Should You Get an Extended Warranty for Your Car? How Extended Warranties Work

What is an Extended Warranty?

An extended warranty is a type of coverage you can purchase for your car that will kick in once the initial factory warranty expires. It can be offered by either the manufacturer or a third-party company and can be purchased at any time before the factory warranty runs out. An extended warranty is sometimes referred to as a vehicle service contract, and can help cover costs for certain repairs that your car may need while you own it. It is important to carefully read the terms of the contract to understand what is and is not covered, and it might be a good idea to research the company who is providing the coverage to ensure they have a good reputation. Additionally, it is important to make sure that the warranty will be honored at the dealer or mechanic you plan on using, and if it will cover a broad network of other dealers. Finally, it may not be worth purchasing an extended warranty if your car is fairly reliable, as you may only end up paying for something you won’t use.

What are the Benefits of Purchasing an Extended Warranty for Your Car?

1. Extended coverage of defects and repairs

An extended warranty for cars, also known as a vehicle service contract, provides coverage for certain car repair costs after your factory warranty expires. It can help protect you against mechanical breakdowns, manufacturer defects in materials or workmanship, and other costly repair expenses. Generally, extended warranties cover repairs for a specific period of time and miles, as stated in the contract. Depending on the contract, you may have to use a dealership, or you might be able to use your favorite repair facility. Certain items are not covered under any circumstance, such as environmental damages, wear-and-tear components, issues caused by theft or vandalism, improper maintenance, vehicle misuse or abuse, damage from accidents, routine maintenance needs, and non-mechanical parts.

2. Convenience of one-stop repair

The convenience of having one-stop repair services offered by extended warranty companies like CARCHEX can help to save car owners money and provide a greater level of protection against car repairs. With extended warranties, car owners can easily access sample contracts online and get personalized help from agents. Additionally, they are not required to submit vehicle inspections or make huge upfront payments, making it easier and more affordable to purchase an extended warranty. Furthermore, the network of over 30,000 authorized mechanics gives car owners greater freedom to choose which mechanic they want to use and they will receive direct claims payment to the repair shop. Finally, the trip interruption benefits and rental car coverage that are offered with extended warranties can help to lower repair costs further. All of these factors make it easier for car owners to purchase an extended warranty for their car and feel more secure knowing they have the protection against unexpected repairs.

3. Protection against unexpected expenses

The purpose of purchasing an extended warranty for your car is to provide you with peace of mind and financial protection in case of a costly, unexpected repair. An extended warranty is similar to an insurance policy, in that you pay a small monthly fee in exchange for coverage specified in the contract. This coverage can save you money if your car needs a repair that’s covered under your contract, as you will only be responsible for covering the deductible (if you have one) and the warranty provider will pay for the rest. Additionally, having an extended warranty can help provide protection and peace of mind if you’re worried about how you’ll pay for a repair. It’s important to note that the cost of the coverage will depend on factors such as the make and model of your car, age of the vehicle, vehicle mileage, and driving history, so it’s best to purchase the coverage earlier in your vehicle’s life.

4. Additional peace of mind

An extended warranty for your car can provide a certain level of peace of mind by protecting you from unexpected repair costs. You will know exactly how much you are paying for your coverage each month and you will be able to rest assured that if a covered repair is needed, you will not have to deplete your savings to pay for it. Additionally, some extended warranties can be transferred to a car’s new owner, increasing the car’s resale value. Ultimately, if you are someone who worries about the cost of car repairs and needs the peace of mind of knowing you are covered, an extended warranty could be a good option.

5. Ability to choose the level of coverage

If you are considering an extended warranty for your car, the ability to choose from multiple coverage plans that offer varying levels of protection can greatly affect your decision. With a third-party provider, you can customize your coverage based on your needs, allowing for more flexibility in cost, repair shop availability, and coverage options. Manufacturers typically offer less flexible plans with shorter term lengths, meaning you would have to renew coverage more frequently. They may also require you to take your vehicle to a dealership for repairs and use only genuine brand parts and service. Third-party providers offer plans with term lengths up to 15 years and 250,000 miles, giving drivers who plan on keeping their car for a long time more coverage options. Additionally, they offer access to thousands of authorized repair shops across the U.S., allowing you to choose from larger selection of repair facilities. Ultimately, the decision to purchase an extended warranty for your car depends on your individual needs and budget, but having the ability to choose the level of coverage can be a major factor in the decision-making process.

