Learn what extended car warranty is and how to choose the right one for you.
People tend to hold on to their cars for longer during an economic slowdown and, therefore, seek out ways to protect their wallets while continuing any warranty coverage they might have.
Besides driving less, one of the best options is to choose an extended warranty — a type of program that help cover significant repairs on a car even if it has passed the limit set by the manufacturer’s warranty.
In this article, we cover the important things you need to know about extended warranties, including what they cover and how to find the right one for you. We hope that you feel more confident about choosing an extended car warranty company by the time you finish reading.
How Extended Warranties Work
Also called a vehicle service contract, an extended car warranty is a way to protect your bank account from the burden of costly vehicle repairs. While most automakers offer warranties on new cars, very few help you when a vehicle has already past this original coverage period.
Part of the reason is that repairs are a major way for dealers to make money. As such, the automakers don’t want to step on the toes of a major part of their distribution network.
Another reason is that older vehicles are more prone to break down, and automakers don’t want to bear the massive financial risk of covering repairs on them.
Finally, if the car companies make it too easy for you to hold on to your old car, you probably won’t buy a new one, and this isn’t something car companies want. It’s called planned obsolescence.
However, several companies have popped up in recent years, offering extended car warranty programs for the owners of older vehicles. These programs help to cover the cost of major repairs such as engine and transmission problems and for many car owners to offer peace of mind.
These programs are not an extension of your manufacturer’s warranty, and as such, you need to check out the plans carefully before signing up. For example, some extended warranty programs have a waiting period, while other auto warranty options have no waiting period.
Also, many people think that, just because their manufacturer’s warranty hasn’t expired, they remain covered for everything. Again, this is where you need to check the fine print.
In many cases, bumper-to-bumper coverage will expire before the drivetrain warranty, so getting extended warranty to cover the expired portion of the manufacturer’s warranty sometimes makes sense.
Also, you don’t need to buy an extended car warranty from a dealer. It might be less expensive to purchase one directly from the company offering the coverage, as this means that you won’t have to pay the dealer’s commission.
Keep in mind that extended warranties — just like your manufacturer’s warranty — won’t pay for everything. This includes things such as oil changes and brake and tire replacement.
These are considered wear and tear items on your car, and it is exceedingly rare that any coverage will pay for them.
Are Extended Car Warranties Expensive?
While the amount you want to pay depends on the level of coverage you are looking for, the short answer is no.
The long answer is that the best way to use an extended car warranty is to consider the age of your car, how much you drive, and whether you can afford to quickly get a new vehicle if your current one needs a major repair.
By considering these factors, you can start to determine your requirements for an extended warranty. From there, you can search what level of protection extended warranty companies offer at a price you can afford.
Just keep in mind that the cost for basic coverage on an older or high-mileage vehicle might be more than a newer or low-mileage car. This primarily has to do with the risk associated with covering an older vehicle.
Still, if you are not sure, then you should reach out to the extended car warranty provider to get more information.
Buying an Extended Car Warranty
As mentioned, you probably don’t want to buy an extended car warranty directly from a car dealer. The reason is that dealers will get a commission on the sale – sometimes a hefty commission.
Instead, you want to shop around by contacting the warranty companies directly. This will give you a better chance to compare plans and see which one is right for you. Even if you are buying a low mileage used car, you still want to compare plans to see which one makes the most sense.
Besides costs, one important item that you want to check is the process the warranty company uses to pay the repair shop. Is it a case where you must pay first and then get reimbursed, or will the company pay the repair shop of your choice directly?
This could be the most critical aspect of getting extended coverage, as it will determine your out of pocket expense. Always remember that, sometimes, the cheapest plan is not the best.
Look for a plan that fits your needs and budget, one that makes it easy to pay for any future repairs.