Check the contract first. It will likely specify when used parts are required or are acceptable. Extended warranties through the manufacturer often will specify "remanufactured" parts which are essentially new but made with used housings and other parts that don't wear out. They will never specify used parts. It's the aftermarket warranties that are the problem. A very large percentage of the cost goes back to the person who sold it to you as a commission. Very little goes to buy the insurance. Years ago the salespeople at the Chrysler dealership I worked for suggested to their customers the insurance cost more than the typical repairs it covered. With all the computers and electrical problems on newer cars, that doesn't apply so much anymore. GM is by far the worst manufacturer when it comes to adding an insane computer to every part of the car, but all manufacturers tend to follow whatever ideas GM comes up with to separate owners from their money. Now it's a harder decision whether or not to buy a contract.
Another problem, as I mentioned earlier, is the "what you need isn't covered" syndrome. The way the system was supposed to work was the repair shop calls the insurance company, not you, for approval of the repair. That put the service writer in the middle. He was the one who had to tell you the bill wasn't covered and you would have to pay for the repairs. When the repair WAS approved, you drove away with a repaired car, and the repair shop was left with an unpaid bill. The longer it takes for the bill to be paid, the longer that company has use of the money.
I know new car dealers have flashy showrooms but if you saw the list of all the costs they have associated with running the business, you would wonder how they manage to stay in business. Unpaid repair bills are a concern to the accountants. To avoid waiting for those companies to pay, most repair shops now require you to pay the bill, then leave it up to you to argue with the insurance company and wait to be reimbursed. Car owners seem to get better results because they are the customers. The insurance companies don't care if they make the repair shops angry.
Sorry if I sound cynical. Perhaps not all insurance companies are miserable to work with, but I overheard too many stories at the dealership from upset car owners. The people behind the service counter are just as unhappy about the complexity of new cars and the high cost of repairs as their customers are. One thing you might consider is most of these companies let you cash in the remainder of the contract, then you can put that money toward the repair.
Thursday, February 10th, 2011 AT 2:00 AM