Words About Warranties
To warrant means to give proof, so when you get a warranty on a car, it’s to give proof that certain mechanical and body parts are sound or will be repaired if they’re not. Of course there are time limits on this. But a warranty allows you to be comfortable knowing that you won’t be stuck with major repair bills soon after you buy a car. It’s a nice safety feature, especially if you’re buying a used car and don’t have a mechanical bone in your body. If that’s the case, have a good technician check the car over. Even then, get a warranty if you can.
A car typically comes with a limited warranty, which offers less than full coverage. Read it carefully to find out what the limits and deductible costs are.
New Car Warranties
Warranties are getting as competitive as car sales, which is good news for consumers. Most manufacturer’s warranties cover repairs for three years or 36,000 miles, but warranties may vary from two to four years and up to 70,000 miles.
To outdo each other, manufacturers are offering helpful extras like road assistance and towing. Some even throw in trip routing services and reimbursement for food, lodging, and alternative transportation if your car breaks down while traveling. While most warranties don’t cover routine maintenance such as filter, oil, and other fluid changes, a few do. This perk can save you hundreds of dollars over the warranty period.
Read the fine print to discover all the coverage you’re receiving. It may be more than you think. You’ll want to make sure you’re not being charged for any of the extras mentioned above, however. If you are, check competitive services before signing up for them.
Used Car Warranty Law
Minnesota has one of the strongest used car warranty laws in the country to protect used car buyers. Under the Minnesota used car warranty law, used car dealers must provide basic warranty coverage for most used cars and small trucks sold to Minnesota buyers.
Because this law applies to dealers only, it’s important to know if you’re buying from a dealer. A dealer is anyone who sells more than five used cars a year, and this person must be licensed by the Minnesota Department of Public Safety’s Driver and Vehicle Services Division.
Sometimes dealers will be unlicensed and pose as private individuals. If you buy a qualifying car from an unlicensed dealer, then your car is still covered under the used car warranty law. (Cars that qualify for the used car warranty are described in “The Basic Warranty” section that follows.) You are legally entitled to all basic warranty coverage even if you don’t receive any written warranty documents.
Friends, relatives, neighbors, or any other private individuals who sell you a car are not dealers, so the warranty would not apply in these cases. It also does not apply if you purchase a car from any of the following:
- Your employer.
- A bank or financial institution.
- A company that previously leased the car to you or a family member.
- The state or any county or city in Minnesota.
- An auctioneer who sells the car in connection with the sale of other property or land.
The Basic Warranty
The used car warranty law covers used cars purchased primarily for personal, family, or household use. The terms and length of the warranty will depend upon the mileage of the car at the time you buy it. For cars with fewer than 36,000 miles, the warranty applies for 60 days or 2,500 miles, whichever comes first. The parts covered under the warranty for cars in this mileage range are:
- Engine: all lubricated parts, intake manifold, engine block, cylinder head, rotary engine housings, and ring gear.
- Transmission: automatic transmission case, internal parts, and torque converter; or manual transmission case and internal parts.
- Drive axle: axle housings and internal parts, axle shafts, drive shafts, output shafts, and universal joints. (Secondary drive axles are covered on automobiles and passenger vans but are not covered on other vehicles mounted on a truck chassis, such as utility and off-road vehicles.)
- Brakes: master cylinder, vacuum assist booster, wheel cylinders, hydraulic line and fittings, and disc brake calipers.
- Steering: steering gear housing and all internal parts, power steering pump, valve body, piston, and rack.
- Water pump.
- Externally mounted mechanical fuel pump.
- Alternator, generator, and starter.
For cars that have between 36,000 and 75,000 miles, the warranty applies for 30 days or 1,000 miles, whichever comes first. For cars in this mileage range, the warranty covers the parts listed above, with the exception of the following parts that are not covered:
- Radiator; and
- Alternator, generator, and starter.
Parts are not covered under the used car warranty law if they are not specifically listed above.
What’s Not Covered
Not all cars are covered under the used car warranty law. The following are excluded from the law and are usually sold “as is”:
- Cars with 75,000 miles or more.
- Cars sold for less than $3,000.
- Custom-built cars or cars modified for show or racing.
- Cars that are eight years of age or older.
