Nov. 27, 2004

Hello Tony

What is your opinion on extended warranties by independent companies? In particular I get a lot of email from company called Warranty Gold. They appear to offer pretty thorough coverage and a lot cheaper than Ford (the maker of my car).

My only concern is what happens if Warranty Gold should ever close their doors?

When I asked their representative the same question, he replied we are protected by an outside insurance company. The rep would not give me any information on the name of this outside company or what exactly the insurance company covers.

Any thoughts?

Steve

Answer:

Hi Steve,

I've sold extended warranties as an Finance and Insurance Manager in several different car dealerships for about 15 years. I've seen all kinds of warranty companies come and go.

Most car dealerships sell extended warranties from independent companies as well as the manufacturer's warranties. I always sold mostly independent as opposed to manufacturer's warranties mainly due to cost. The latter usually cost substantially more.

By law, all warranty companies are required to have an insurance company back them up in the event they go out of business.

These insurance companies are supposed to cover you for the term of the warranty contract the same as the warranty company itself.

I would have to say that if a warranty company won't openly disclose to you who they're insured through to forget about them.

After all, when you buy an extended auto warranty you are buying "peace of mind," and the last thing you want to do is worry about the strength, stability and backing of the company you go with.

An extended auto warranty is a good thing to have. Just choose a company wisely!

Tony Iorio

All my very best...

Tony Iorio

UPDATE:

Warranty Gold ceased all business operations prior to December 31, 2004.

According to an update on their own web site dated Dec. 15, 2005 the following statement appears: "When Warranty Gold originally filed its Chapter 11 bankruptcy, management reportedly intended to move the business forward as an operating entity, and at the same time create a mechanism to pay off the customers who held Warranty Gold VSCs (vehicle service contracts). Through a series of events, management eventually elected to discontinue such operations. Since late 2003, Warranty Gold has been in a liquidation mode. These efforts are now being directed by the Plan Trustee of the Warranty Gold Liquidation Trust."