Extended Car Warranties: What’s Covered, What’s Not, and Is It Worth It?
Your vehicle is nearing the end of its factory warranty. You plan to keep it for a few more years, but worries about future repair bills concern you. What if something goes wrong with the engine or the transmission? Should you purchase an extended car warranty?
What Are Extended Car Warranties?
An extended car warranty covers the repair costs for major vehicle components if they malfunction. Unlike manufacturer warranties, which are typically in place for three to five years, an extended car warranty may last up to ten years or longer.
When purchasing a new car, the dealership may give you the option to buy an extended car warranty. You can also obtain one through third-party providers. There are usually some limitations to the purchase, such as buying it before the vehicle reaches a certain age or mileage.
Types of Extended Warranties
Not all extended warranties are created equal. Some cover most of a vehicle's parts, while others have specific limitations.
Powertrain Warranty
Powertrain warranties cover components that control the vehicle's torque, or engine power. Parts categorized as "powertrain" may include the vehicle's engine, transmission, differential, and axles, plus their supporting components, such as the timing belt or oil pan. These parts are often very expensive to repair, making this type of warranty attractive to owners who want to keep their car for the long haul.
Bumper-to-Bumper Warranty
A bumper-to-bumper warranty is the most comprehensive of all warranty types. It covers nearly every car component, from the engine to the trunk latch, as its name suggests. That includes the vehicle's AC and heating system, electronics, anti-theft system or device, and powertrain.
Drivetrain Warranty
Drivetrain warranties cover parts that transfer engine power to the wheels. Those components include the transmission, differential, drive shaft, and axles. However, it does not cover the car's engine.
The specific coverages of a drivetrain warranty can vary widely, so read the contract carefully to know what's included. Note that drivetrain warranties are rare — you're more likely to receive offers for powertrain or bumper-to-bumper coverage.
What Does an Extended Warranty Cover?
An extended warranty for cars pays the cost of repairs on covered components that break down or malfunction. It covers the expense of replacement parts and the labor to install it.
Some extended warranties require drivers to pay a deductible when they make a repair claim. Providers may also request that you have the repair done with specific mechanics in their network. If you opt to work with repair shops outside their purview, the provider may deny the claim.
What Isn't Covered?
Extended warranties won't cover repairs to items outside the contract. That's why it's critical to get clarity on what's included. Don't assume that every warranty provider's policy is the same, since some may offer more coverage than others.
As an example, assume you buy a powertrain warranty for your Ford SUV. The AC stops working, so you call the warranty provider to arrange repairs. They inform you that the AC isn't part of your coverage. This makes sense because the warranty only covers the powertrain. It isn't a bumper-to-bumper policy.
Extended warranties also won't cover routine maintenance or roadside assistance. You're responsible for oil changes, tire rotations, and filter replacements. It also doesn't pay for wear-and-tear, such as tire or brake pad replacements.
Factors Influencing Warranty Cost
You won't find warranties available in a one-size-fits-all pricing model. