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Repetitious & Unanimous: Don't Accept 50/50 Warranties

Popular wisdom has it that the biggest problem with 50/50 warranties is the opportunity they create for overcharges. If the job costs $50, the warrantor will tell you it cost them $100, and charge you half -- er, um, $50.

You think you're splitting the cost of repair with the dealer, but they're tricking you into paying the whole bill. You think your used auto is covered by a warranty, but in reality it's not.

A Chorus of Critics

There are a whole bunch of credit unions on the Web that seem to have borrowed heavily from each others' advice pages. Not only the wording is similar; they also each repeat that single example of the $50 repair inflating into a $100 repair, which is then split 50/50 with the customer.

See if you can spot the similarities below:

from: Research Federal Credit Union, Warren MI

"Talk warranty after you've settled on the price. And never accept a 50/50 warranty--the dealer pays half of warranty-covered expenses. On any vehicle, fight for at least a 30-day, 100% drivetrain warranty. If you're also thinking about buying an extended service agreement, remember that the price of a service agreement usually is negotiable, too."

from: LBS Financial Credit Union, Long Beach CA

"Talk warranty after you've settled on the price. And never accept a 50/50 warranty--the dealer pays half of warranty-covered expenses. On any vehicle, fight for at least a 30-day, 100% drive train warranty. If you're also thinking about buying an extended service agreement, remember that the price of a service agreement usually is negotiable, too."

from: Digital Federal Credit Union, Marlborough MA

"The warranty to avoid is any “50/50” warranty. It's you pay half, they pay half. What's the problem here? If you have a $50 repair, some dealer's shops will bill you $100. Your fifty percent now just happens to be the whole bill."

from: Credit Union National Association Inc., Madison WI

"The warranty to avoid: any "50/50" warranty. You know—you pay half, they pay half. What's the problem here? Split what should be a $50 repair, and some dealers will give you a bill for $100. Your 50% now just happens to be the whole bill."

from: First New England Federal Credit Union, East Hartford CT

The warranty to fight for: A free ninety-day, 100% Drive Train Warranty. Under the terms of this warranty the seller will repair anything that makes the car run for three months. Power windows and the like aren't covered, but you can live with that. If you can't get a free ninety-day warranty, try for a sixty or thirty day.

The warranty to avoid: Any "50/50" warranty. You know, you pay half, they pay half. What's the problem here? Have a $50 repair, and some dealers will give you a bill for $100. Your fifty percent now just happens to be the whole bill.

In contrast to all these think-alike credit unions, Edmunds.com Inc. remains neutral on the subject of 50/50 warranties in its advice column about buying and selling used cars.

Instead of endorsing or criticizing 50/50 warranties, the Edmunds column merely suggests that the seller provide a written warranty, and that the buyer take the time to understand what percentage of the work is covered. In other words, disclosure of the percentages is more important than any specific number.

In another Edmunds column entitled "Games Dealers Play," the topics of extended warranties and 50/50 warranties aren't even mentioned. Given the way the credit unions go into detail to explain what they perceive to be the unfair rules of the 50/50 warranty game, this omission by Edmunds is more than peculiar.

Don't Be a Fool

The Motley Fool, normally an investment advice magazine, once carried a 13-part column called Buying a Used Car. In the last part of that comprehensive piece, author Paul Maghielse pulls no punches in his damnation of 50/50 warranties:

"Used car lots are notorious for enticing buyers with an extended mileage "50/50" warranty, or some such beast. This warranty makes them a lot of money. How? Well, they pay half the parts and half the labor on the work performed, but, here's the clincher, they perform the work and set the rates. It's dealer shysterism at its worst, so don't fall into this money pit even if they are giving it to you for free."

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