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Are extended car warranties worth it?

06:41 PM CDT on Tuesday, March 18, 2008

By OLGA CAMPOS

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Are extended warranties worth it?
03/18/2008
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With the purchase of a new car also comes the sales pitch for an extended warranty. But a nationwide campaign was launched -- aimed at steering car buyers away from the extra coverage.

A full-page ad in USA Today was directed at the car-buying public. It stated, "You don't need an extended warranty, despite what the car dealer says."

It's part of a nationwide campaign by Consumer Reports to dissuade new car buyers from paying for extra coverage. It came after a survey of 8,000 of its readers.

"Forty-two percent of the people in our survey didn't use the extended warranty at all, mainly because they didn't have repairs or because they manufacturers' standard warranty covered the repair,” said Donato Vaccaro, Consumer Reports.

But the National Automobile Dealers Association, which represents 20,000 new car and truck dealers, strongly disagreed with Consumer Reports.

"Consumers are benefiting from extended service contracts that protect against unexpected costly repairs after the manufacturer warranty expires,” said NADA Public Relations spokesman Charles Cyrill.

NADA also says extended coverage is more likely to pay off since consumers are keeping cars longer.

But Consumer Reports said extended coverage benefits new car dealers who earn, on average, $800 dollars on each extended warranty sold.

At the Great Hills Shell garage in Northwest Austin, experienced mechanic Brad Updegraff explained before buying a warranty, the consumer needs to know where the repair work can be performed.

"The one big question you want to ask the warranty company is what does the coverage give you?" he said.

As part of its nationwide campaign, Consumer Reports is encouraging car buyers to shop for top rated vehicles that, according to their research, are less likely to need major repairs -- or consider buying an extended warranty from an independent source just before the manufacturer's warranty is about to run out.

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