Written by: Carefree Auto | Published On: June 10, 2024
If you’ve ever had the opportunity to own a car, there’s a good chance you’ve been offered an extended warranty for your vehicle. Whether it’s at the dealership as you’re closing a deal or through the mail once you’ve owned the car for some time, the majority of car owners are bound to find themselves faced with a choice—to buy an extended car warranty or opt out.
While many people are familiar with extended car repair insurance due to the aggressive marketing approach sellers tend to take; it would be unwise to dismiss the product or overlook its potential value. If you find yourself caught between the warranty cost, confusion and the prospect of paying for repairs out of pocket, you’re not alone.
To help you make an informed choice regarding extended car warranties, we’ve put together a thorough guide to everything you should know about them. From the basics about what they are to the details about what they cover, you’ll find the information you need to make the right decision for you and your car here.
KEY TAKEAWAYS:
● Extended warranties provide coverage for car repairs beyond the manufacturer's warranty period, offered by third-party companies for a fee.
● Coverage options vary widely in terms of cost, coverage, and terms, necessitating careful consideration before committing.
● Extended warranties typically offer bumper-to-bumper or powertrain coverage, with some plans including routine maintenance but excluding wear items and damage from accidents.
● Bumper-to-bumper warranties mimic factory warranties, covering most components, while stated-component warranties focus on listed items, and powertrain warranties cover mechanical parts.
● Exclusions to coverage often include wear items like tires and brakes, along with damage from accidents or neglect, dictated by the contract terms.
● Extended warranties provide financial security for unexpected repair expenses, especially as cars become more complex and repairs more expensive.
● Costs vary based on factors like vehicle type, coverage level, location, and deductible, with negotiation advisable, particularly when purchasing from a dealership.
● Consider specific coverage needs, budget, deductible preferences, service flexibility, and provider reputation when shopping for extended warranties.
● Investing in an extended car warranty or car care plan is a proactive measure to safeguard your vehicle and finances from unexpected repairs.
What is an Extended Car Warranty?
At its core, an extended warranty for a car is exactly as it sounds—it offers coverage for repairs for an extended period of time. For example, a warranty of this variety will kick in once your manufacturer’s warranty or certified pre-owned warranty expires.
Sometimes referred to as vehicle service contracts, extended warranties are provided by companies (often third-party or separate from the vehicle manufacturer) for a fee. They are in addition to any standard manufacturer warranty.
When you start to break down what extended car warranties look like in action, you’ll see that there is massive variation in cost, coverage, terms and more. In other words, there’s a lot to learn before committing to a warranty for your vehicle.
What Do Extended Car Warranties Cover?
When considering investing your hard-earned money in a warranty, it’s wise to start with the coverage. The level of coverage offered plays a direct role in the value proposition of each particular car repair insurance plan, and choosing the one that fits your budget and needs is step number one. As you might expect, there is a spectrum of extended car warranty coverage that can be scaled to fit your unique situation.
Two of the primary categories to note are bumper-to-bumper coverage and powertrain coverage. Bumper-to-bumper essentially mimics the original factory warranty of a new vehicle, while powertrain is concerned with things like engines and transmissions.
Most plans offer a combination of these coverages, giving you an opportunity to choose a level of coverage that fits your needs and price point. Even routine expenses like regular maintenance and oil changes can be included in high-end extended car warranties, though this is rare.
Unlike a factory warranty, which tends to cover repairs, an extended car warranty will likely have a deductible. Even if a specific part or service is covered by your car repair insurance—including the labor to install the part or perform the service–you might be stuck with additional cost.
What are the Types of Extended Warranties for Vehicles?
While there is significant variation and interplay between plans, most extended warranties for cars fall predominantly into one of three categories. Getting familiar with these types of car repair insurance plans can help you sort through the myriad of available plans and choose the right one for you.
● Bumper-to-bumper extended warranties are usually close to comprehensive, leading to the term “exclusionary.” Rather than being defined by what they do cover, bumper-to-bumper warranties are characterized by what they don’t cover. As such, they typically include a list of components and services that are not included in the policy. Bumper-to-bumper extended warranties are generally the closest thing to an original factory warranty.
● Stated-component warranties are close to the opposite of bumper-to-bumper warranties. Sometimes called “inclusionary” warranties, coverage of this type only protects items listed in the contract. Because they tend to cover fewer components, stated-component warranties are less expensive on average than bumper-to-bumper options. If you are considering a stated-component warranty, be sure to thoroughly check the list of included components to confirm it covers problems that are most common for your vehicle.
● Powertrain warranties are designed to cover mechanical components, such as axles, differentials, engines and transmissions. To simplify, extended powertrain warranties cover the parts of the vehicle that make it move. Other systems, like electrical and navigational systems, are not covered.
What Parts Are Excluded by Extended Warranty Coverage?
When differentiating between extended car warranties and determining which (if any) is right for you, it is important to take note of what is not covered. Again, this list can vary between plans, but there are certain exclusions to look for and be aware of.
Most extended warranties do not cover wear items. This includes things like brakes, tires and wiper blades. They also omit damage caused by accidents, collisions, abuse, or deferred maintenance. Some extended auto warranties may cover routine maintenance—like oil changes—but it is uncommon.
The components that are covered by your extended car warranty will be determined by your contract. Some systems and parts may be covered, while others may be excluded. As cars become more complex, including the addition of driver’s assistance and safety features, it’s vital to confirm that the warranty you purchase covers the pertinent systems of your vehicle.
Keep in mind that, while wear items like tires are not typically covered by car repair insurance, retailers who sell such products often offer protection plans that account for certain defects or failures.
