necessarily translate into a better deal for you.

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Warranties are getting more publicity these days. What started last century as a simple, 12-month promise against defects in your new car has been transformed into a marketing tool for manufacturers and car dealers looking for a sales boost. Warranties have increased in length, but we aren’t sure these superwarranties deliver added value.

Worse, there are several facets about today’s warranties that you won’t hear in the sales pitches. For example, despite the appearance of strength, today’s warranties remain potentially flimsy. Would you believe that the type of gasoline you use might be enough to void your warranty? Also, there might be free repair programs sneaking past you even after your warranty expires—a so-called secret warranty. Once the quiet music in the background, warranties have become a symphony of change now playing out at your local dealership.

SUPERSIZE ME. Hyundai started the superwarranty trend almost a decade ago when it bumped up its bumper-to-bumper coverage to 5 years, 60,000 miles, and its powertrain warranty to an unprecedented 10 years, 100,000 miles. In addition to providing peace of mind that any repairs would be on the Korean company’s dime, these moves were made to reassure buyers that Hyundai was serious about quality. The idea was that the cost of warranty repairs over the longer life of the superwarranty would push the automaker to build better cars to keep it from losing its shirt. It worked. In 2007, Hyundai reported its ninth consecutive year of record sales in the United States, and its improved quality has been noted by several sources, including Consumers Digest.

Others have followed suit, the latest being U.S. automakers. Early in 2007, General Motors announced a 5-year, 100,000-mile powertrain warranty on all its vehicles. Then Ford upped its powertrain coverage to 5 years, 60,000 miles. In July, Chrysler made headlines by announcing an unlimited powertrain warranty, meaning that as long as you owned the vehicle, any defects in the engine, transmission, driveshaft and drive axles were Chrysler’s problem, not yours.

This certainly appears to be a good thing, but a longer warranty does not necessarily mean you are getting a better car, says Philip Reed of Edmunds.com. A 10-year, 100,000-mile powertrain warranty is not a big deal, Reed explains, because it covers only those areas where few problems typically are found anyway. A better deal is a longer bumper-to-bumper warranty that covers all of the smaller issues that consumers more often face. Manufacturers have not increased bumper-to-bumper warranties at the same rate as powertrain warranties, however.

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Chris Martin of Honda, whose company, like six others, offers a 3-year, 36,000-mile bumper-to-bumper warranty, says the automaker believes a defect in a car typically would show up during the first 3 years. Martin says Honda might boost its warranty but not until sales figures show it to be a worthwhile move.

If anything, warranty lengths will continue to go up, and Chinese automakers will have a lot to do with that, says George Peterson, president of AutoPacific, which performs market research and product consulting. As Chinese automakers enter the U.S. market in the next year, they will offer large warranties to entice potential buyers while touting confidence in their products.

“You need to have a statement to [convince consumers] that your products are reliable, durable and safe,” Peterson says. “That comes with a warranty.”

One potential drawback of the superwarranty is that not all remain in effect if you sell the vehicle. In other words, you can’t use the superwarranty as a selling point when you put it on the market. In the case of Chrysler’s unlimited powertrain warranty, for example, the second owner loses the never-ending coverage on the powertrain. The coverage defaults to that of the bumper-to-bumper coverage—3 years, 36,000 miles. Ford’s powertrain warranty, on the other hand, remains in effect no matter how many times the vehicle is sold.

If you plan to keep your car for more than 5 years, experts tell us, a longer warranty should be part of your buying consideration. Otherwise, bigger is not necessarily better.

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