Today’s Eye on Delaware segment is extended service contracts for vehicles. With the country continuing to struggle in a down economy, consumers are increasingly finding new ways to stretch their dollar. One industry which has seen considerable growth over the last 18 months are auto warranty providers as consumers look to extend the life of their current vehicle, instead of purchasing a new one.
Topics discussed: Mark Hammon from AA Auto Warranty provides some helpful tips.
• How auto warranties work
• What makes them a good investment
• Challenges within the industry
• How to find the right company
• Purchasing an extended service contract
• Why use a broker?
Question: How does an auto warranty work?
A warranty works by a customer contracting with a company, which basically says that in return for a payment, the warranty company is going to pay the repair bills of the customer. Any good warranty works in the following way:
- Customer takes the vehicle to any licensed repair shop.
- The repair shop figures out what is wrong with the vehicle.
- After that is figured out, the repair shop calls the 800 toll free claims number and tell them what the problem is. Then they get an authorization to do the work.
- The work is performed.
- The repair shop is going to get called back right after the work is done to obtain payment directly over the phone.
- The customer should not have to pay first and wait to be reimbursed.
That is the case with all the warranty companies that we represent.
Question: What makes extended auto warranties a good investment?
The reason that warranties are a good investment is simply because the cost of repairs these days.
- Transmissions are a couple thousand dollars.
- Power mirrors are in the 300 to 400 dollar range.
- Power window motors, regulators, and all sorts of exotic parts tend to be expensive as well.
All of those things add up over the lifetime of vehicle. Most people keep their vehicles now much longer because folks can’t afford a new one. It’s beyond question that paying $1500, $2500 and sometimes even more (for more expensive cars) for a warranty is going to be paid back in spades. Think about the average labor rates now, $85, $95 or even $120 an hour in some markets and on some vehicles, that’s only going to increase as time goes by.
A warranty is an excellent investment for the second most expensive purchase that people make during their lives.
Question: What are some of the challenges the industry is facing?
There’s no doubt that the warranty industry has encountered some negative news in the past few months. Some companies have been using auto-dialers. Some companies have been calling people who are on the “No Call” list. Some companies are actually being sued by the FTC for misleading customers, for not showing contracts, for misrepresenting coverage, for not giving back refunds. AA Auto Warranty does not use auto-dialers and doesn’t buy or sell lists. So, that’s why it is all the more important in this climate of negative news to get our message out that we are a long standing company with an excellent reputation who is committed to finding the right plans for customers. We think it is a positive thing that the warranty industry might come under more scrutiny and more or better regulated by states, because there are some companies out there who are making a bad name for the entire industry… an industry that we think helps millions of customers every year.
Question: How can consumers find a good company to do business with?
Reputation is important. In this business, there are a lot of companies out there and one way you can tell the difference is by reputation. AA Auto Warranty has been in business since the early 1980’s, so we’re not just an up-and-comer. We have a good reputation because we believe in a commitment to customer service and we believe in what we do. We think that warranties are a good investment and we have warranty consultants, professional warranty advisors (not just salesmen), manning the phones to help people. We can prove that we have a good reputation by something for example like our Better Business Bureau record. It shows something like under 40 complaints over the last 3 years and in that time we have had more than 14,000 customers enroll, so that is like a 99.997% customer satisfaction rate which nobody can even touch. Over the years we have built up a very good reputation, which we are proud to talk about and are definitely committed to defend.
Question: How do your customers sign up?
We do business by having a website. People come to our website looking for information about warranties. They find us on search engines or through our advertising. They go to our website and provide us with basic information about their vehicle and how to contact them. Our professional warranty advisors call the folks up and see how we can help them find a warranty that is right for their needs and right for their budget. We have hundreds of plans available in practically every occasion. What we are looking to do is to find which of our warranties best fits the customers needs. We are not interested in selling the most expensive warranty. We are interested in selling the one that fits the customer best. We don’t do business by making cold calls, by buying lists of customers names, by selling lists of customers names, using auto dialers, or any of the tools that some companies use to drum up business… we don’t use at all. We only depend on customers going to our website or giving us a call and letting us help them.
Question: Why should someone use a broker to get their warranty?
The benefits of dealing with a broker are two big ones… Variety and Options. A broker, like us, AA Auto Warranty, represents six different warranty companies that don’t offer warranties directly to the public. They simply concentrate on paying claims. That’s all they do. Our responsibility is to take the hundreds, and some cases, thousands of options that are available for certain vehicles and find the best one for our client. Now, when a warranty company sells their own plan, they are going to try to squeeze the customer into their limited selection of warranties. That’s not what any good broker, like AA Auto Warranty, does or has to do. Instead, we’re able to take the customers situation and needs and basically customize a warranty solution that’s going to work best for them. Variety and options is the key benefit to working with a broker.
For more information, go to: Auto Warranty or call 1.888.222.4445