What are the Advantages of Extended Warranties?
With extended car repair insurance plans being costly investments, it’s fair to wonder if the benefits outweigh the financial implications. Before committing to a contract and spending your hard-earned money on an extended warranty, be sure to weigh the potential advantages against the cost.
While everyone views risk and reward differently, there are a handful of clear-cut benefits to protecting your vehicle with an extended warranty. Consider the following advantages and apply them to your situation to determine whether such a service contract is worth it to you.
● Unexpected vehicle repairs can be expensive. For example, a transmission can cost over $5,000 to replace. Other systems can rack up the repair bills, too, with many replacements or repairs costing over $1,000. Without a warranty, you would likely pay for these expenses out of pocket. An extended warranty can offer you peace of mind and financial security when these unexpected expenses arise.
● Car prices are going up, and with them, repairs are getting more expensive. Part of this is thanks to the rising complexity of vehicles. Technological advances are great, but they also make vehicles more complicated and expensive to maintain and fix. Extended warranties help offset these growing expenses.
● More and more repairs are done by replacing parts, modules and systems. In the past, a mechanic could diagnose an issue and repair specific parts. Now, entire modules are replaced instead. This translates to pricier fixes that can quickly add up.
● The length of car loans continues to expand, meaning that many people continue to make payments on their vehicles long after the factory warranty has expired. Protecting your asset by investing in an extended warranty can give you valuable peace of mind and confidence when faced with repairs and loan payments.
Warranty Cost – How Much Should You Pay for Extended Coverage?
With the benefits of extended car warranties in mind, it’s time to weigh the advantages against the downsides. For most people, the greatest deterrent to investing in vehicle repair coverage is the cost. So, how much does such a warranty cost?
Much like the level of coverage provided, cost can vary significantly. While the only way to know the exact expense is to find a specific plan, most extended warranties cost between $1,000 and $5,000. Where a warranty falls within that range is dependent on a number of factors, including the following.
● Your vehicle is among the most potent factors determining the price of the warranty. Its age, mileage, make and model are all significant considerations that can cause the price of a warranty to fluctuate.
● The type of warranty you choose is another major factor. If you choose bumper-to-bumper coverage, it will undoubtedly be more expensive than a powertrain warranty. So, choose carefully between bumper-to-bumper, stated-component, and powertrain warranties.
● Your physical location can play a role in determining the price. Many warranties are dictated by the region in which you live or buy your warranty.
● The cost of the deductible for repairs that are included in your plan can affect the warranty cost. The higher the deductible, the lower the price (as a general rule).
● The company providing the coverage.
Can You Negotiate Extended Car Warranty Cost?
Selecting an extended vehicle warranty is only half of the battle. Most warranties can be negotiated, giving you an opportunity to reduce the initial asking price the provider quotes you. This is particularly worth noting when purchasing your warranty at a car dealership.
Like most things in the automotive world, extended auto warranties are accompanied by high markups. So, if you are interested in protecting your vehicle with an extended warranty, it is wise to try to negotiate the initial quote down. A good place to start is half of the original price. From there, you can either negotiate further or look for coverage from a different company.
A common sales tactic is to rely on pressure. Salespeople will try to create a feeling of “now or never” to coerce you into a commitment. Rather than succumbing to this pressure, walk away and take the time to thoroughly research your options. That way, you can buy a warranty with confidence at a fair price.
What to Consider When Shopping for an Extended Auto Warranty
If you have decided that an extended car warranty is right for you, there are a few key factors to consider before committing to one.
● The coverage you need (or want) should be determined by your budget and the concerns specific to your vehicle. For example, a car equipped with expensive and complex electronics could prove costly to repair. In this scenario, you want to ensure those systems are covered. Look for a bumper-to-bumper warranty or a stated component plan that includes said systems.
● Warranty cost is bound to be one of the most influential factors in your decision-making process. Be sure to shop around for the best price and compare several options before settling for one. During this process, you should negotiate prices on the plans most appealing to you.
● The deductible an extended car warranty demands should be taken into account when choosing coverage. If a deductible is high, the cost of the plan should be lower (and vice versa). There are trade-offs to both ends of the spectrum, so strive to find the right balance for you.
● Some extended vehicle warranties dictate where you can get your car serviced. A good example of this is when purchasing coverage from a manufacturer. In situations such as these, you might be locked into having repairs performed at franchised car dealerships. Other plans—typically from independent companies—usually offer more flexibility.
● The reputation of the warranty provider matters and should play a role in your decision-making process. Do your homework, read online reviews and check with the Better Business Bureau to ensure the sellers (and any related companies) are trustworthy.
● Different plans pay for repairs in different ways. Choose a provider that pays for repairs in your preferred method, whether that be direct to the shop where the work is completed or as reimbursem*nt to you.
Be Preemptive by Investing in a Car Savings Plan
Your vehicle is a necessity, and protecting it is an investment worth making. Fortunately, extended warranties are not the only option to save you from financial stress should you experience car problems. Auto savings plans, like Carefree Auto, are a great choice for owners on a budget and offer benefits from maintenance discounts to repair reimbursem*nt and roadside assistance*. No matter what route you go, make sure you’re protected when the unexpected happens.
*A 30-day waiting period applies to the repair benefits and roadside assistance after plan activation. Other terms, conditions and exclusions apply.
The Carefree Auto blog is not meant to be a substitute for professional advice. The text and pictures within the content are intended for information purposes only. Readers should consult with a licensed mechanic or auto professional before seeking services.
The Carefree Auto Card is not insurance and Carefree Auto is not an insurance provider.
