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Tips on Extended Warranties

Written by David Peterson

Is an extended warranty on your police cars right for your department? A checklist is recommended to track this information as you go through this process.

Extended warranties cover specific groups of components for various time and mileage intervals, such as five years/100,000 miles. This is different from the manufacturer’s original limited warranty, which typically covers ALL vehicle components for defects in materials and workmanship for a specific period of time or mileage, such as three years/36,000 miles.

If you replace your vehicles every two to three years with a lower mileage, few extended warranty options exist, and they might not be worth buying. If you hold the cars longer or put more miles on them, one of many extended warranty plans might make sense.

Begin by obtaining information on your actual vehicle maintenance costs, including, preventative maintenance, minor repairs and major repairs. This step may take longer than anything else on this project. To make the best decision, you need to know mechanical breakdown costs, maintenance costs for wear items, and OE recommended maintenance costs for items such as oil and filters, air filters, and transmission and cooling services.

Knowing the preventative maintenance costs is important because extended warranties now can be bought to cover scheduled maintenance only, in addition to traditional mechanical breakdown warranties.

Preventative maintenance is typically the highest of these overall maintenance costs, followed by the minor expenses of replacing tires, brake pads and rotors. These minor expenses are not typically covered by warranties. Expect to see major expenses of engine and transmission repair or placement next in line. All extended warranties should cover these major mechanical breakdowns, assuming that you provide proof of proper maintenance.

Determine what maintenance is done in-house and what is outsourced. Depending on the repair services being done in-house, you might be able to save on maintenance labor, diagnostic and repair equipment and technician training expenses for major repairs with an extended warranty. For the extended warranty to provide the maximum benefit, the nearest service location must be within a reasonable distance. In addition to location, make note of its service hours and its ability to provide emergency or priority service.

Once you know the various repair costs, you are ready to look at the options for component coverage on the extended warranty. Ford offers four levels: PowertrainCARE, BaseCARE, ExtraCARE and PremiumCARE. These plans ranging from covering critical powertrain components to high tech electronics, steering, suspension, electrical, emissions, HVAC and safety items.

The primary interest with most police departments is powertrain, which covers the engine, transmission, driveshaft and axles. For example, the four-year/100,000 mile PowertrainCARE plan, with a $50 deductible, has a suggested price of $2,275.

You can choose from many combinations of mileage and years, depending on your need and budget. Be sure to cost out a variety of time and mileage combinations. Coverage begins at the vehicle’s original warranty start date and zero miles. In other words, the coverage isn’t added to the base warranty term. Selecting a higher deductible amount, such as moving up from $50 to $100, will save on the plan’s cost. Extended warranties most often have a standard deductible amount applied to each repair visit.

Roadside assistance is generally included for the chosen term of the extended warranty. Items such as towing for failure of covered components, flat tire change, fuel delivery, and battery jump-start should be on the list.

The police department may also be able to save money by getting scheduled maintenance coverage. Be sure to check the coverage based on factory recommended maintenance intervals. With these plans, options include a severe-service schedule for patrol cars and normal-service intervals for administrative units. A scheduled (preventative) maintenance program for 100,000 miles has a suggested price of $1,735, and for 60,000 miles, a suggested price of $1,155.

The cost of these plans varies widely based on the time/year coverage, the component coverage and the deductible. Of course, the lower cost plans involve just the powertrain components. Every evaluation should include this base-line level of coverage. Your local dealer can help with these figures. The dealer determines the actual selling price for all plans.

David Peterson is the business growth manager, Commercial Vehicle Operations, Ford Motor Co. He can be reached at dpeters1@ford.com.

Published in Police Fleet Manager, May/Jun 2006

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