- Cars purchased primarily for business or agricultural use.
- Vehicles with a gross vehicle weight of more than 9,000 pounds.
- Vehicles manufactured in limited quantities.
- Vehicles not manufactured in accordance with federal emission standards.
- Diesel engine vehicles.
- Salvaged vehicles.
- Ordinary Maintenance: The warranty does not cover ordinary maintenance, such as changing spark plugs, ignition, points, filters, fluids, lubricants and oil, and brake and clutch linings. These remain your responsibility.
- Collisions, Abuse, and Negligence: Repairs needed because of inadequate maintenance or taking poor care of the car are not covered. Nor is the dealer required to repair any parts still covered by the original factory warranty or parts that the manufacturer agrees to repair at no charge because a part was defective.
If you have a warranty dispute with a dealer, you may have to take the dealer to court. Any lawsuit under the used car warranty law must be filed within one year after the warranty expires. The good news is you can usually settle the dispute in conciliation court, where procedures are relatively informal and you don’t have to hire an attorney. For more information, call the Minnesota Attorney General’s Office at (651) 296-3353 (Twin Cities Calling Area) or (800) 657-3787 (Outside the Twin Cities) and ask for the free brochure Conciliation Court: A User’s Guide to Small Claims Court.)
The Buyer’s Guide
The Federal Trade Commission and state law require dealerships to display the buyer’s guide on the car window. The buyer’s guide is a double-sided form that the dealer fills out to tell you whether the vehicle comes with a warranty and, if so, what the warranty includes. If the “warranty” box is checked, the car is covered by a warranty required by the state’s used car warranty law or another warranty offered by the dealer. If the “as is” box is checked, the buyer is responsible for paying for all repairs that the car requires.
Even if the car you buy is covered under the used car warranty law, you may waive coverage for a particular covered part. If you’d rather negotiate a lower price, and take the car with a defective manifold, you must sign and circle a statement on the warranty that indicates that the manifold isn’t working properly.
The “As Is” Disclaimer
If the “as is” box is checked on the buyer’s guide, you have to pay for any and all car repairs once you buy the car. “As is” appears on about half of all used cars sold by dealers in the United States. In Minnesota, however, this disclaimer isn’t allowed unless the car fits one of the exceptions to the used car warranty law.
What if a Part Breaks?
If the drive train falls off as you leave the lot or the manual transmission sticks within the time period of the warranty, you are entitled to have it fixed free of charge. You must report the problem to the dealer within the warranty period. Of course, to be fixed without charge, it must be a part covered by the warranty.
Don’t just pull into the first repair place you see and then think you can present the dealer with the bill, however. The dealer must repair or replace the part. If the dealer doesn’t have a service facility, he or she will tell you where to take the car. If it’s inconvenient for you to go to the dealer for repairs—if you live across the state, for example—you may have the repairs done elsewhere with the dealer’s consent.
Once the defective part is fixed, you’ll receive another warranty, good for an additional warranty period for that particular part.
Refund? It’s Dealer’s Choice
It may be the dealer’s choice to forego repairs if they’re too expensive and refund the cost of the vehicle to you instead. In this case, the refund must include all the charges you paid, including any towing expense, minus a reasonable deduction for your use of the vehicle. The law does not give the car buyer the right to demand the full purchase price in compensation.
Extended Warranties or Service Contracts
The Minnesota Attorney General’s Office encourages Minnesota automobile owners to fully understand motor vehicle service contracts, sometimes erroneously referred to as “extended warranties,” before purchasing one. Although these contracts are intended to cover unexpected and costly vehicle repairs after the original warranty has expired, they may be marketed in a deceptive manner and contain fine print that limits the coverage available. Before buying a service contract, consumers should first fully understand the terms of the contract and who is responsible for providing the coverage, and then consider the following tips.
Motor Vehicle Manufacturers or Licensed Dealers
Service contracts may be sold by motor vehicle manufacturers or their licensed dealers, but those entities are not required to meet all the requirements of Minnesota’s service contract law. They are required to make certain disclosures, offer the right of return, and are prohibited from certain deceptive acts, but are not required to meet or disclose the financial requirements discussed below.
