Extended Car Warranties: Peace of Mind or Something Else? Feature – Car and Driver #atlantic #auto #mall

#extended auto warranty

Uncovering the coverage offered by extended-warranty companies.

The TV commercials are slick and convincing: Buy a service contract for your out-of-factory-warranty vehicle even if it has more than 200,000 miles on it and never face repair bills again.

Too good to be true? Probably. Three principal companies that sell these extended warranties US Fidelis (the largest), Mogi, and StopRepairBills.com as well as about 35 others, operate in the St. Louis area. All have websites, but business is conducted only by phone, with salespeople paid by commission, working from a script.

Illegal? Probably not, but Michelle Corey, head of the St. Louis Better Business Bureau, says the sheer volume and ongoing complaint patterns involving industry giant US Fidelis, as well as complaints against numerous other St. Louis area extended-vehicle-service-contract companies, are nothing short of astonishing.

We continuously are receiving reports from consumers saying they have been pressured or misled into buying warranty contracts they either don t want or don t need, or have been left holding the bag when the claim-processing company refuses to pay for costly repairs, she says. US Fidelis, as well as Mogi and StopRepairBills.com, has an F grade with the St. Louis BBB, the lowest possible.

An example from Corey s US Fidelis file: The owner of a construction company reported he received phone calls and direct-mail solicitations from US Fidelis regarding his Ford F-250 Super Duty pickup. He said he told the salesman that the truck was titled in his company s name and asked whether that would be a problem, and the salesman told him it would not. He paid $2175 for the warranty. Eighteen months later, the truck had transmission problems, with repairs totaling $9500. The insurer refused to pay, noting that the name of the man s business was on his truck s title.

Robert Kasper, a mechanic in Orlando, Florida, has dealt with dozens of these claims. Sometimes, Kasper says, the fine print helps the companies keep from paying. One of my customers had an electrical fuel pump go out, and the company said it wasn t covered. I called the customer, and she read off her policy: We cover mechanical components including fuel pumps. Her fuel pump was electric, not mechanical, so it wasn t covered. The St. Louis BBB has received 1146 complaints about US Fidelis, but Ken Fields of Fidelis says that represents well under one-half of one percent of our customer base. And the last time I looked, we had only three unresolved complaints. The business uses a halo in its logo and describes itself as a faith-based firm, reflecting the values of company founder Darain Atkinson. Last April, the St. Louis Post-Dispatch described Atkinson as a convicted thief, burglar, check forger, and counterfeiter who found the Lord while incarcerated in jail and is presently being blessed with a new $17 million, 20,752-square-foot home that is under construction.

While Mogi refuses to speak to the press, US Fidelis and StopRepairBills.com have active spokespeople and clerks who track down and refute negative online comments about their companies. Mike Carter, an attorney for StopRepairBills.com, says much of the company s problems with the BBB come more from clerical issues than customer service. The BBB, for instance, doesn t like the name StopRepairBills, arguing that it implies that customers will never again be faced with repair bills. Carter likens it to the electronics chain Best Buy: Is every product in that store a best buy ? Every product? Carter says his company is working with the BBB to try and get the company s ratings up to, say, a C.

Booming auto sales spawn something new for China: a market in secondhand cars

#secondhand cars

Booming auto sales spawn something new for China: a market in secondhand cars

GUANGZHOU, China As car enthusiasts converge on the annual Guangzhou auto show, few have anything except a shiny new set of wheels in mind. But explosive growth that transformed China into the world’s largest auto market is also giving life to a new industry here: used cars.

Chinese started buying new cars in huge numbers about four years ago, about the average length of time analysts say drivers will stick with a vehicle before trading it in for a fresh model.

The secondhand market is already taking off, with sales growth last year outpacing that for new vehicles. By volume it is still dwarfed by new cars, which outsold used vehicles three to one. In countries such as the U.S. that ratio is reversed, highlighting the secondhand market’s vast potential to make car ownership affordable for millions more Chinese.

