For more information, visit CarEdge.com
Affiliate Disclosure: This post may contain affiliate links. If you make a purchase through one of these links, Greatful Moments may earn a commission at no additional cost to you. Thank you for supporting Greatful Moments.
Buying a car can be exciting, but it can also feel overwhelming. There is the vehicle itself, financing, insurance, taxes and fees—and then, just when you think you’re finished making decisions, you’re asked whether you want an extended warranty. But what exactly are you paying for?
The words “extended warranty” are often used broadly in the automotive industry, even though there can be an important distinction between a true manufacturer’s extended warranty and a third-party vehicle service contract.
Automotive retail analysts and car consumer advocates Ray and Zach Shefska of CarEdge offer information that can help consumers understand their options before agreeing to additional coverage.
What Is an Extended Car Warranty?
An extended warranty is additional coverage for certain repairs or services after a vehicle’s original manufacturer’s warranty expires. However, not every product called an “extended warranty” is technically a warranty.
A true extended warranty is provided by the vehicle’s manufacturer or dealer. A vehicle service contract, often sold by a third-party company, can provide additional repair coverage but is a different type of agreement.
Both are designed to help protect vehicle owners from unexpected repair bills, but consumers should know who is providing the coverage and exactly what the contract covers.
Do You Need an Extended Warranty?
There isn’t one answer that applies to every car buyer. Your decision may depend on the vehicle you’re purchasing, how long you plan to keep it, the manufacturer’s original warranty, the vehicle’s reliability and how comfortable you are paying for an unexpected repair yourself.
Buying a New Car– New vehicles generally come with a manufacturer’s warranty, although the length of coverage and mileage limits vary by manufacturer and vehicle. Before purchasing additional coverage, look at the warranty that already comes with the car.
If you plan to keep the vehicle beyond the manufacturer’s warranty period, additional coverage may be something you want to investigate. Don’t simply assume you need it because the finance office offers it. Take time to understand what you’re actually buying.
Buying a Used Car– Used vehicles can be a different story, particularly if the original manufacturer’s warranty has expired. An extended warranty or vehicle service contract may provide additional protection from certain unexpected repair expenses. On the other hand, you should consider the vehicle’s age, reliability, condition and your ability to pay for repairs yourself. For used vehicles, consumers may also find vehicle service contracts offered by third-party providers.
What Should You Look for in the Coverage? If you’re considering an extended warranty or vehicle service contract, don’t focus solely on the price. Read the contract and look at the details.
Duration and Mileage– How long does the coverage last? Is there a mileage limit? Make sure the coverage period actually matches how long you expect to own and drive the vehicle.
Covered Components– Find out exactly what systems and components are covered. Depending on the contract, coverage may include major components such as the engine, transmission and electrical systems. Don’t assume that “bumper-to-bumper” or similar language means everything is covered. The actual contract is what matters.
Exclusions– Every contract has exclusions. Regular maintenance and wear-and-tear items may not be covered, for example. Knowing what isn’t covered can be just as important as knowing what is covered.
Deductibles– Look at the deductible and understand when it applies. Is it charged once per repair visit, or could you have multiple deductibles associated with a repair? A seemingly inexpensive service contract can look very different once you understand the deductible.
Additional Benefits– Some contracts may include benefits such as roadside assistance or rental-car reimbursement. Those benefits may be useful, but they should still be considered alongside the actual repair coverage.
Should You Buy the Warranty at the Dealership? The dealership is not necessarily your only option. Dealerships may offer extended warranties or vehicle service contracts as part of the vehicle-buying process. While that can be convenient, consumers should compare the price, provider, coverage and exclusions with other available options.
You may also be able to purchase coverage directly from the vehicle manufacturer, depending on the vehicle and circumstances. Third-party companies also offer vehicle service contracts. The important thing is to compare the actual contracts rather than choosing based solely on the salesperson’s description or the monthly payment.
Don’t Sign Without Reading the Contract– This may be one of the most important parts of the entire process. Before agreeing to an extended warranty or vehicle service contract, ask to see the contract.
Look at:
- What is covered
- What is excluded
- The length of coverage
- Mileage limitations
- Deductibles
- Cancellation provisions
- Where repairs can be performed
- Roadside assistance or rental-car benefits
- Who administers the contract
If you don’t understand something, ask questions before signing.
The Bottom Line– An extended warranty or vehicle service contract isn’t automatically right or wrong for every car buyer. The decision comes down to the vehicle, the coverage being offered, the cost of the contract and your own willingness to take on unexpected repair expenses. The biggest lesson for consumers is simple: know what you’re buying before you sign.
Don’t let the words “extended warranty” make the decision for you. Find out whether you’re being offered a manufacturer’s warranty or a third-party vehicle service contract, read the actual agreement, compare coverage and prices, and make sure the protection makes sense for the vehicle you’re purchasing. A few extra minutes spent reading the fine print could help you make a much more informed decision at the dealership.
About CarEdge– CarEdge is a car consumer advocacy platform that provides resources designed to help shoppers make informed vehicle-buying decisions. The company offers car-shopping tools, dealer information, buying guides and educational videos.
For more information, visit CarEdge.com
Thank you,
Glenda, Charlie and David Cates
