Which Matters More: Reputation or Warranty Coverage?

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Two of the factors most people consider when shopping for a new car are its overall reputation for quality and reliability (as well as that of the company which built it) and the warranty it comes with.

What’s interesting, when you think about it, is that some of the brands with the best reputation have not-so-great warranties – while some brands that aren’t reflexively considered “good bets” offer much better warranty coverage.

For example, the Japanese leaders – Toyota and Honda – offer fairly skimpy three year/36,000 mile basic/comprehensive warranty coverage with their new cars. And their “powertrain” warranties (the limited warranties that cover just the engine and transmission, etc.) are typically good for only five years or 60,000 miles. Contrast that with lesser-known brands such as Mitsubishi – which offers a much stronger five year/60,000 mile basic warranty and a lengthy, ten-year, 100,000 mile warranty on the powertrain.

You’ll discover similar disparities elsewhere – and not just from brand to brand but sometimes even within a brand, from model to model. (For example, General Motors offers better warranties on its Cadillac division models than its Chevrolet divisions models, even though all are built by the same company – GM – and in some cases, share parts – including identical engines – and are assembled in the same plants.)

But which is more important – the reputation for high-quality and reliability?

Or the superior warranty coverage?

Well, for openers, a reputation is less tangible than a warranty – which is a legally binding contract with clearly specified obligations that are enforceable by a court (if need be). If your car’s transmission fails while the vehicle is still “covered” then the expense of replacing it won’t be your responsibility.

You have that in writing – literally.

Also, it should be kept in mind that the automakers don’t pick the time/mileage intervals of their warranty coverages out of a hat. They do extensive durability studies “in-house” to give them a very good feel for the average lifespan of most major systems and components, such as engines and transmissions. They then base their warranty coverages on those average lifespan calculations, on the assumption that most of the cars won’t have problem “x” while covered under warranty.

It’s not a perfect system, but it’s reasonably accurate – sort of like the actuarial tables used by insurance underwriters. If it weren’t – if the cars started to fail or have problems en masse while still covered under warranty – the result would be a financial catastrophe for the automaker.

On the other hand, an unreliable car that’s either constantly in the shop or which you can’t depend on isn’t worth much to you, even if the actual expense of getting it repaired is paid for under the terms of the warranty. Sometimes, unanticipated problems just happen. Sometimes, a manufacturer with a not-so-great-reputation will try to buck up consumer confidence in its vehicles by offering super-comprehensive warranties that in some cases will cover most of the vehicle’s major components longer than the original buyer will own the car.

The truth is that it’s something of a gamble, either way.

A car with a great reputation but a mediocre warranty could still turn out to be trouble. The current Toyota debacle is Exhibit A. Six months ago, Toyota was the proverbial gold standard, as far as its reputation for building high-quality, reliable cars was concerned. People snapped up Toyotas – often at full MSRP “sticker” – without batting eye because of the confidence they felt in the Toyota name.

The reality, however, is proving to be a little different.

Meanwhile, makes that have proven less trouble-prone in the real world – even if they don’t yet have the established reputation – have had to resort to offering as much as twice the warranty coverage to get buyers to consider them.

Hyundai (and its sister company, Kia) are Exhibit B.

Bottom line: Don’t assume the car will be reliable just because it has a good reputation. There is often a lag between public perception/image and the actuality “on the ground.” If you’re old enough to remember the ’70s, you may recall that all Japanese cars – including Hondas and Toyotas – were once considered junk; it took many years for these companies to establish a reputation for high quality. And likewise, don’t assume that just because the car you’re looking at comes with a really exceptional warranty, it’s going to be exceptionally reliable.

Spending an hour online researching the facts about prior recalls and major known defects from the National Highway Traffic Safety Administration’s searchable database at http://www.recalls.gov/nhtsa.html and Consumer Reports detailed information about any given vehicle’s general record for upkeep costs and problems reported by owners (see http://www.consumerreports.org/cro/cars/index.htm) will help you decide which matters most, the “rep” – or the warranty.

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