Auto Service World
News   June 11, 2018   by Allan Janssen

Warranty provider tackles industry misperceptions

A Canadian provider of third-party auto warranties says increased simplicity, transparency, value, and efficiency would go a long way to rehabilitating the perception of extended warranties among motorists.

Joe McBurney, president of Obvi Inc., says there are a number of common misunderstandings – from cost to complexity – which have made consumers suspicious of warranties, and his company wants to correct the record.

“We want to make things simple for our customers to understand,” McBurney said. “Breaking down the most common problems with traditional extended warranties for automobiles is an important place to start.”

One of the biggest points of confusion revolves around warranties that cost far more than the repairs themselves would have cost.

“The math is simple: $3,000, $4,000, or $5,000 warranties just don’t make sense,” he said.

He also cautioned consumers to be wary of terms of coverage that expire before a failure is likely to occur. Most major mechanical breakdowns occur between 120,000 – 160,000 kilometers, a fair policy must cover this time period – many warranty providers offer options that expire too soon thus eliminating any value for the customer, he said.

McBurney noted that most policies are not transferable at a dealer trade. Extending the warranty of a vehicle is an investment in future repairs, he pointed out. This should not be voided during a dealer trade, which is the most common method for Canadians to offload a vehicle.

He said poor coverage has been part of the warranty sales game for years.

“As a seasoned insurance professional, it is shocking that second, third, and fourth tier sub-par coverage is still an option,” he said. “Warranties should be easy to understand with coverage and a term that offers the policy holder value.”

According to Obvi, many overpriced warranties are rolled into finance plans.

“This tactic not only increases the amount of interest paid by the customer, but it instantly creates a loan-to-equity imbalance,” said McBurney. Customers are committing to a bi-weekly or monthly incremental increase to their payments and are often unware of the total cost which can be many thousands of dollars, it adds up fast.

Finally, consumers are usually not dealing with experts when they buy extended warranties.

He recommends that consumers deal directly with the company who will issue a policy and then oversee all claims.

“Sales and claims handling from different sources can create confusion and frustration,” he said.

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