Ford, Honda, VW have fewest extended service claims, study says

Certain Fords, Hondas and Volkswagens were the most dependable vehicles covered by their contracts, according to a study by the extended service contract administrator Warrantech.

Based on claims history, Warrantech said the following vehicles were the most reliable for their categories in 2009:

Asian brands: Honda Pilot and CR-V crossovers and Civic small car.

Domestics: Ford Ranger and F-150 pickups and Escape crossover.

European brands: Volkswagen Beetle and Jetta and Passat sedans.

The results included several model years, said Jeanine Folz, senior vice president of insurance services at Warrantech, of Bedford, Texas.

"The more reliable vehicles require less insurance reserves. They break down less frequently, and when they do break down, they cost less to repair."

Warrantech declined to cite a specific example of the cost savings at wholesale or retail, citing proprietary data. Besides, dealerships set retail prices for the service contracts, and there are other inputs to pricing besides reliability, Folz said.

Rearview mirror

Warrantech uses claims history two ways.

The first is to set wholesale pricing for extended service contracts marketed under its own brand names, as well as for other clients. Warrantech clients are dealerships, dealership groups, financial institutions and automakers, Folz said.

Naturally, prices also vary greatly by how much is covered and for how long. For example, bumper-to-bumper coverage costs more than basic powertrain coverage. Prices can vary from car to car. Or to keep pricing simple, prices may be averaged out across categories, such as Asian, European or domestic, Folz said.

Looking ahead

Warrantech also works with the insurance companies that back its extended service contracts to estimate how much the insurance companies should set aside in reserves against future claims.

The difference between reserves for a less-reliable car and a more-reliable car could be millions of dollars one way or the other for an insurer, Folz said. Reserves are a major component of the wholesale price of an extended service contract, she said.

"Accurate actuarial analysis can save an insurance carrier millions of dollars because insurance covers those claims from the first dollar to the last dollar," Folz said. "If they've underpriced that service contract, they still have to pay the claims."

You can reach Jim Henry at