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Extended Car Warranty

Last Modified: May 09, 2018 by Jeff Ostroff | Originally Published August 28, 1999

In this section, we'll teach you everything you need to know about buying a new or used car extended warranty. We'll clarify the various options and what they mean to you. We'll point out the scams that you are likely to encounter, both at dealerships and when dealing with third party warranty companies. Be sure to read our complete guide on extended car warranties, including the related content. One wrong step can cost you thousands of dollars. We make sure you are properly educated on all pertinent topics:

Extended Car Warranty

An extended car warranty is a product that extends the term of the original warranty provided by the manufacturer of a vehicle. Legally, only the manufacturer of a product can offer you an extended warranty and refer to it as such. However, many third parties sell "vehicle service contracts" that give you the same type of coverage for a much lower price.

as is no warranty sticker

Each coverage contract is slightly different and may not exactly replicate the manufacturer's original warranty. There are different levels of coverage that you can purchase as well as different deductible options. There can be a lot of confusion and opportunities to make mistakes and buy the wrong coverage.

In the related pages we have all of the in depth information that you will need to get a complete understanding about related topics such as:

Car Under Repair

Extended Warranties Can Protect Your Wallet

In a nutshell, any warranty is insurance against future high cost repairs. You pay a known upfront cost so you can avoid getting hit with unexpected expenses when something breaks. They are available for both new and used cars.

Vehicle Service Contracts are the most confusing "product" car dealers sell. The language is tricky and difficult to understand. We are here to clear it up for you. There is a large profit for the dealership in this "product" that they almost force on you, so you can expect high pressure sales tactics.

Buying extended coverage from a reputable third party company instead of the dealership will always get you a better deal.

The level of protection available ranges from the least expensive "big ticket item" coverage to the most expensive "bumper to bumper" plans. We have done research in this area. We have found the companies that offer the most complete coverage at the lowest prices. Reviews are below. We will discuss the unique features of the CARCHEX compete model. Then we will cover WarrantyDirect, another high quality provider.

Your premiums are deposited in a "claims reserve account." It is insured in case the administrator goes belly up.

Tips

Why we like CARCHEX and the "compete" model

Just like buying a car, I always encourage shopping around for the best price. The CARCHEX "compete" model is like shopping around. They offer coverage from multiple top tier administrators including their own products to ensure the highest level of coverage at the best price.

Do You Need Extended Coverage?

25 years ago people would have definitely answered yes to an extended car warranty. They knew that cars, especially from American manufacturers, were not reliable. Does anybody remember the Chevy Vega? A trip to the shop was as common as a morning coffee.

Now, there is a false sense of security because cars are getting more reliable. Better made, cars with over 100,000 miles are common and previously unthinkable.

Reliability that hints to a less likelihood of a breakdown and a hesitation of getting an extended warranty which is a mistake.

Every situation is unique and coverage will differ but one covered repair can pay for the entire cost of the plan.

On the other hand, there are situations where it doesn't make sense to buy extended coverage. Use our simple guide below to assist in making your decision. Everybody's situation will be different

Car Under Repair

When You Should Consider Coverage

  • You purchased a used vehicle that is past the factory warranty period
  • You bought a new car and plan to keep it longer than the manufacturers coverage
  • You plan to eventually sell your car to a private party and want to increase resale value

When You Don't Need Extended Warranty Coverage

  • You plan to trade in or sell the car before the manufacturers coverage expires
  • Lease Specific Cases:
    • If you are leasing and covered by the manufacturers warranty - It is a scam for a dealer to sell you a plan!
    • Your lease duration is less than or equal to the manufacturers warranty
    • You will not exceed the mileage limit of the factory coverage during the lease period

Quality Coverage for California Residents

California PlateGood news for California residents. We recommend two extended car warranty coverage companies.

CARCHEX is licensed to offer Mechanical Breakdown Insurance in California. Plans are available from high quality administrators. Each plan has four available levels of protection, deductible options, and up to seven years of coverage. Click here for a California quote from CARCHEX

WarrantyDirect offers extended coverage for California residents. They offer 3 levels of coverage and 3 deductible options. Policies are issued by General Fidelity Insurance Company (AM Best A- Excellent rating).

