Auto Extended Warranties and Credit Unions

Mechanical Breakdown Insurance (MBI) can be a good alternative to aftermarket extended warranties. I discussed the differences and advantages in this previous post.

A common place to purchase MBI policies is from a credit union. The problem with credit unions, however, is that it can be difficult to find one in which you are eligible to join and also offers MBI policies. I found two national credit unions that anyone can join and offer MBI policies.

The first is Lockheed Federal Credit Union. You can be qualified to become a member by joining the non-profit Achievers Club. Their MBI policies are only available to California drivers.

The second is Pentagon Federal Credit Union (PenFed). You can become eligible to become a member even without military affiliation by joining the National Military Family Association. PenFed has an extensive site on its auto extended warranty policy which they call Mechanical Breakdown Protection (MBP).

At first I was thinking that Penfed was offering a MBI policy which is typical of most credit unions. However, after some research, I'm not sure. It may be a vehicle service contract. The policy is administered and underwritten by Mercury Select Management Company. According to California Department of Insurance's database, this company is licensed to provide vehicle service contracts.

Whether Penfed's policies are MBIs or vehicle service contracts, the policies seem worthwhile and something to consider. PenFed provides an instant quote tool for their MBP policies which works well. Also, they have detailed information on their policies. Some of the notable benefits of their policies include:

• cover 100% of all covered components, parts and labor charges including applicable taxes
• seals and gaskets are covered for all covered components
• no overheating exclusion
• wear and tear covered which results in mechanical breakdown of the part (excluding routine maintenance items)
• You can take your vehicle for repair to any licensed repair facility
• Once the repair is authorized and completed, they pay the repair facility/dealership immediately by credit card.
• can be transferred to any private party who purchases your vehicle

Another benefit is that the term of the contract begins on the date of the quote, not the car's in-service date. So if it's a 7-year/75K policy and your car is 3 years old, the term may last until the car is 10 years old (assuming the car's odometer stays below 75K).

I gave their instant quote tool a try with some sample vehicles. Here are the quotes that I received for their Platinum Coverage, 6-years/100k-miles, $0 deductible policies. I assumed 2002 models with 30K miles on them since a 3-year/36k-miles factory warranty is typical.

• BMW 3-Series - Cost: $2,015
• Ford Mustang GT - Cost: $1,605
• Chrysler PT Cruiser - Cost: $1,420
• Honda Civic - Cost: $1,210