Extended Service Contract Comparison

THIS IS AN OLD WEB PAGE. Except for the Warranty Gold update, it was last modified April 25, 2001. Most information is as of June 30, 1998.

Visit Walt's other Boxster pages.

Because of the worst-in-the-industry 2 year warranty on the 1998 Porsche Boxster, I've taken an interest in extended service contracts. Sometimes called extended warranties, they are not warranties under federal law, but simply a contract to pay for certain repairs under certain circumstances.

There are a number of potential problems with an extended service contract:

This contract is not a warranty from the car manufacturer, even if you buy it from your dealer. It is a contract with an administrator (or sometimes your dealer), backed by an insurance company. The terms of the underlying insurance policy are not revealed to you.
It is only as solid as the companies involved. (See Warranty Gold note below.)
It does not cover your entire vehicle. It may cover a specific list of parts, or it may cover all but a list of excluded parts, sometimes significant.
You may not know whether a particular problem will be covered until it has been repaired and you try to collect. This is also true of manufacturer's warranties, but the manufacturer is probably more concerned with its reputation and goodwill.
Some contracts require a part to break completely to be covered. Others cover wear and tear.
Repairs may use remanufactured or used parts if they are of "like kind and quality" to the ones removed.
You may be required to use specific repair facilities, and to get approval before repairs start. This may involve a delay for the company to inspect your car.
You must perform all required maintenance - and be able to prove it.

All of these problems can be seen by closely inspecting the contracts (not a brochure) before committing to a service contract. And all the contracts mentioned below allow a 30 to 60 day free cancellation period (except maybe in a few states - see the contract first).

Below is a comparison of the contracts I've looked at so far. My conclusion: The best coverage, on the face of it, is Diamond Coverage from Warranty Gold. It covers wear and tear, and has fewer exclusions than the others. Western General has the longest history and an ongoing relationship with Porsche dealers, and the administrator has the same address and phone number as the underlying insurance company. And if you buy a contract through a dealer, it's possible that the dealer will be on the hook if the contract company goes out of business. On the other hand, the terms of the Western General policy is inferior, and you'll pay a markup. (The dealer cost of the Western General contract is roughly the same as the price of the Warranty Gold contract.)

Note: Warranty Gold is no longer paying claims on most of its service contracts, due to the insolvency of its insurance company. See their information site, or search the web for "Warranty Gold complaints".
(11/4/03)

You might also want to look at the FTC's discussion of extended service contracts.

Disclaimer: I'm not an attorney. I took a reasonable shot at condensing and simplifying some complicated documents, and used reasonable care in gathering and reporting information, but there's no guarantee that I haven't made mistakes. Most companies offer several different coverages. Use this for comparison but rely only on the terms of the actual contract.

Company	Western General	GLS Warranty (Deluxe Coverage with Wear and Tear option) Note: This company appears to have evaporated as of June 2000.	Warranty Gold (Diamond Coverage) ^[9]
Major exclusions:^[5]	Wear and tear Damage caused by non-covered parts	Wear and tear prorated Damage caused by non-covered parts Failure to pass a smog check	Damage caused by non-covered parts
Cost: ^[1]	$2,530	$1,548 (7 yr/100K mi.)	$1,615 (Warranty Gold) $1,259 (Warranty Direct) (by phone - $1,379 on Web site)
Failures covered:	Mechanical Breakdown: Failure of a covered part, due to a defect in the part or faulty workmanship as supplied by the manufacturer, making it unable to mechanically perform its function, and excluding gradual reduction due to normal wear and tear. See note on exclusions^[5]	Breakdown: Failure of a covered part to work as it was designed when properly serviced, due solely to defects in its material or workmanship, and excluding decrease in performance due to normal wear and tear, or failure to pass a smog check. Wear and Tear Breakdown: Gradual reduction in operating performance (optional coverage). Payment pro-rated over an assumed 100,000 mile vehicle life. Excludes: Repair to correct low compression or oil consumption See note on exclusions^[5]	Failure under normal service: A covered part has failed when it can no longer perform its function due solely to its condition, and not to action or inaction of non-covered parts, or when it has worn beyond the manufacturer's tolerances allowed for the vehicle and mileage. See note on exclusions^[5]
Parts covered: ^[2]	All original equipment factory installed mechanical and electrical operating parts and assemblies, except those excluded.	All parts of the vehicle, except those excluded.	All parts of the vehicle, except those excluded.
Parts excluded:	Those listed below^[3], and: All fasteners Battery cables Throttle body assembly *But also including*: A/C high pressure hoses	Those listed below^[3], and: All rubber parts (except oil seals) Cables (except speedometer and hood latch) Hydraulic cylinders (clutch?) Fiber optics and filters Remote activation devices Thermostats *But also including*: Original tires (road hazards) Safety restraint systems	Those listed below^[3], and: Manual and hydraulic linkages Weather strips Bumpers, body sheet metal and panels,outside ornamentation Emission systems^[4]
Maintenance requirements:^[6]	As recommended by manufacturer, within 10 days or 500 miles of schedule.	As recommended by manufacturer.	According to the manufacturer's recommendations in the owner's manual.
Other limitations:	Total policy payout limited to vehicle price. Repair limited to vehicle value.	Repair limited to vehicle value. Does not cover storage, taxes and freight.	Total policy payout limited to lesser of vehicle price or $25,000. Repair limited to vehicle value.
Other coverages and benefits:^[7]	Car rental: $25 per 8 labor hours, plus 2 days for parts order and 2 for inspection, up to $200. Travel expenses: $50 per day to 3 days. Towing: $50	Car rental: per 8 labor hour, to 6 days Travel expenses: to 3 days Towing and road service (Amounts were not stated in sample contract)	Car rental: $30 per 8 labor hours, to $150 Towing to $50 Travel expenses $75 per day to 3 days Lost key service: $35 Purchase price refund - see note [8]
Repair procedure:	Must use issuing dealer, or if not practical, go to licensed repair facility and contact Claims Service before starting. If Claims Service is closed, repairs may start but are limited to $350, and must contact Claims Service immediately when they open.	Must use a facility to which they refer you. Prior authorization required (except in emergency when unable to contact administrator) If they dispute with the repair facility, they may take car and move it to another one.	Any licensed repair facility. Pre-repair authorization required
Claims 800 number response:	Monday morning: reached a friendly claims rep in 1 1/2 minutes.	Monday morning: Phone answered by a person, who said half the adjusters were out to lunch and I could call back or be called back.	Monday morning: Reached a friendly claims rep in 2 minutes.
Dispute resolution:	May file a claim with insurer if not paid within 60 days. Contract may be cancelled if vehicle does not meet insurer's eligibility and underwriting guidelines.	May file a claim with insurer if not paid within 60 days.	May file a direct claim with insurer. Claims are subject to binding arbitration under commercial arbitration rules of the American Arbitration Association.
Local Better Business Bureau report:	WG Warranty and Insurance Services in business since 1959. CA Dept. of Insurance reports Western General Insurance Company (at same address) in busines since 1973. BBB file opened 1995. 5 complaints in last 3 years including 2 this year. All resolved satisfactorily with the customers.	Did not inquire.	Warranty Gold: In business since 12/84. BBB member since 1/28/98. [10] No unsettled complaints. Participant in BBB dispute resolution program. Austin BBB does not reveal resolved complaints. Warranty Direct: In business 4 years. 25 complaints over past 3 years including 20 this year. Has responded satisfactorily to all but one.
Geographic coverage:	U.S., Canada, Guam, Northern Marianas	U.S. and Canada	U.S. and Canada
Where to call:	Sold only through dealers; can be reached at 800-242-9442.	A GLS Warranty customer has advised me that they can no longer be contacted. The 800 number and web page I had for them no longer work.	Warranty Gold 800-580-9889

