We sat down with Bill Small of
5 Star
Warranty (one of the FA club sponsors) to see what his thoughts are
on the industry and what people are looking for when shopping for an
extended warranty. As for the FA staff's collective experience: extended
warranty policies have saved a lot of our butts after the factory warranty
expired!
Q: What is the biggest obstacle for on-line providers of service
contracts?
A: There are several obstacles for many online providers to overcome.
Number one is that we are online providers and not your typical
brick-and-mortar operation. Consumers in the past sat face-to-face to make a
purchase, usually from the auto dealership where they purchased the vehicle.
Most consumers do not know that many service contracts sold by automotive
dealers, banks and credit unions are third party contracts and the vendor
has zero obligations. Brick-and-mortar can be soothing, but it can also
provide a false sense of security to buyers. Get the facts.
Q: With the demise of many dot.coms and deceptive
practices on the Internet, how does 5 Star Warranty convey to its customers
that they are indeed a reputable company?
A: We have always tried to convey to all of our customers to do their
homework, whether they purchase from us or another company. We ask that
consumers check our BBB and Web Assured file; we have zero complaints and
have been in business over 10 years. We offer a sample copy of our actual
contract for review and ask people to please call us if they have any
questions. Information and education are the most important tools any
reputable company has to offer.
Q: Why should anyone purchase an extended service
contract if the vehicle is still under the manufacturer's basic warranty?
A: That's a very good question. Foremost, the pricing--I cannot tell
you what the pricing structure will be in a year from now, but you can be
sure they won't be going down.
Also most service contract providers, as do we, have different mileage
thresholds or restrictions for different terms of a contract. For example if
you purchase a 5 year 60,000 mile warranty from us and you have less than
20,000 miles, the price is lower than if you have 25,000 miles. This is due
to actuarial and claims data supplied by the underwriter.
The bottom line is that you can be offered more coverage options at a lower
price the sooner you purchase the contract.
Q: If you had the option of purchasing on-line or calling a company
to purchase, what would you advise a consumer to do?
A: I believe that the Internet is a fantastic tool for research and
study. It has also changed the way we conduct business and communicate.
Banking and online purchase transactions, I feel are very secure but the
chance of failure exists. I have always preferred to speak to someone who
represents the company. That is why we have you talk to a trained specialist
that can tailor a contract to your specific needs.
Q: What does the future hold for the service contract industry in
general?
A: I think that the future of the service contract industry is very
promising. The Internet has made consumers much more knowledgeable, which in
turn will require the industry to perform at a higher level. Areas like sale
presentations, product knowledge, customer service and claims administration
will all vastly be improved.
