Guard My Ride - A Look at the Extended Warranty Industry for Used Car Purchases

The COvid-19 pandemic has affected every industry and individual on the planet. But not the used car industry. 

Sales for used cars have increased over the last two years as a result of a number of factors, including semiconductor shortages in the manufacturing of new vehicles and customers in general tightening their purse strings.

However, the purchase of a used vehicle brings up the issue of extended warranties, a necessary service that unfortunately has a bad reputation among consumers.

When a new vehicle is purchased, the manufacturer will provide a warranty for a set period of time, usually around 5 years.

Used vehicles may also come with warranties, but these are typically provided by a third party. These third parties may or may not have the same resources as automakers, resulting in situations in which they are unable to meet their promises and obligations on this front.

Consumers typically expect the same level of service from extended warranty providers as they do from the primary market. The consumer's lack of knowledge results in unrealistic expectations.

The inability of extended warranty providers to meet expectations can lead to the mistaken belief that the industry as a whole is riddled with scams and bad actors. 

It doesn't help that a number of players engage in bad faith business practises, resulting in a rather tarnished reputation for the industry thus impacting the second hand car market in general.

The other half of the puzzle is the providers themselves, as well as the unethical behaviour of a few in particular.

Many things can be interpreted as bad faith business practises. One example is late payments for warranty claims. It is critical to remember that almost everyone who owns a vehicle relies on it for a significant portion of their daily lives.

Exorbitant promises made by some providers may also appear appealing to an unwary consumer - what appears to be too good to be true is often true.

As required by law, extended warranty providers must be underwritten by existing major insurance providers. This is one of many reasons why the consumer should have a recourse if the warranty provider goes bankrupt.

The pandemic has affected this industry as it has every other.

In addition to untrustworthy extended warranty providers closing down, genuine businesses that provide a good service would have been forced to close permanently as a result of the nation's lockdowns and movement control orders issued over the last two years.