The challenge in China is to develop a modern market for secondhand autos. The business is dominated by thousands of small trading companies that operate out of big trading halls or open air markets on city outskirts. Vehicles are sold tax free and ownership can be transferred in a day but quality and fair pricing can be uncertain. By some estimates, four in five used car transactions take place at these markets.

For foreign automakers, the used car business in China is very different to anything that you would recognize in the Western world, said Marin Burela, president of Changan Ford, the U.S. company’s China joint venture.

Global automakers have been slow to add used car sales at dealerships but are now racing to expand into the business, which will diversify their revenue and help build brand loyalty.

Liu Yu-chen, a 28-year-old snack food entrepreneur, plans to buy his first second-hand car after owning a series of new vehicles, the latest a Toyota Prado SUV bought in August.

After conducting a good inspection, you just need to figure out whether the car appears to have been in any accidents, said Liu as he browsed vehicles at Guangzhou’s Guangjun Used Car Market, which houses dozens of small auto trading companies.

He is budgeting up to 1 million renminbi ($164,000) for a used Land Rover and doesn’t consider the price tag high. Luxury autos tend to be more expensive in China because of taxes and foreign automakers pushing the limits of what they can charge.

What I want to buy is a well maintained car, no damage. Scratches don’t matter. If there’s no big problem with the bumpers, no weird sound from the engine, then I’ll consider it, said Liu, who flew from his home in the central city of Xian to car shop in the southern economic boomtown because he thought they would be cheaper.

Last year in China, used car sales rose 11 percent to 4.8 million vehicles, while new car sales rose 7 percent to 15.5 million. Ford’s Burela, speaking at the Guangzhou auto show which runs until Saturday, said the industry expects used car sales of 6 million this year, about 10 million in 2016 and 20 million by 2020, putting it on par with new vehicle sales.

About half of Ford’s 500 dealerships have been approved to sell certified used cars that come with warranties. The company has also opened six showrooms this year selling only secondhand vehicles.

Dealers in China will need to focus on used auto sales to raise their profit margins as new car sales start to plateau. In the U.S. about 55 percent of a dealer’s revenue comes from new vehicle sales while 25-30 percent comes from second hand sales, and the rest from parts and servicing.

But in China, new car sales have accounted for 90 percent of revenue, said Ivo Naumann, Shanghai-based managing director of advisory firm AlixPartners.

Chinese brands, unpopular because of quality concerns, will likely fall further behind the dominant foreign brands including General Motors, Volkswagen, Toyota and Nissan as the secondhand market develops, Naumann said.

Some people who probably historically would have bought a new car because they were first time buyers, they’ll say: Well I only have $8,000, I could buy a Chinese brand, low quality, or I could buy this second hand car from Volkswagen. And then that can have an impact on the overall market, Naumann said.

Because China’s auto industry is still new, there are bottlenecks holding back growth of the secondhand trade. For one, there’s no system of easily transferrable temporary plates for dealers, constraining the number of cars they can have in stock.

Another problem is lack of accurate and consistent information about prices. Beijing-based Bitauto Holdings, which runs a car pricing and listing website, is teaming up with U.S. company Kelley Blue Book to launch a China price guide next year using data on 1 million transactions from their other partner, the China Automobile Dealers Association.

Some dealers have adopted the latest technology. Dongfeng Nissan, the Japanese company’s China joint venture, has its own system to assess trade-in values. Staff use iPads to carry out a step-by-step check. They can photograph scratches or other damage and upload it.

The system will automatically prompt an overall score on this car and a recommended resale price to staff, said deputy general manager Yasuhiro Konta.

Currently, most owners who want to sell a car will typically take it to between three and five traders to get an idea of price, usually an estimate by a senior employee based on their own judgment, said Bitauto’s chief financial officer Andy Zhang.

The whole experience is fairly insecure, Zhang said. It’s very important to have those benchmark prices out there.


Follow Kelvin Chan at twitter.com/chanman