How good is the warranty at Direct Buy Auto Warranty?

Extended warranties that are sold years after the initial sale on a product which requires a certain amount of ongoing care and maintenance are a very problematic type of coverage. This is largely where the problem lies with these third-party extended car warranties.

A business that's selling "insurance" needs to be able to evaluate the risk. This applies to all kinds of insurance. For instance, when selling a life insurance policy, the company will determine how healthy the person is, and based on that, quote a premium that's lower for someone in good health and higher for someone in bad health.

Some companies will sell life insurance without bothering to check out the health of their prospective insureds, but generally, they need to charge a higher premium and/or they need to set up some form of "exclusion", whereby they make it clear that they will only pay out the amount of coverage they're agreeing to provide under certain conditions. As an example, some insurance companies offer policies that require a person to live at least two years after they get the policy in order for the full coverage to be effective.

Consider who are the most likely purchasers of these extended auto warranties. It is going to be people who are concerned that their car is likely to break down during the term of the policy. Even if the car has been properly maintained, the car owner may well have some signs that trouble is brewing.

But does the warranty company send out a mechanic to check out your car's health? Most likely not, because in many cases, once they found out the car had a problem, they would have to either decline coverage, charge so much for coverage that the person probably wouldn't buy it, or limit the coverage in such a way that it wouldn't be very attractive coverage. The company would have to absorb the cost of the mechanic for policies that didn't get sold, and because of this, they'd have to charge even higher premiums, which would make these policies completely unsalable.

Instead, they impose various forms of exclusions and limitations. As an example, they may require proof that you''ve provided certain maintenance, which may even be above and beyond what the manufacturer requires. You have no way to know how rigorously they will apply these requirements. If you have failed to abide by these requirements, then your claim will be denied. For instance, they might require you to have certain service performed every 10,000 miles, and if you didn't get the service performed until 10,500 miles had passed, they could deny your claim.

In the meantime, you have paid a premium (and even paid for maintenance that maybe wasn't really needed), but in reality, you haven't been eligible for coverage. So if this describes your situation, you're paying a premium and you're getting no coverage!

Because you're the person who best knows the condition of the car and who directly suffers the consequences of the way the car is treated and maintained, buying a warranty would be problematic. Not only will it generally be a waste of money, if you happen to have a claim, it will waste your time and energy trying to get it paid, as well as create additional stress in your life. It would be nice if there were a magic bullet so you could eliminate the stress that occurs when your car has a mechanical failure, but the extended warranties are not the solution.