You may want to offer more attention in the purchase of an extended warranty for your vehicle after reading this article. Automakers are spending Billions to repair vehicles under Warranty but who's really footing the bill?

A recent article in the Detroit News and Free Press has brought about some attention regarding the lost revenues and growing tension over the drastically increasing costs to have vehicles repaired under manufacturer warranty. The article states that for some manufacturers, warranty costs are gobbling up profits in these difficult economic times. Furthermore, since Product Development time has become so condensed and quite often rushed, Warranty costs for the manufacturer are on a major upswing. More vehicles have been recalled by the second quarter of 2004 than all of 2003.

Who's footing the bill?

With sagging balance sheets automakers are increasingly turning the heat up on suppliers to step up and share the cost of claims or recalls triggered by defects in parts.

While warranty costs are burdening manufacturers, there is light at the end of the tunnel for some manufacturers who are now sharing the expense with suppliers.

Repair Techs feeling the squeeze!

Repair shops and technicians are also feeling the squeeze from automakers to reduce charges to repair vehicles under warranty and they're pushing back.

A group of technicians working at various auto dealerships have been trying to organize a class action lawsuit against manufacturers. These individuals are looking for additional time to diagnose and repair vehicles under warranty in which was heavily trimmed down in 1999. It has been estimated that the technicians have lost in the areas of $10,000 due to cutbacks in warranty repair payments.

Article: Understanding the System and Making it Work for You

Imagine walking down the Main Street in your home town shopping for a particular item, only to find hundreds of stores selling the exact same product. My first thought would be "How great for competition," but not so! This type of glut only breeds confusion for the consumer. Healthy competition promotes educated decisions -- an overload of cheap options reduces quality and lowers the bar for everyone.

In today's increasingly hectic society the internet has become a major source of information. Marketing companies of every type have embraced this technology to sell their products to a larger group of consumers. In this rush to market products the internet has become bloated with hundreds of extended warranty and auto related companies, some promising the sun, moon and stars in order to compete.

The auto warranty market has become very much like the typical Main Street. There are many reputable companies selling quality warranty protection. However, the volume of cut rate retailers has tripled in recent years and made a confusing process that much more difficult. Don't get me wrong, you can still find great rates on an extended auto warranty but you should expect to pay a reasonable price for it.

Let's compare purchasing an extended warranty to buying health care insurance. Both are rated similarly basing their premiums on a combination of age and mileage. I know this sounds kinda funny, but just bear with me a bit longer. When was the last time you negotiated with Blue Cross or The Prudential to lower your basic premium or got the mother of all extended warranties at half the price? My guess is never!

Okay, so where am I going with this? It's quiet simple, you can't get around the classification that applies for your vehicle based on a national average. Sounds complicated doesn't it? Here is how the rating system works for auto warranty repairs.

Auto manufacturers, Chilton and Mitchells do meticulous time studies and keep records as to the amount of labor involved in replacing a particular component on all vehicles serviced in the Continental U. S. and Canada.

Auto manufacturers and non-biased organizations such as Consumer Reports study the longevity or life expectancy of most vehicles. This is done to determine what components in your vehicle will fail and when. All of this information is bought, sold and traded throughout the automotive industry, including extended warranty companies. Databases are compiled on each vehicle as to their life expectancy and probable mechanical failures. The rating system is really quiet simple, the more probable your vehicle is to breakdown, the more expensive it will be to repair, therefore it will cost more to warranty.

Lets break it down in simple numbers, a Honda Accord typically is rated as a class 1 or 2 by most warranty companies, this is an excellent rating or classification. An exclusionary plan for this vehicle will probably cost between $1100.00 on the low side and $1400.00 on the high side. On the opposing side, a BMW 7 Series is rated anywhere from a class 5 to a class 9 depending on the companies rating chart. This is going to cost you quiet a few more dollars to insure .You had better be prepared if it does have a component failure, typically one large repair in this type of vehicle can cost almost as much as an extended warranty contract. I suppose the best way to sum up is, if you are buying a champaign and caviars dreams vehicle, don't expect to pay spam prices for an extended warranty.

How does this relate to warranty main street that we spoke about earlier? It doesn't take a rocket scientist to figure it out. If half of automotive industry is spending hundreds of millions of dollars researching the probability of mechanical breakdown and the other half is documenting the time and cost it will take to make the necessary repair, then how can a majority of the online warranty companies market a quality product at bargain basement prices. If no one is slashing prices on the wholesale side, then just how good is their company? If the company they represent based it's rates on quality information from organizations such as the auto manufacturer, Chiltons and Mitchell time studies, then they should be very close in price to everyone else. Quality doesn't come cheap!

That brings me back to the Blue Cross and Prudential question. These companies base their prices on national averages just like reputable warranty companies do, or SHOULD DO. You don't see any of these guys cutting their prices, or advertising "save thousands of dollars".

Good warranty companies live in the real world. That is, they base their rates on quality information and in turn give you coverage at a fair price based on your vehicle's classification, age and mileage. It reminds me of a phrase that I saw hanging on a banner in a repair shop, "Good work ain't cheap and cheap work ain't good". The simple truth is, you get what you pay for.