Type of Warranty Coverage to Buy

Ignore terms like "Bumper to Bumper" which is misused and abused. Every extended car warranty company has their own definition of the term and it will not match yours.

Get the right coverage for your car and fully consider what they are buying. An "extended warranty" does not mean a golden umbrella of protection that covers all. Read the contract, understand it and get help if needed.

No plan covers standard consumable items such as tires, batteries and windshield wipers. Don't expect coverage for glass, lenses, lights, trim, upholstery or paint. Plans won't cover exhaust systems, brake pads and rotors, shock absorbers and similar items. These items are standard exclusions, do not be alarmed.

Some plans have benefits such as towing, roadside assistance and car rental reimbursement. When they do, you must read the fine print carefully. These benefits typically don't kick in until the manufacturer's warranty has expired.

The Sooner You Buy, the Better the Price

Due to inflation, prices for extended car warranties will go up the longer you wait and the more mileage that you have on your vehicle equals higher cost. Never wait until the manufacturer's coverage expires, buy an extended plan with it to get a better extended plan.

What To Look For In a Contract

The wrong extended car warranty for a new car equals disaster and despair. For example, getting named component coverage instead of an exclusionary coverage. When repair isn't covered there is only pain.

I recommend that you buy auto warranties directly from the source. Most online car extended warranty contracts are more affordable and have better coverage than the dealer's offerings.

Coverage For Breakdown and Wear & Tear

Many extended car warranties only cover mechanical breakdown, not wear and tear. Most failures that need repairs can somehow be traced to "wear and tear." It is important that your plan covers both.

Most cheap plans will only cover mechanical breakdown. Most parts wear out and don't necessarily "break." This fact gives the administrator an out. I never recommend only buying mechanical breakdown coverage. It is a waste of money.

truck undercarriage

Well Funded and Insured Car Warranty Administrator

To ensure sufficient funds are available to pay a covered claim, choose an administrator with a highly rated insurer for their "Claims Reserve Account."

An Auto Warranty Contract that Takes Effect the Day You Buy It

Choose an auto extended warranty that starts the clock when you buy the car, not the coverage.

Reinsurance Should Have "A" Rating on A.M. Best

Re-insurers backup the insurance that protects the warranty. Consider it as fail safe.

$0 Deductible/One Deductible Per Visit

Some auto warranty contracts charge deductibles for every part repaired. Pay more and get $0 deductible.

100% Money Back Guarantee

Unhappy with your plan and have not made any claims? A 100% refund should be ready before 30 or 60 days.

Transferable When You Sell the Car

Some auto warranties end when you sell your car. Choose an auto warranty that allows you to transfer it to the next owner. This will help your car's resale value.

Don't Have To Buy It After Buying The Car

Most auto warranties allow you to buy later. But don't wait too long, buy at today's lower cost to protect against increases.

Coverage for ABS Brakes and Engine Overheating

If you have ABS brakes, verify your auto warranty covers them. Avoid clauses like "This contract does not cover overheating regardless of the cause."

Car Rental Reimbursement

Get a policy that includes car rental reimbursement. The benefit is for repairs covered by the warranty. Still covered by the manufacturer’s warranty? This is only a benefit if the dealership provides it. Ditch the pitch and ask them to show the contract!

Towing

I highly recommend a policy that covers towing. Towing may be an expensive part of the repair process. Just like car rental reimbursement mentioned above, it is only provided for covered repairs.

Trip Interruption

Many of the best policies include Trip Interruption reimbursement which protects you from meal and lodging expenses incurred due to a covered breakdown far from home. Typically, you have to be at least 100 miles from home to get the benefit. Check the policy limits and don't check in to the Ritz and expect a reimbursement!

