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Shopping for a Vehicle Extended Warranty

U.S. News & World Report
February 20, 2013
Shopping for a Vehicle Extended Warranty
Shopping for a Vehicle Extended Warranty

While used vehicles generally cost less than new vehicles, repair and maintenance costs can grow quickly after a few years of wear and tear, especially if your used car is no longer under warranty.

If your next car doesn’t have a warranty anymore, or you’d like some additional coverage, you might consider purchasing an extended warranty. Extended warranties can provide peace of mind because you know your car is protected if something major goes wrong. In some cases, extended warranties aren’t worth the extra cost, so it’s important to do some thorough research before buying one.

Is your vehicle still under warranty?

If the vehicle you’re considering is relatively new and has low mileage, you may decide you don’t need an extended warranty at all. Manufacturer warranties tend to be transferrable, as long as the vehicle hasn’t been in a bad accident or had updates that will cause the manufacturer to void coverage, so you may not need an extended warranty. Check the vehicle’s warranty information to get the specifics on what the manufacturer will and will not cover. Generally, new cars include basic, powertrain and corrosion warranties. Sometimes, roadside assistance is also included.

A basic warranty is the bumper-to-bumper coverage that comes on all new cars, generally covering everything except fluids and items that must be changed out during routine maintenance. Basic warranties usually last for three years or 36,000 miles, whichever comes first.

Powertrain warranties cover parts like the engine, transmission, axles and other mechanical gear that make the car move. Items that may wear due to environmental conditions, such as belts and hoses, may not be covered by powertrain warranties, but internal parts and accessories, such as the starter or alternator, are usually included. A typical powertrain warranty lasts for five years or 60,000 miles, though some automakers offer longer coverage. Hyundai, Kia and Mitsubishi, for example, have 10-year/100,000-mile powertrain warranties.

Manufacturer warranties that cover rust or corrosion ensure the body of your vehicle will stand the test of time. These warranties typically do not cover surface rust, though a hole in the body or frame would be subject to coverage. These warranties can last five to six years without a mileage limit.

No one wants to be stranded on the interstate, and fortunately, many new cars come with some sort of roadside assistance if your car breaks down, gets a flat tire or runs out of gas. Mercedes-Benz, for example, provides unlimited roadside assistance as long as your car is serviced at one of its dealerships.

Does your vehicle have good reliability?

After you’ve researched the manufacturer’s warranty coverage, it’s also wise to research the reliability ratings for the vehicle you want. J.D. Power and Associates provides vehicle reliability and dependability ratings. Your vehicle’s reliability rating will give some indication of whether an extended warranty will be an unnecessary expense or coverage that will save you money in the future. If you drive a foreign car, an extended warranty may also be a good idea, especially if parts and maintenance fees are costly and the model’s reliability is poor.

After you’ve considered vehicle reliability and are aware of any coverage your car still has, you probably know whether purchasing an extended warranty will provide peace of mind. If you’ve decided to green-light additional coverage, here are some things you’ll want to consider before you sign up.

Who’s covering it?

The vehicle manufacturer, dealer or an independent company can provide an extended warranty. If the repair is covered under the warranty agreement, the warranty provider will cover the repair. If the problem is not covered under the warranty agreement, you’ll have to pay out of pocket. 

Is there a deductible?

You’re likely considering an extended warranty so that you’ll save money down the road. For this reason, it’s important to know what your deductible is and how it’s structured. Some deductibles charge a set amount per visit, while others require a deductible that is paid per repair. A deductible that charges you per repair could add up to a lot more money out of pocket if your car needs more than one thing fixed.

Will you have to pay up front?

Assuming you decide to buy an extended warranty, you’ll want to know how a payment is handled when you bring your car in for repairs. Some extended warranties require that you send receipts from the shop to the warranty provider and wait to be reimbursed, which means that you’ll have to pay for the service up-front and get your money back later. These types of warranties are less desirable. It’s in your best interest to look for an extended warranty that will pay the shop or dealership directly, rather than stick you with the initial financial burden.

Know what’s covered

As you look at different extended warranties, it’s important to read the fine print and understand what is and isn’t covered. For example, some warranties have “breakdown” and “wear-and-tear” coverage. A “breakdown” warranty only applies to parts that break, but won’t cover parts that have stopped working properly due to use.

You should also find out if the warranty covers things like roadside assistance, towing and vehicle rentals. These are big ticket items that can be expensive if they’re not covered by the warranty you choose.

It’s also important to know if there are any other limitations on your new coverage. Ask if it works in other states, especially if you travel frequently or may sell the vehicle to a new owner. A transferrable extended warranty could carry a lot of value to potential buyers should you decide to sell your car down the road.