Service contract accolade? Not exactly

Jim Henry is a special correspondent for Automotive News

I thought I had a heck of a story earlier this month, at least within the narrow world of extended-service contracts. Service plan provider N.E.W. Customer Service Companies sent around a press release claiming that Consumer Reports, which had "led a charge against the extended warranty industry," had experienced a change of heart.

Well, no -- on a couple of counts. First, the Consumer Reports' article cited by N.E.W. was about appliances and consumer electronics and didn't apply to cars. Not only that, the article specifically states: "Extended warranties don't deliver." (I know, I know, "extended warranty" is not the correct name.)

What N.E.W. was driving at was that the Consumer Reports article noted "high product failure rates and shrinking manufacturers' warranties." That's true enough. However, it was N.E.W., not Consumer Reports, that said those factors make extended-service contracts a good idea.

In fact, Consumer Reports told me that the magazine's advice on extended-service contracts on cars remains lukewarm at best: "We counsel consumers to buy reliable cars," said spokesman Doug Love.

"If someone has their heart set on something that has a poor reliability record, then we suggest putting money aside in a repair fund that you can access if needed -- or pocket if it turns out the vehicle didn't need any big repairs," Love said. "If you still want the warranty, then we counsel folks to be sure to read the fine print and know what you're getting for the price paid, and know where you can take your vehicle for repairs."

Not what you'd call a ringing endorsement for extended-service contracts.

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