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Auto Warranties

There are a wide variety of vehicle warranties that can cover your car over its lifetime.  Warranties range from the original factory warranty to extended warranties and even mechanical breakdown insurance. The coverage they provide will vary making it important to understand the differences between warranty types. Below is a brief overview of the different warranties available:
Factory Warranties – If you are buying a new car its factory warranty will cover against certain issues. Most vehicles come with a 3-year/36,000 mile bumper to bumper warranty. The majority of manufacturers offer a longer warranty for the drivetrain, between 60,000 and 100,000 miles. There are often restrictions and exclusions so read the warranty carefully.  When this warranty expires you will be responsible for all repairs or will need an extended warranty.
Extended Warranties – These warranties take over where your factory warranty ends. You can buy one when you purchase a new or used car. They come in a number of different types and are referred to as service contracts, mechanical breakdown insurance or most commonly as extended auto warranties. Here is a quick breakdown of the various types of extended warranties in the marketplace:

  • Extended Auto Warranty – This is the most common type of extended auto warranty. These warranties are sold mainly at dealerships but also by online third party vendors. They offer varying grades of coverage so it is important to have a full understanding of the coverage and exclusions of these warranties.
  • Service Contract – Basically an extended auto warranty by a different name, they cover certain repair costs and routine maintenance. They often have numerous exclusions and are sold almost exclusively online.
  • Mechanical Breakdown Insurance – This is coverage that is only sold by a insurance agents. Very few insurance companies offer this type of coverage and there are a number of requirements which must be met. These policies only cover repairs due to mechanical breakdown. They policies offer no coverage for regular wear and tear and are only offered on vehicles with less than 15,000 miles on them.
  • Certified Used Cars – Most manufacturers sell certified used vehicles. Certified vehicles have been reconditioned and given the manufacturers stamp of approval. Due to the reconditioning these vehicles are sold with a limited bumper-to-bumper warranty, often around 12 months.

What You Need to Know

Extended warranties are binding legal contracts so it is imperative that you understand all terms and conditions have a complete understanding of the contract before you sign. Look for these items when comparing extended warranties:

  • Exclusions – This is key. A high quality extended warranty should offer coverage of all of the major parts of your car. Look for listed exclusions and if any of them are major components you should keep shopping. Common exclusions are tires, windshield wipers, brake drums and rotors as well as batteries.
  • Getting Service – Some warranties only allow the car to be serviced at specific service centers. You should avoid these warranties. If you are out of town it may not be possible to get the repair covered.
  • Deductibles – Deductibles are quite common with extended warranties. If possible find a warranty that doesn’t require a deductible. Look for per-visit deductibles and avoid per-repair deductibles.
  • Transferrable – Extended warranties ideally stay with the vehicle. This can be a good selling point when its time for a new car. Verify the warranty is transferrable before you buy.

What Auto Warranties Cost

The cost of an extended warranty will vary greatly and is based on the mileage and year of the vehicle. Prices can run from $500 up to  $2000 and the average is around $1000. Older, higher mileage vehicles will be more expensive and once a car has over 125,000 miles on it the policy will be often be too costly.

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