After you have agreed to buy a new or used vehicle, you might be asked if you want to add an extended warranty to your purchase. You may have spent a lot of time negotiating the sale of your vehicle but are unsure about purchasing an extended warranty. The dealership may be trying to convince you to buy this pricey addition as you wonder how exactly this warranty works. Before you agree to this purchase, it is important to know exactly what you will be buying.

Although these warranties are profitable for dealerships, they can also be beneficial to drivers. Ask yourself how long you plan on keeping your car and how often it will be driven. Purchasing an extended warranty for used vehicles may be beneficial if the car seems likely to break down. On the other hand, some cars may not need any expensive repairs until after the warranty has expired. In the end, you must decide if the peace of mind of not having to cover unexpected repairs is worth the cost of the warranty or if you prefer to take your chances.

What is an extended warranty?

Also known as a service contract, an extended warranty on automobiles is essentially a maintenance agreement that is designed to offset the cost of repairs. You can add this warranty to new and used cars that already have bumper-to-bumper and powertrain warranties. These warranties for cars that have been purchased from a dealership will be initiated immediately after the manufacturer’s warranty expires. For used cars, the warranty may be transferable. Sometimes, sellers will include an extended warranty on used vehicles in order to attract potential buyers.

Typically, these warranties are used to cover the cost of auto repairs after factory warranties have expired. In order to keep from voiding your extended warranty purchase, you must perform regular maintenance on your car. Some warranties will not cover the cost of repairs if you cannot provide proof that your car has been serviced according to recommended guidelines. For this reason, it is suggested that drivers who get this warranty keep the receipts from all of their maintenance and repairs.

What does an extended warranty cover?

Auto extended warranty coverage generally serves as a safeguard against expensive and unexpected repairs. These repairs are covered for an agreed-upon amount of time and up to a certain number of miles. The conditions of this warranty can vary from plan to plan, but common repairs and maintenance items like brake pads, tires, air cleaners or oil changes are usually not covered. Additionally, some plans only cover specific parts or a portion of a vehicle, so ensure that you are aware of the extended warranty info for your particular plan.

Drivers also have the option to add extras to further define extended warranty coverage on their vehicle. Some common add-ons include towing, roadside assistance and trip interruption protection. In most cases, coverage options can be negotiated. Buyers are encouraged to only purchase extended warranty vehicle coverage options that fit their needs.

Extended Warranty Types

Extended warranties are offered in two primary forms, and they have numerous major differences. A dealer extended warranty is offered by the car makers whereas third-party warranties are handled by a separate organization. The differences between these types of extended warranties are detailed below.

Dealership Extended Warranty

The first type of extended warranty available is a dealership warranty, which is often backed by auto manufacturers. This is the most common type of extended warranty for used vehicles that have been manufacturer-certified. Often, these types of warranties will specify which franchised dealerships can perform repairs on your vehicle. Typically, the service department of the dealership where you purchased your vehicle will be authorized to perform any necessary repairs under this warranty.

Like all warranties, they differ in what they cover. Dealer extended warranties can come in bumper-to-bumper coverage or coverage for specific parts of the vehicle. Dealership warranties usually cover the repair of vehicles using original equipment manufacturer parts, which is their primary benefit over third-party warranties.

Third-Party Extended Warranty

Third-party warranties are also referred to as an aftermarket warranty. This type of extended warranty is handled by an independent party with no direct relationship with the auto manufacturer. The main advantage to this type of extended warranty for used vehicles is that you have more options to shop around. Different third-party companies can offer various coverage options at competitive rates. These plans are also beneficial because you are not limited to franchise dealerships for your repairs.

For third-party extended warranties, you may be asked to pay for your repairs upfront and then file a claim to reimbursed later. They may also require you to obtain approval before making any repairs to your vehicle. Finally, you may also have an extended warranty deductible that you have to pay before the third-party company covers the cost of repairs.

Note: Not all third-party companies are that same, and some may even try to scam you. It is important to verify that a third-party company is a reputable provided before you purchase an extended warranty from them.

Things to Consider With an Extended Auto Warranty

Before you decide whether or not you want extended warranty on your vehicle and the type of coverage that would be best for you, there are some factors to consider. These considerations include:

  • Whether or not the vehicle is still under the manufacturer’s warranty.
  • The length of time you plan to own the vehicle.
    • There is no need to purchase this type of warranty if you will not be keeping the vehicle for long.
  • Whether or not an extended warranty deductible is required for repairs.
  • Where the warranties allow you to make repairs.
  • Whether or not you plan on modifying or altering your vehicle.
    • This may cause your warranty to be voided.
  • Which option best suits your coverage needs.

How to Buy an Extended Warranty on a Car

Once you have considered the various warranty options and stipulations, you may be wondering how to get an extended warranty on your car. If you are looking for a dealer extended warranty, you can head directly to your dealership to make the purchase. For third-party extended warranties, you can find a reputable provider and contact the dealer directly. You can purchase an extended warranty at any time, but it is better to purchase one before your manufacturer’s warranty has expired in order to get a cheaper rate.

Note: Extended warranties do not have to be purchased when you purchase your vehicle.

Last updated on Friday, February 28 2020.