6. Knowledge that the car will be properly repaired

An extended warranty can provide drivers with peace of mind when it comes to car repairs. If a car experiences a problem that is covered under the warranty, the driver can take it to a repair facility or a dealership and have the repair done quickly and easily. The warranty company will then reimburse the driver or pay the mechanic directly for the covered repair expenses, minus any deductible costs. In addition, an extended warranty can help to ensure that any repairs are done properly by authorized dealers or repair shops. This can help to ensure that the car is repaired properly and also offers the assurance that any necessary repairs will be covered.

7. Ability to save on repair costs

Purchasing an extended warranty can help save money on repair costs by providing coverage for expensive repairs. Instead of paying the entire cost of the repair out of pocket, the warranty provider will cover the repair costs after the deductible (if any) is paid. An extended warranty can also provide peace of mind for those who are worried about how they would pay for a costly repair. Depending on the plan, an extended warranty may also cover corrosion damage, giving drivers the freedom to take road trips without worrying about their car’s potential rust damage.

8. Coverage of newer parts and systems

An extended warranty for cars can cover a variety of parts and systems, depending on the type of warranty purchased. There are three main types of warranties available: powertrain warranty, stated-component coverage, and bumper-to-bumper warranty.

A powertrain warranty covers only the most critical parts of the engine, transmission, and drive axle. Stated-component coverage is also known as an exclusionary warranty, covering all parts except for a short list of excluded parts. Lastly, bumper-to-bumper warranty is similar to the factory warranty on a new vehicle and covers most car parts in the event of mechanical failure.

In addition to these main warranty types, many warranty companies also offer levels of coverage in between these.

9. Car manufacturers’ warranties

Car manufacturers’ warranties are a type of protection provided by a car manufacturer to cover any manufacturing faults or defects in a new vehicle. Generally, they provide three years or 36,000 miles of bumper-to-bumper coverage and five years or 60,000 of powertrain warranty protection. Some automakers even offer up to 10 years or more of coverage. These warranties are important for car buyers to purchase because they guarantee coverage for any repairs that might need to be done while the warranty is in place. Additionally, some automakers include a maintenance plan in the purchase price of a car or offer optional maintenance packages, which are separate from warranty coverage, but can be beneficial for car owners in terms of saving money on maintenance costs. An extended warranty from an aftermarket warranty company can last up to 10 years and offer more coverage for car owners who want additional protection.

10. Warranty service visits and reimbursement

An extended warranty for cars typically covers the cost of repairs and replacement parts needed to address a problem covered by the contract. Generally, a third-party extended warranty will cover parts, labor, and even towing for covered repairs. Depending on the coverage level you select, you may have to pay a deductible each time you have a repair done. Generally, extended warranties require you to use an authorized repair shop or dealership, although some providers allow you to use any repair shop of your choice. Some warranties may also provide coverage for rental cars if your vehicle needs to be in the shop for an extended period of time. In addition, most extended warranties are transferable if you sell your vehicle, although there may be a transfer fee associated. Lastly, most extended warranties offer a prorated refund if you decide to cancel the policy before it expires.

How Much Does an Extended Warranty for Cars Typically Cost?

An extended car warranty typically costs anywhere from $1,500 to $3,000, depending on a variety of factors such as the make and model of the car, its age, mileage, condition, and the amount of coverage included. Other factors such as the deductible amount and the number of high-tech parts can also affect the cost. Many providers charge a monthly payment which is roughly two-times the estimated cost of repairs. If you want to get the best deal, it’s a good idea to shop around and get quotes from multiple sources, including your car’s manufacturer or a third-party company. You may also want to consider mechanical breakdown insurance (MBI), which offers similar coverage at a much lower cost.