What's In A Warranty?
Deborah Lockridge
Senior Editor
Doug White isn't a big fan of extended warranties. But on his latest truck order, he negotiated them for the automatic transmissions.
White, director of fleet maintenance for Maryland-based Dunbar Armored, made the decision after some of these transmissions failed on the fleet's trucks just months after the standard three-year warranty expired.
"In some cases, it definitely makes sense" to buy an extended warranty, White says. When he considered the $1,800 to $2,000 price for a new transmission vs. the $300 price of an extended warranty, he decided the investment will more than pay for itself if the new transmissions fail at the same rate as the ones on his 2000 model trucks.
Extended warranties are available for nearly every part of the truck. They can be very specific, like White's, or quite comprehensive. With the slow economy prompting many fleets to extend their trade cycles, manufacturers report an increased interest in extended coverage plans, as they are often called.
WHY AN EXTENDED WARRANTY?
Buying an extended warranty is a lot like buying insurance: If nothing goes wrong, your money's out the window. But if something major fails after the standard warranty expires, you'll be glad you've got it.
Some truck buyers want the peace of mind of knowing they're covered. Others find it easier to budget. Extended warranties also can increase the residual value of a truck at resale time.
"It's to their benefit to get an extended service coverage that matches their trade cycle, so their operating costs are known," says Rick Dziadzio, manager of service operations at Detroit Diesel.
Cliff Putterill, heavy duty automotive marketing product leader at Cummins, explains it this way: "If you purchase an extended coverage plan, you have a known amount that will be paid on the front end, versus an unknown amount. Bearing in mind that the truck is a profit center, they are able to work up a whole lot more accurately what the return on their investment would be."
Dunbar's White points out another reason to consider extended warranties. "Back when the economy was going great, there was a lot of policy money going around to help you out," he says. A component that failed a few weeks after the warranty expired was often handled under warranty, no questions asked. Today, however, warranty claims come under much closer scrutiny.
However, not everyone is in favor of extended warranties. Darry Stuart, DWS Fleet Management Services, says in his experience with his clients, extended warranties have limited applications.
"If you look at the fine print, and you look at the quality of what's being built today, they really cover things that don't fail for the most part," Stuart says. "Bigger fleets are more likely to be able to negotiate policy adjustments, so I'm not sure the economics work when you look at the whole picture."
On the other hand, he says, a one- or two-truck owner-operator may be well served by comprehensive extended warranties used as an insurance policy - especially if he has problems maintaining a maintenance fund for unexpected repairs.
Carol Lavengood, director of market communications at Cummins, says, "I tend to think about it in terms of how conservative or risk-averse I am. What kind of peace of mind do I want to pay for?"
WHEN AND WHAT TO BUY
In most cases, the decision to buy an extended warranty is made during the truck purchase process. Some fleets are able to negotiate an extended warranty at a lower cost as part of the deal.
Most extended warranties are only available at purchase time or within a limited grace period after the purchase, such as 90 days, six months or a year. In some cases, there is another transitional time period where you can still buy the extended warranty by paying an additional premium.
What you'll pay for a plan varies greatly, depending on exactly what's covered and what's on your application.
"Coverages can range from $100 up to multiple thousands of dollars, depending on what the customer desires, or the type of vehicle," says Steve Locanto, manager of finance, planning and administration with International's Truck Group.
Time and mileage are major factors affecting price, along with what components are covered. Engine horsepower ratings are another variable. Tougher applications, such as construction, logging and heavy haul, typically mean more expensive extended warranties than linehaul applications.
Because there are so many options in extended coverage, it's important to know what you need before you buy.
"Since a purchased extended warranty is, in effect, an insurance policy, determine what level of risk you are comfortable with," recommends Mack Warranty Manager Rich Walck. For instance, he says, the most popular Mack plan covers just the engine. A chassis plan covers most of the non-powertrain items on the chassis, but costs more.
"Regional fleets, who are used to fixing these small items themselves, will often avoid the chassis plan, while fleets where the chassis seldom visits its home shop are more likely to buy the chassis plan."
Karl Mayer, manager of marketing services for ArvinMeritor, suggests this as a first step: "Take a good look into your operations, your maintenance records and your successes (or lack of) with components you've run in the past."
If you've had problems in a specific area, that might be an area where you would consider buying extended coverage.
Heating and air conditioning is a popular extended warranty package, according to John Duncan, warranty manager with Peterbilt. Replacing a compressor these days can be extremely expensive.
