Extended Auto Warranty Buying Tips
Our extended warranty buyer's guide will teach you everything you ever wanted to know on how to find, research, select and purchase a new or used car extended auto warranty. Also known as vehicle service contracts when offered by a third party, these types of contracts can vary greatly in price, coverage or both.
The golden rule to buying an auto warranty is to research what's covered and what's not covered by the policy and don't overbuy coverage.
You have many choices when it comes to protecting your vehicle from mechanical breakdown. It can be very discouraging to know which company to choose and what type of coverage to buy. Select the right auto warranty and you're protected, select the wrong coverage and you may be paying thousands of dollars out of pocket, you thought would be covered by the policy.
We've taken the fear out of shopping for an auto warranty, and we'll teach you how to steer away from unethical companies and scams. We'll show you were to find free quotes online and use them to negotiate a better price with local dealerships in your area.
This section will provide you with the tools and insider tips to help you make an informed decision on how to select the best extended warranty coverage to meet your budget and driving needs.
Topics in this section:
- What is an extended auto warranty?
- Types of available warranty coverage?
- What to look for in a good extended warranty?
- Extended car warranty buying tips.
- Deal with a reputable company.
- Do you really need to buy a warranty for your car?
- What does "length of coverage" and "vehicle eligibility mean?
- When exactly should I buy an warranty for my car?
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.
Types of Available Coverage
I've personally witnessed customers blindly buy extended service contracts by just listening to the salesperson or finance manager's pitch. Many times salespeople will unknowingly (or knowingly) mislead customers by making statements such as, "bumper-to-bumper coverage" and "if it breaks, it's covered" when it's simply not true.
All warranties are not created equal, each provider has their own tiered levels of protection and they all have different names they go by.
Examples of tiered levels of coverage:
- Power train Coverage (lowest level and least expensive)
- Standard Coverage
- Comprehensive Coverage
- Ultra Wrap Coverage (highest level and most expensive)
Don't ever take a salesperson's word for what's covered on a plan. Salespeople will say whatever it takes for a sale. Each provider has their own explanation of "bumper-to-bumper," our advice is to do the research yourself and ask each company what their definition of the term is.
Warranty coverage we recommend:
- Mechanical Breakdown Coverage
- Wear and Tear Coverage
- Exclusionary Coverage
We recommend you purchase coverage that includes both "mechanical breakdown coverage" and "wear and tear" coverage. This will provide you with the greatest level of protection and not only cover large expensive items like engines and transmissions but also lesser, more common parts and systems.
You also want exclusionary coverage instead of an inclusionary policy. Exclusionary policies cover everything on the vehicle unless it is listed on the their exclusionary list. An inclusionary warranty only covers what is listed on the contract.
Online companies we recommend such as CARCHEX and Endurance Vehicle Protection offer these types of coverage's. Both these companies even provide copies of their actual contracts on their websites for your review.
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?
When you should avoid a warranty company:
- Customer complaints and satisfaction not strong with the Better Business Bureau.
- Policy is not transferable.
- You pay for repairs upfront and out of pocket.
- Cold calls to your home. (reputable companies don't operate this way)
- Extremely low prices, scare tactics or bad mouthing the competition.
- Limits on spending and repair costs.
- Very large exclusions list on what the plan will not cover.
- Lifetime or unlimited mileage contracts.
- You're solicited you through the mail claiming your warranty is expired.
Visit our section on how to select an extended auto warranty for more detail on how to research and select a good extended service contract.
Extended Auto Warranty Buying Tips
- 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?
Deal with a Trusted Extended Warranty Company
Instead of paying too much at a dealer, we recommend contacting online third party extended warranty companies such as CARCHEX and Endurance Vehicle Protection. These companies provide you with extended warranties, legally named extended service contracts, with equal or better coverage at a lot cheaper price than what the dealer will charge you.
These companies allow you to submit your vehicle's information to receive free, no-obligation warranty price quotes. No games, gimmicks or high pressure tactics...Just straight up coverage options from top administrators within the industry so you can decide on which level of protection is best for you. Once you've received your quotes, you can use them to leverage yourself when negotiating a warranty with a dealership.
My Recommended Extended Warranty Companies
CARCHEX is a pioneer in the auto warranty industry. In business for well over a decade, they have an A+ rating and are also an accredited business with the BBB.
Endurance Vehicle Protection offers a 30 day money-back guarantee. They are the direct administrator and obligor so you can rest assured, there's no middleman involved.
Do You Need to Buy a 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.
What is Length of Coverage and Vehicle Eligibility?
There are several different types of plans available for you to buy. You should not only consider the type of coverage for your vehicle but also how long you would like to be covered.
Most extended service contracts have a time and mileage limitation or "Length of Coverage." The longer the term and the higher mile limitation, the more expensive the policy will be.
Common Extended Warranty Coverage Lengths
- 24 months / 24,000 miles
- 36 months / 36,000 miles
- 48 months / 48,000 miles
- 60 months / 60,000 miles
- 60 months / 100,000 miles
The months will start on the date you purchase your vehicle, the coverage range can be anywhere from 3 months to 10 years. Always ask the warranty provider how much it would cost to add another year to your plan, it's normally pretty cheap and well worth the additional coverage.
Mileage calculations can be a little misleading. Some plans define the term mileage to be from mile zero and other plans mean additional mileage above and beyond the accumulative mileage at the date of purchase. This can have a huge impact on how long your vehicle will be protected.
Mileage example: You buy a car that already has 65,000 miles on it and the coverage you purchased is for 36 months / 100,000 miles showing on the odometer. You will only be covered for another 45,000 miles or when your odometer reads 100,000 miles. If you're coverage states an additional 100,000 miles, you will be covered all the way up to 165,000 miles.
Always inquire with the company you're dealing with to fully explain the mileage limitation of the policy you want to purchase. This information should be listed somewhere on the actual contract agreement you will sign also.
Be very careful with warranty companies offering unlimited mileage policies. These plans most likely have a hidden clause, hidden disclaimers, or their just a scam to get your money. Our advice is to avoid them.
Vehicle Coverage Eligibility
A vehicles age, make, model, and features such as engine size, turbo, diesel or 4x4 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.
Why Waiting to Buy an Auto Warranty May Cost More
You do not have to buy a warranty at the time you purchase your vehicle. However, the longer you wait and the more miles accumulated, the more it will cost you. Cost of coverage has a direct correlation to age and miles of the vehicle.
For example, an extended service contract for a brand new car with 89 miles on it will be cheaper than the same car a year old with 12,000 miles on the odometer.
The reason the plan's cheaper is because there is less risk for the provider. If you don't buy a warranty at the time you buy a vehicle, don't wait too long to finally purchase one.
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My Recommended Sites for Car Shopping
CARCHEX and Endurance Vehicle Protection are the quickest way to see what an extended warranty will cost you for the vehicle you're buying. These online sites will provide you with free, no-obligation quotes and the prices are normally pretty good. You can also use these quotes to negotiate an even better price with a dealership.
Share Your Tips - If you have any extended auto warranty tips that will help other car buyers save money. Please tell us about it in the comments below, so we can share it with everyone.