NOTES:

[1] Cost is for a 7 year, 70,000 mile (or closest available) service contract on a 1998 Boxster. Quotes were received over the phone. Choice of deductible - usually 0 to $100 - may affect price slightly.

[2] Repairs may be made with "like kind and quality" (rebuilt or used) parts. The Warranty Gold claims rep said they occasionally use used parts, although their marketing department has contacted me to state that "whatever parts the manufacturer recommends would be used." The Western General claims rep said they can use used parts, though generally the adjuster goes with whatever the mechanic recommends unless the cost seems way out of line. The GLS contract explicitly states used parts are permitted.

[3] All the contracts exclude the following. Some parts inapplicable to Boxsters have been omitted.

Battery, shocks, brake rotors, tires and wheels.
Manual transmission clutch assembly.
Safety restraint systems, including air bags; exhaust.
Glass, lenses, sealed beams, light bulbs.
Trim, moldings, bright metal, chrome, upholstery and carpet, paint.
Maintenance service and parts, including spark plugs and wires, hoses, drive belts, etc. Covers filters and fluids only if required in a covered repair.

[4] Under Federal law, automakers must warrant all emissions-related equipment for two years or 24,000 miles. Some components, such as the catalytic converter and electronic emissions-control units, are covered for eight years or 80,000 miles. California law requires a warranty that the vehicle will pass emission tests for 3 years or 50,000 miles, and 7 years or 70,000 miles for a part costing over $300 to replace.

[5] All contracts exclude failures due to breakdown of a non-covered part. They also exclude failures due to loss or contamination of fluids, lubricants and coolants, racing, commercial use, mechanical alterations outside manufacturer's specs, and towing except with a manufacturer-approved tow package. So, for example, if a hose bursts and causes the engine to seize, the damage is not covered.

[6] All contracts permit the owner to perform maintenance if all receipts, and sometimes a log, are kept. See contract for specific requirements.

[7] All contracts may be canceled by the buyer within 30 to 60 days if no claims, and thereafter canceled pro-rata less a fee of $25 to $35.

[8] On newer cars, Warranty Gold offers an extra cost ($100 at this writing) option to refund 85% of the purchase price at end of contract if there are no claims. Warranty Direct offered me a 100% rebate if no claims. Both of these were offered over the phone and did not appear in the sample contracts I reviewed.

[9] It has been reported to me that Warranty Gold contracts used to be administered through a third party, Warranty Direct. Warranty Direct then reportedly went into competition with Warranty Gold while continuing to administer previous Warranty Gold contracts. It has been reported to me that Warranty Direct has become difficult to deal with on claims, and there are 20 Better Business Bureau complaints against them. Therefore I have removed links and references to Warranty Direct from this web page. The customers who gave me this information still have confidence in Warranty Gold and I do not mean any of this to reflect on current Warranty Gold contracts. However, it does illustrate the nature of extended service contracts and the problems that can arise with them.

[10] As reported by the Austin Better Business Bureau. A Warranty Gold representative stated they have been in business since 1/81, a member of an unspecified BBB since 12/95 and with Austin BBB since 1/98.