"I think it's one of the peace of mind driver comforts," Duncan says. "If you're in the Southwest, you may even consider lack of air conditioning as a truck-down situation."
Electrical components and electronics are another popular area for extended warranties. These kinds of repairs can be expensive, whether it's for a new ECM or simply the amount of labor hours that are often spent tracking down the source of the problem.
While buying extended warranties based on your experience with component problems is one strategy, at the other end of the scale, you might want to consider them for new, unproven technology.
Not only may you be wary of the reliability of new technology such as electronics and emissions controls, but it may be difficult for a fleet to keep its technicians up to date on the latest technology.
"With new engines and new technology, we've got to re-evaluate the extended warranty decision with every purchase," Dunbar's White says.
When choosing an extended warranty program, Mack's Walck advises customers to consider whether they will be able to use the warranty if they have a problem.
"This provides a strong incentive to stick with the OE," he says. "There may be second-party warranties, but they may not be accepted in remote locations."
SPEC'ING FOR LONGER WARRANTIES
If you pay attention to the spec'ing process, you can get some longer warranties automatically.
"When you get into customized [extended warranty] packages, the type of componentry is a major consideration in the cost," says Peterbilt's Duncan. "Some of the componentry -<\f>maybe your starter - your alternator, fan hub, the supplier may support some of the extended warranty for a particular model, so we're able to reduce the cost to the customer."
As an example, Mack's Walck notes that an overcrank-protected starter will typically have a 36-month warranty from the starter manufacturer, where a standard starter may only have 12.
Other premium components come with their own extended coverage.
"If they've had problems, say, with improper wheel end maintenance or wheel end adjustment procedures, there are many options out there for unitized hubs on front axles and trailer axles," says ArvinMeritor's Mayer. "They can spec a component that will last longer, have lower maintenance, and that will have a longer warranty coverage associated with it."
Synthetic lubricants in axles and transmissions also mean longer warranties. For instance, Eaton and ArvinMeritor transmissions filled with synthetic lube have a five-year/750,000-mile warranty, compared to a standard three-year/300,000 mile.
Some manufacturers have made spec'ing for longer life, lower maintenance and longer warranties easier if you buy specially spec'd vehicles.
For instance, the Freightliner Trucks Century Class S/T offers the industry's leading standard Class 8 warranty, according to spokesman Chris Brandt: three years/350,000 miles.
International's Diamond Spec program offers longer warranties for those using it - two years, versus the one year of the standard warranty for a regularly spec'd truck.
The Diamond Spec program helps customers make sure they have the right specs for their application.
"We found a lot of these vehicles are mis-spec'd," says Mike Roeth, vice president of reliability and quality for International's Truck Group. A Diamond Spec truck is pre-engineered to fit a specific application. "We found when customers get the right specs, we'll have lower warranty costs, and that's why we can extend these warranties."
Kenworth earlier this year expanded the availability of its Extended Service Interval option package. Originally available on the T2000, ESI is also now offered on T600, T900 and T900 models for on-highway applications. With this option package, truck buyers choose ESI components that provide enhanced reliable performance. Owners can extend the base warranty from the standard one-year/100,000 miles to three years/350,000 miles for $1,600.
WHAT AN EXTENDED WARRANTY IS NOT
It's important to know exactly what an extended warranty covers. Manufacturers stress that warranties cover defects in material and workmanship, not parts that wear out under normal use or abuse.
"I think sometimes there's a misconception out there that if they abuse the products or misapply the product, that it should still be covered under warranty - and that's not true," says ArvinMeritor's Mayer.
International's Locanto says another misconception is that customers think warranties cover what manufacturers call "maintenance items." These are things such as light bulbs, brake pads, rotors, batteries, windshield wipers - things that must be replaced on a regular basis by the vehicle's owner. While light bulbs seem like an obvious "maintenance item," others are not so clear cut, so make sure you know what's excluded before you buy.
Stuart notes that whether a failure is caused by a warrantable defect or from improper use or maintenance, it is often a subjective decision. For instance, Stuart says, if you buy an extended warranty for the HVAC, it typically doesn't cover lines, fittings, hoses or loss of freon. These are considered maintenance items. Yes, the compressor is covered. But if the compressor fails because of a leak in a hose (caused by a lack of maintenance on your part), you could be facing the replacement cost of a new compressor you thought was covered by your warranty.
The bottom line? Think about what you're buying, why you're buying it.
And read the fine print.
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