Fact #1: Most dealers bring their auto industry experience to bear when selecting the warranties they offer their consumers. They evaluate multiple providers choosing to go with the ones that offer them the best combination of coverage for the consumer and margin for the dealership.

Fact #2: Most dealers make considerable money on the sales of these warranties. In some cases dealer margins are close to 60% of the cost of a warranty.

The vast majority of extended auto warranties are sold through franchised or independent auto dealerships. There is significant benefit from having an experienced professional check out the references of the administrator, the underwriter, and the re-insurer. When choosing a warranty from a dealership, consumers generally benefit from the dealer's due diligence, but pay a premium for that service.

The determination of whether to buy your warranty from the dealer vs. direct may, therefore, be a function of your relationship with your dealer. If you have confidence in your dealer and are willing to pay for his/her experience, buy your warranty from your dealer and get peace of mind.

If you want to save that dealer markup and have time to invest in finding the right warranty provider, then buy direct. But, like the dealer, do your homework. This means buying from a reputable warranty administrator or their authorized representative. Learn about the reputation of the dealer and the administrator. Ask for references and check them out. You also can contact your local or state consumer protection office, state Department of Motor Vehicles, local Better Business Bureau, or local automobile dealers association to find out if they have public information on the firms. Look for the phone numbers and addresses in your telephone directory.

Find out how long the dealer or administrator has been in business, and try to determine whether they have the financial resources to meet their contractual obligations. Individual car dealers or dealer associations may set aside funds or buy insurance to cover future claims. Some independent companies are insured against a sudden rush of claims.