Extended auto warranty buyer’s guide.

What is an extended auto warranty?

By law, the maker of the product (vehicle) is the only one that can provide you with warranty coverage and refer to it as such.

When coverage is provided by a third party service provider, it is considered an after-market product. These types of policies go by different names, such as vehicle service contracts, extended service agreements, or mechanical breakdown agreements.

An extended warranty is a contract stating the warranty provider will repair or remedy any defects or damage when something breaks on the vehicle within a certain period of time or mileage. The seller will repair the vehicle and there will be no cost to the buyer unless otherwise stated in the contract agreement (deductible may or may not be required).

NOTE: Many times the dealer owns the company providing the extended warranty policies they sell. Car dealers make a ton of money selling extended warranties, it’s all a numbers game. Dealer’s sell way more policies than claims being made. This in turn makes for a profitable product. There are coverage plans are available for new and used cars alike. Keep in mind, If you buy a warranty for a new car, it will run concurrent with the manufacturer’s factory warranty. If you have a repair that’s covered the manufacturer’s warranty will take precedence until it has expired.

What to look for in a good extended warranty

• Always ask what is NOT covered and review it well.
• When does the mileage limitation start, mile zero or the mileage currently on the vehicle.
• How much is the deductible? (higher the deductible, the cheaper the warranty)
• Is the deductible “per visit” or “per repair item?”
• How many months and miles will your vehicle be protected?
• Can you choose any repair shop or dealership to have repairs done?
• Is the company certified with the Better Business Bureau?
• Does the company pay for repairs upfront with a corporate credit card?
• Is the policy transferable to another person or vehicle?
• Call their customer service line…How fast do they pick up and are they rude?
• Is the warranty provider insured and re-insured by a major company?
• Will the company pay claims for the life of the contract?

Additional extended auto warranty buying tips

The golden rule to buying an auto warranty is to research what’s covered and what’s not covered by the policy.  You will find this information on the warranty contract, normally found somewhere on the back in the fine print.

• Don’t overbuy coverage for your vehicle.
• Never take a salesperson’s word on what a plan covers.
• You don’t have to buy a warranty from a car dealership.
• Make sure you read the actual contract before signing anything.
• Don’t include (roll) the cost of a warranty into your car loan.
• Leave room in your budget for an extended service contract.
• Get competitive quotes before contacting a car dealership.
• The cheapest warranty is not always the best coverage for you.
• You don’t have to buy a policy at the same time you buy a car?

Do you really need to buy an auto warranty?

Vehicle technology is moving at an incredible pace, the repair costs for that technology is moving just as fast. There are some situations purchasing an extended warranty will be waste of money and other times when you should consider protecting your investment. Keep in mind that one costly repair could pay for your policy.

Reasons to think about purchasing an extended warranty:

• The vehicle’s manufacturer warranty is about to expire or has expired by miles or time limit.
• You plan on driving the vehicle for longer than the factory warranty coverage.
• Peace of mind when purchasing a vehicle with no coverage and higher mileage.

Most new cars sold have a comprehensive bumper-to-bumper warranty that covers the whole vehicle for at least 3 years or 36,000 miles (excluding consumable items such as clutches or brakes).

Why you may not want to buy an extended warranty:

• You will trade the vehicle before the factory coverage will expire.
• You’re leasing a vehicle for less than the manufacturer’s warranty term.
• You’re financially stable and can afford any possible future repairs.

No matter what situation you’re in, a dealer will attempt to sell you an extended service contract. They don’t care if you’re leasing or you trade your car every two years. All they want to do is put another “warranty sale” on the board. The decision to purchase coverage for your vehicle is ultimately up to you. If you’re still undecided if you should purchase a policy or not, here’s some auto warranty buying questions to ask yourself.

Vehicle coverage eligibility explained

A vehicles age, make, model, and features such as engine size, turbo, diesel or 4×4 will determine if a vehicle qualifies for a certain level of protection and the cost for that protection.

Some warranty providers have additional coverage supplements (additional fees) for certain items such as diesel engines, dual wheels, hybrid, one ton trucks, and turbochargers. Some policies may have an additional charge for sensor or technology package coverage.

Vehicle usage and history are also taken into consideration when considering eligibility. Business or commercial use will add to the cost of coverage. Some warranty providers will not cover certain vehicles such as salvage or branded titles, police vehicles, lemon law vehicles, gray market vehicles, trucks over a ton, and vehicle’s used as taxis.

Each auto warranty company has its own list of ineligible vehicles, you should inquire with the provider and find out if your vehicle is eligible before purchasing coverage.

You will want to know how your vehicle is equipped before contacting a warranty provider. It’s in your best interest to give them accurate information about your vehicle such as the exact mileage and options such as a turbocharger. This information has a direct reflection on the eligibility and price quoted to you for coverage.