Warranties for Hummers
Updated July 11, 2006
By Ben Evans
The Exotic Warranty Company
(out of business)
By the amount of claims, and the cost of the repairs, I don't know why ALL H1 owners don't have a warranty. We're at about 130% payout ratio on our H1 policies now, and most of them aren't even 1/2 done with their time/mile limit yet. It's a big money loser for warranty companies. (This is reflected in our new rates being substantially more).
IMHO, GMPP will be cheaper than my company now, and that's who I'd hit for the policy. If you can't get one through GMPP, my company is still a viable option, but you will either make a good return on the policy, or return not much of the money. It's hit or miss. Those who use the policies make out like bandits. Those who never make claims seem to never make claims at all.
On another note, the parts you mention prices for in your consideration for if you want a warranty or not, are not parts that fail often. If your engine was a 6.5L TD I'd be concerned only with the #8 issue of which AM General washed their hands of (we've tried trust me) since GM took them over. The vampire issue can be proactively fixed by adding something to the cooling loop I recall. The drive train on the H1 is rock solid.
The issues that I replace on a continual basis for Hummers are:
- Steering components
- Power- steering parts *galore* (PLASTIC pump on a HUMMER???)
- Turn signal levers
- Window/lock switches
- #8 Engines on 6.5L TD's (3 this year, 4th still pending)
- Seam-Split radiators
- HVAC leaks and blowers
- Half shafts (Although most are denied claims since most broke during user error off-roading)
- Leaky seals
- Geared hubs
- Lift pumps
That's just the list of stuff I can think of being common problems. Many on this list will tell you their H1's are problem-free. It's true, most H1's are problem free and break like "normal" cars do and at the same intervals. I am a strong and firm believer that there are about 1 of every 5 H1's that are just plain lemons. Why are they lemons? Strictly lack of scheduled maintenance. Such *may* be the issue on your 1995. I have found that if a customer has done his/her A/B/C scheduled maintenance in accordance with time AND mileage, AND not abused the H1, that there is rarely something that has a problem. Those that do a schedule C service every 3 years because that's what it takes to put the miles on are those who have the most troubles, and that cost me the most money. I'm happy never writing a H1 policy again, but if the customers want them at the current price where we will make 15% on the contracts all in general, that's great, and the product is there for you. You just have a 37.5% chance of making money on the contract -- which I don't believe is bad odds with a H1 and an uncertain past.
After re-reading this post, it may sound like I'm bitter -- Far from it. You should see the money we make off of Lamborghinis and Bentleys. It far surpasses what we lost on H1's thus far. I write in this tone to stress the urgency and importance of a *properly maintained* H1. If it doesn't have a service history, DUMP IT. Unless of course the truck was one that Chuck Kopelson owned where you know that it was above and beyond maintained, a service history is undeniably extremely important. RECENTLY serviced doesn't mean crap either -- If I don't do service for 3 years and then do a RECENT oil change (Schedule A service), it was still neglected for 3 years.
Since I'm gathering you're fairly new here, just a bit of background, I've personally owned 8 (eight) Hummer H1's in my life. I've only had hell and headaches with 2. The first one was my 1996 Hardtop, which was never maintained. The second was my 2000 Slant back (Stuff continually needing replacement) which had initial problems from sitting at the factory for almost 2 years. All the bugs on the Slant back are ironed out and the new owner must be happy with it since he has a warranty with me and hasn't had any problems in the last 6 months. The rest were solid trucks (although we did go through 5 or so power steering pumps on a different 2000 green wagon).
Oh, and weather plays a big impact on parts life. Park it outside in the winter and enjoy the slew of rust/corrosion related repairs. :) Strongly recommend a garage for the H1. Wash it after off-roading. etc..
(Disclaimer: I'm the President of The Exotic Warranty Company)
There are two warranty companies that offer contracts on H1's -- Mine, and GMPP. That's it. There have been a few in the past but none who have charged enough $ for the contracts to stay in business. When you say factory extended, I'm guessing you mean GMPP. Here's the differences between the two programs:
GMPP: Major Guard is their best coverage, it is 100% bumper to bumper less regular service and maintenance items. Their policies are only sold through dealers at a set rate, and dealers (depending on the state) are allowed to markup as they please. Other coverage choices are available such as Value Guard which is essentially an engine/tranny/fwd/rwd warranty for a much discounted price. They have been in business for a LONG time. A really long time.
Exotic: Premium coverage is 100% identical to Major Guard. Contract language is identical. Our policies are sold direct, and through dealers. Our dealers are allowed (depending on the state) to markup the contract as they see necessary. We have been in business about 1.5 years. Our RETAIL pricing is GMPP's WHOLESALE pricing. Since we don't have a payroll of nationwide adjusters and most everything is electronic, we have significantly less overhead than GMPP who is still all paper-based. Thus, the price is lower through us for the same coverage, however we haven't been in business as long as them.