Only Buy from Reputable Companies
Determine who is selling the contract. It is not uncommon for brokers to use deceptive and misleading tactics such as impersonating your vehicle’s manufacturer or dealer, or using a name that falsely suggests an association between them. Many brokers intentionally use similar names so that you may not be able to determine who they are. Some may assert that your warranty has expired, when it may not have expired, and when they do not know if you have already purchased a service contract. The Minnesota Attorney General’s Office has taken action against such companies to reform their practices. You should assess the way the service contract is marketed to you to determine if it is a company you want to do business with. Ask for references and check out the company with the Better Business Bureau at (651) 699-1111 or (800) 646-6222.
Determine who is the provider of the service contract and who will administer and pay the claims when your car breaks down. Ask for references and check out the provider and administrator with the Minnesota Department of Commerce and the Better Business Bureau.
Find out how the contract provider ensures that it has the money to faithfully perform its obligations under the service contract. You can do this by obtaining a copy of the contract provider’s registration with the Minnesota Department of Commerce at (651) 539-1500. Minnesota law requires that providers back up service contracts by meeting one of the following requirements:
- Insure all service contracts under a reimbursement insurance policy in the amount of $15,000,000 (or $10,000,000 with the Minnesota Department of Commerce’s authorization);
- Maintain the required reserve and provide a security deposit to the Minnesota Department of Commerce; or
- Maintain a net worth or stockholders’ equity of $100,000,000.
The contract should state whether the provider’s obligations are insured (and tell you the name of the insurer) or whether only the provider is backing the obligations.
Carefully Review the Contract Before Purchase
A reputable company should allow you to review the contract before you buy it. Remember that sales brochures are not contracts. Review the contract before you buy it or make a deposit on it.
Regardless of what you may be told, few service contracts cover all repairs. When reviewing the contract, pay particular attention to the “exclusions,” or those things the contract will not cover. The exclusions are usually listed near the back of the contract. Be wary of exclusions that may deny coverage for any reason. According to the Federal Trade Commission (FTC), examples of these exclusions may include the following:
- “If a covered part is damaged by a non-covered component, the claim may be denied,” or
- Contracts which specify that only “mechanical breakdowns” will be covered, may exclude problems caused by “normal wear and tear.”
Look for any requirements or conditions you must meet in order to obtain coverage under the contract. Service contracts typically state that in order to be eligible for coverage under the contract, you must perform a certain type of maintenance on your vehicle. For example, the contract may require you to change the oil every three months and provide proof that this has been done. If something later goes wrong with your engine and you cannot prove that the oil was changed every three months, the company might deny your claim (even if the oil change had nothing to do with the needed repair).
Determine whether the contract has any deductibles and carefully review how those deductibles apply. For example, a contract may have a $100 deductible for each repair or for each component repaired.
Find out if you need prior authorization from the contract provider in order to have repair work done on your vehicle. People have been denied reimbursement for repairs because they did not get prior authorization before having repairs performed.
You may be able to negotiate the price of a service contract, just as you would negotiate the price of a car or trade-in vehicle.
Your bank, car manufacturer, dealer, and others cannot require you to purchase a service contract as a condition of a loan or of the sale of the motor vehicle.
Minnesota law requires that service contracts are written in clear, understandable language that is easy to read and includes the following:
- Identity of the parties, including the provider, third-party administrator, seller, and the buyer;
- Purchase price and sale terms;
- Amounts and terms of any deductibles;
- Coverage, limitations, and exclusions;
- Restrictions on transferability of the service contract;
- Cancellation terms;
- Duties and obligations of the buyer;
- Exclusions for consequential damages and preexisting conditions; and
- Whether the contract is insured and by whom (unless the provider is a manufacturer or licensed dealer).
If this information is not stated in the contract, do not buy the contract. If this information is stated, you may still wish to contact the Minnesota Department of Commerce at (651) 539-1500 to obtain further information about the company you are contracting with.
Right of Return
Minnesota law permits a buyer of a service contract to return such contract for a full refund if no claim has been made and the buyer returns the contract to the provider within 20 days of the date the contract was mailed to the buyer, or within 10 days of the delivery of the contract if the contract was delivered at the time of sale. If the provider fails to refund the buyer within 45 days after the return of the contract, the provider is liable for a penalty of 10 percent of the amount that remains unpaid for every month until the full amount is paid.