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  • Ben Beck

But I Bought The Extended Warranty

When buying a car, a lot of people buy the “extended warranty” under the mistaken belief that it is an extension of the manufacturer’s original warranty. Wrong. Instead, what the unknowing car-buyer purchases is an extended service contract. An extended service contract (or an “extended warranty” as it is usually incorrectly referred) is very different than an extension of the original manufacturer’s warranty and what you may think you are buying.

Service contracts (or used-car “warranties” as they are often incorrectly labeled) are usually sold for an additional charge by auto dealerships on used cars. Extended service contracts (incorrectly called “extended warranties”) are often sold on new cars to protect against failures of mechanical or electrical components after the expiration of the original manufacturer’s warranty.

Understanding the difference is important. Service contracts are entirely optional, you do not have to purchase a service contract or an extended service contract. On the other hand, a manufacturer’s original warranty (e.g. 3 year/36,000 mile bumper-to-bumper warranty or 5 year/60,000 mile powertrain warranty) comes with a new vehicle, cannot be disclaimed by the manufacturer and come with no additional charge.

If you are purchasing a new or used car and the sales representatives tries to sell you a “warranty” or an “extended warranty” chances are it is a service contract and not in fact a warranty. Why do dealerships frequently refer to service contracts as warranties? Well because it sounds better and because the term warranty has significant meaning not only in the everyday common-sense way but in the specific language of the California Lemon Law’s statutory language.

Under the California Lemon Law if the word “warranty” is used in the document covering the terms of the service contract then a warranty is created and the consumer is then afforded all of the protections that come along with a breach of that warranty. Car dealerships know this and avoid including the words “warranty” in the document and instead entitle it a service contract.

Next time you are in the market to purchase a new or used car and the sales representative offers to sell you a “warranty” or an “extended warranty” ask to see it. In almost every instance what you will find is that the word “warranty” appears nowhere in the document being offered for you to purchase. Instead, what you will find is that what you are buying is a service contract.

Some people like to have the piece of mind of added protection of a service contract absent an original manufacturer’s warranty (e.g. on a used car) or an extended service contract to cover mechanical or electrical failures during the period after the manufacturer’s original warranty expires. But it is important to know what you are buying.

For example, you will be sorely disappointed if you believe that you will have the protections of the California Lemon Law if something goes wrong during the period covered under a service contract or an extended service contract because you believe you have a warranty. A service contract is not a warranty and does not come with the protections of the California Lemon Law (the one-way attorney fee shifting perk that requires manufacturers to pay a car buyers’ attorney fees, the remedy to the car buyer of a repurchase or replacement vehicle or, when appropriate, a civil penalty against the manufacturer when it knows it sold you a lemon and does not buy it back when it was supposed to).

Sometimes the car dealership is selling you a used car with an actual extension on the manufacturer’s warranty. A Certified Pre-Owned (CPO) vehicle is a used vehicle that has passed a manufacturer’s CPO inspection which is typically a comprehensive inspection of the major component parts of the vehicle. If it meets the manufacturer’s criteria then the manufacturer will offer it for sale, through one of its authorized selling dealerships, as a Certified Pre-Owned Vehicle.

The difference between a CPO and a service contract is that a car buyer is afforded the protections of the California Lemon Law when buying a CPO vehicle. It is important to note that CPO cars may sell for more than similar used models without the certification, with good reason, because they come with the manufacturer’s guarantee. However, like an original manufacturer’s warranty, a CPO designation is not a feature that can be sold as an add on for an additional charge like a service contract or extended service contract.

Bottom line, know what you are paying for so you are more informed on your consumer rights.


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