General notes on warranties and the scams we have seen/learned:
The Florida department of Financial Services shut down and liquidated Exotic Warranty for violations having to do with the selling of contracts when they were not licensed/ authorized to do so. They had the wrong kind of license and were turned down in 2005 for the correct license due to a failure to meet the capital and surplus requirements of the Florida Insurance Code.
As of the liquidation date, April 12, 2006, all warranties issued by The Exotic Warranty Company and/ or any of its affiliates are cancelled. Under the Florida statues It looks like any dealer that sold an Exotic Warranty is responsible for the payment of any claims made under the contracts they sold.
ALL warranty companies are required by the State's Department of Insurance to carry a certain reserve pool at all times, and post performance bonds to ensure claims are paid if the company goes bankrupt. GMPP has them in place as Exotic does as well. This is how the good guys play.
IF the company is based overseas (as GMPP/Exotic are NOT), then other rules apply and they may not have to have *any* claims pool. So, if you are buying a Honda warranty from some Internet broker, be VERY careful who sells you the policy. It is imperative that if you don't know the company that you check that they are in good standing with their dealers with claims.
Also, typically the underwriters stay in business. We have a pretty simple way to figure out what to charge for a warranty. It's by looking at actuary tables of repairs on pools of the same cars. Usually when someone thinks their warranty company went out of business, it was actually the marketer that closed their doors. It's nowhere near as bad as some make it out to be.
So, there's some notes on GMPP, Exotic, and the industry as a whole. Hope it helps.
Being in the warranty business and fixing a ton of cars every day, here's my experience from least reliable: (4/29/2004)
3.) Hummer H1
4.) Mazda RX-7 series
Those 3 are the *big* money losers (hence rates getting ready to nearly double on the H1). I was surprised to see as many MB repairs as we do, it's never anything critical that breaks, usually just the luxury fluff which is highly expensive. Porsche's seem to just leak fluids every day. That's about all they are good for. ;) The Mazda RX is because the Apex seals in the rotary engines die very often and it requires a new engine every time for the tune of $5k Warranty Prices Raised.
We *will* make money on a majority of the contracts that we sell *now*. In the past we are losing money on nearly all the contracts. That said, if you buy a contract from us, there's a 35-40% chance that you will earn your premium back and then some. The other 60-65% of the warranty buyers will not make money with one, it will cost them more.
This is not unique to us, it's common across the industry. A good clean warranty company will run a 30% claims loss ratio. That means for every $100 they take in, they pay $30 back in claims for the entire life of the contract. Hummers are a different beast though.
Now that you know the true ratio of profits to claims, make your own decision if it's a gamble you want to take with less than blackjack odds.
What to Expect with Engine Problems
Your extended warranty might not cover the engine anyway depending on your coverage. Many warranty policies will only cover the
failed part and not the incidentals of the failed part. lets say your engine burns a exhaust valve and it takes out your cylinder wall ruining the engine. They will cover your valve and that's all. I have adjusters come out to the shop and the customer has to pay the
tear down fee and the warranty company will tell you to replace the failed part only.
In the past customers took these problems to their hummer dealer and told them they were losing a gallon of coolant every week and they got a free engine. After testing the engine at the plant they figured out that half the engines they had were good. Not enough engines failed because of the design to have a federal recall performed.
Ride complaints are now only "officially" covered during the first 2/32 of tread. The MTR is rated as a 30K tire under normal use according to Goodyear. After the 2/32 rule, claims are now covered on a one by one basis and it seems a lot has to do with the individual stores willingness to help you.
In my case, three of my tires are at 14/32 and one is at 9/32. The dealer claims the 9/32 tire cannot be attributed to the truck as the alignment front and rear is within spec. I've used NuCar for many years and they are usually straight shooters with me, I really can't complain. Goodyear says that tire has "abnormal wear" compared to the other 3 and will be excluded entirely. They will prorate a warranty on two of the other tires which the store feels are "extremely" out of round. This prorate will be approximately 50%. The forth tire is not bad enough to be warranted.
Bottom line, I have to purchase the tires from Goodyear at $316.00 per tire. Two will be half price. The retail centers have a memo not to mount any 2 piece wheels with bead-lock and run-flat due to not having the correct equipment. I suspect they can't get the O-rings and don't have the torque settings. So I will be spending $948.00 to replace tires on a truck with only 8140 miles. The truck will have to go back to the dealer to have the tires mounted