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EXTENDED WARRANTY


According to federal law, "extended warranties" that are usually offered by salespeople to buyers of new and used cars are not warranties. They are auto service contracts.
A warranty is a written promise by the manufacturer that the car that you are buying will perform up to stipulated standards. Warranties automatically come with new cars. You don't have to buy them.

On the other hand, you pay extra for an auto service contract. Many auto service contracts are not backed by the manufacturers of the vehicles but by independent companies, some of which in the past have not remained in business for the full terms of the contracts. Furthermore, many of the failures that an auto service contract covers duplicate what a warranty covers. For example, why pay for protection against engine failure for the six years or 60,000 miles provided by an auto service contract when the powertrain or bumper-to-bumper warranty that automatically comes with the car protects you against engine failure for seven years or 70,000 miles, whichever comes first.

Ironically, the same salesperson who extols the manufacturer's warranty when he or she is trying to sell you a new car will turn around and try to sell you on the virtues of an extended "warranty" when you agree to buy the new car. Auto service contracts are big
moneymakers for dealerships.

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