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Extended Car Warranty

Last Modified: March 06, 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, 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

An Extended Warranty 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 extensive research in this area. We have found the companies that offer the most complete coverage at the lowest prices. Full 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.

Extended Warranty Tips

Why we like CARCHEX and the "compete" model

We have worked with CARCHEX for many years. Just like buying a car, I alway 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. They make sure that you get the highest level of coverage at the best possible price.

Do You Need Extended Warranty Coverage?

25 years ago people would have definitely answered yes. 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, many people have developed a false sense of security because cars are getting more reliable. Since they are better made, it is common to find cars with over 100,000 miles. Years ago that was almost unthinkable.

With reliability on the rise, people believe there is less likelihood of a breakdown. They may think they don't need an extended warranty. This type of thinking is a mistake.

You are more likely to keep your car longer since it is made better. The longer you keep anything, the more likely it is to require repairs. Due to the electronics and technology in today's vehicles, a repair is likely to be very expensive.

Whether or not you need coverage depends on your situation. The cost to repair today's high tech vehicles is rising. You don't want to get stuck with an expensive repair bill down the road. 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 PlateIf you live in California we have some good news. Coverage is available for you from the two companies that we recommend!

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 and deductible options. You can get 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). Click here for a California quote from WarrantyDirect.

Type of Warranty Coverage to Buy

Ignore terms like "Bumper to Bumper." That terminology is a vast wasteland of abuse, hype and misrepresentation. Every dealer and company has their own definition of what Bumper to Bumper really means. I guarantee it does not match your definition.

It is important for you to get the right coverage for your car. People buy coverage without considering what they are buying. People hear "extended warranty" and immediately think they are protected by some golden umbrella covering anything that goes wrong. Many people fail to read their contract. Without reading you can't understand the coverage. You need to know what to look for in the contact.

Keep in mind that 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. They also 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

Prices for the plans will go up the longer you wait. Just like most products, inflation will always be a factor in the cost. Additionally, the more mileage that you have on your vehicle, the higher the cost of extended coverage will be. Never wait until the manufacturer's coverage expires before buying an extended plan. In fact, you will get a better price if you buy while the manufacturer's coverage is still in effect.

What To Look For In An Extended Warranty Contract

People sometimes buy the wrong warranty for their new car. For example, getting named component coverage instead of an exclusionary coverage. Sometimes they pass altogether because some uninformed experts say warranties are useless. Did they ever have to pay $2,400 for a transmission repair? The most common mistakes people make can be traced to buying the wrong warranty. Later, they file complaints when they find out their repair isn't covered.

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.

Auto Warranty Coverage For Breakdown and Wear & Tear

Many 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. My friend didn't listen to my advice and his warranty company refused to cover a new switch module, claiming "wear and tear."

truck undercarriage

Well Funded and Insured Car Warranty Administrator

You want an administrator who uses a highly rated insurer for their "Claims Reserve Account." This ensures sufficient funds are available to pay a covered claim.

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

Most auto extended warranties start the clock when you buy the car, not the coverage. What if you end up waiting 12 months to buy a warranty? That time shouldn't count against you.

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

Re-insurers backup the insurance that protects the warranty. Should the insurer fail from excessive claims, the reinsurance kicks in.

$0 Deductible/One Deductible Per Visit

Some auto warranty contracts charge deductibles for every part repaired. Avoid the issue altogether and pay a bit more for $0 deductible.

100% Money Back Guarantee on your Extended Warranty

If you are unhappy with your extended plan and have not made any claims, they should refund 100% before 30 or 60 days.

Transferable Extended Auto Warranty 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 The Auto Warranty Immediately 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.

Warranty 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

You'll want a policy that includes car rental reimbursement. You will get this benefit for repairs covered by the extended warranty. If you are still covered by the manufacturers warranty you will not get this benefit unless the dealership provides it. Don't fall for a sales pitch that tells you otherwise, make them show you the contract!


I highly recommend a policy that covers towing. Depending are where you break down, towing can be a very 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 polices include Trip Interruption reimbursement. This coverage protects you from meal and lodging expenses incurred do to a covered breakdown when you are far from home. Typically, you will have to be at least 100 miles from your home address for this benefit to kick in. Make sure to check the policy limits. Don't check in to the Ritz and expect to be reimbursed!

Repairs Can Be Done at Any ASE Certified Repair Shop

Some really bad warranties force you to have repairs done at the dealer where you purchased the warranty. Other slightly better plans, required you to use a brand dealership (ie. take a Ford to a Ford dealership) for covered repairs. These requirements can be very inconvenient. The better warranties let you get repairs done at any ASE certified shop.

Auto Warranty 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 Warranty Company

It's very important to buy coverage from a company that has 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. I have done extensive research on all of the companies that we recommend. We have worked with these companies and our visitors to resolve various issues. Believe me, I hold them to everything they say. We review their financials, government audits and actuary audit statements. We verify they have enough funds in their claims reserve accounts to cover your repairs.

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 visitors until March 31.

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 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 or call them at 877-867-3580

Important Warnings About Extended 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 an Extended Warranty

Perform the Manufacturer's Scheduled Maintenance on Your Vehicle

oil cap

The warranty contracts warn you to maintain 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 companies are strict about this requirement. They use it to weasel out of paying for repairs that should be covered. Some policies have maintenance logs in their contract books where you log each service performed on the car.

Avoid Issues When Making a Claim

If you need a repair while the manufacturer's warranty is still in effect, you must 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. 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 Please view our advertising policy page for more information.