Repairs Can Be Done at Any ASE Certified Repair Shop

Really bad warranties force you to have repairs done at the dealer where you purchased the warranty. Slightly better plans, require you to use a brand dealership (ie. take a Ford to a Ford dealership) for covered repairs. Very inconvenient, so go for the better warranties that allow repairs at any ASE certified shop.

One that Pays the Repair Shop Directly

Some warranties make you pay out of pocket for covered repairs. Since you need to be reimbursed, it gives them room to weasel out of paying. Even if they do pay, this can cause a financial hardship in the short term. Choose a warranty that pays the repair shop directly.

Deal With a Solid Company

Only buy coverage from companies with solid financials so they can actually pay your claims. The news over the last few years is littered with stories of companies that went under and left policy holders with worthless paper.

Car dealers will tell you that I'm making money with scare tactics. In reality, I'm uncovering tricks that will save you money!

Advertising Policy

Our Reviews of Warranty Companies

CARCHEX CARCHEX offers the "compete" model by offering policies from multiple top tier administrators including their own exclusive line of products. Their line of products was developed by combining their 14 years of industry experience with the backing of Assurant, Inc., one of the most respected insurance providers. They are now licensed to sell Mechanical Breakdown Insurance in California

I always say that you should shop around for the best price and coverage and CARCHEX makes that easy to do. They will make sure that you get the highest level of coverage at the best price, even if it is from another administrator. Most important to me is that they will let you see the contract for the coverage in the CARCHEX Direct system as they are talking to you. Everything is up front so you know exactly what you are getting. Read our full review >>

Get A Quote From CARCHEX or call them at 866-538-5986

Limited Time Offer: CARCHEX is offering $100 off all policies for CarBuyingTips.com visitors until June 30.


WarrantyDirect WarrantyDirect has the most coverage options of any company we have researched and 28 years of experience. They have been around through several full claims paying cycles. They are one of the largest brick-and-mortar warranty companies. Their warranties are accepted at more than 21,000 car dealerships and auto repair facilities. Most of their plans cover wear-and-tear failures, overheating, unlimited number of claims and include free sign and drive roadside assistance.

They offer more coverage than most. The coverage starts the day you buy, not the date the car was titled. WarrantyDirect has an excellent record with the Better Business Bureau (BBB) and WebAssured.com. They are licensed to sell coverage in California and Florida, the most stringent states when it comes to regulatory issues. They process over 7,000 claims every month. Read our full review >>

Get a Quote From WarrantyDirect.com or call them at 877-867-3580

Important Warnings About Car Warranties

warranty card

Caution About Manufacturer's 100,000 Mile Warranties

Many manufacturers are advertising very high mileage coverage. Don't get suckered in by the hype. You should focus on the word "limited." These are not full blown bumper to bumper warranties as they would have you believe. They are limited to the power train and do not cover the parts most likely to break. You should consider protecting your investment with a "bumper to bumper" extended warranty to cover these holes left by the manufacturer's limited coverage.

Tips for After You Buy the Warranty

Perform the Manufacturer's Scheduled Maintenance on Your Vehicle

oil cap

Don’t let companies weasel out of paying for repairs by maintaining your vehicle according to the manufacturer's schedule in the owner's manual. You must keep up with all the required maintenance. Make sure to perform oil, fluids and filter changes on time. Be sure to use only approved parts and fluids. Keep all receipts as proof that the proper maintenance has been performed. Some policies have maintenance logs in their contract books where you log each service performed on the car.

Avoid Issues When Making a Claim

Use the active manufacturer's warranty for repairs and go to a dealership. The extended coverage plan does not pay for repairs until the original warranty has expired.

When you need to make a claim, you want the process to be as smooth and hassle free as possible. Be prepared in advance and read our advice on the best practices for getting your claim approved.

CarBuyingTips.com has affiliate referral relationships with multiple web sites. This means that for many of the links you see on this site, we are paid referral fees for leads generated from visitors that click on links or fill out forms on this site. In some cases we are paid a commission for a purchase made on a site that is linked to from CarBuyingTips.com. Please view our advertising policy page for more information.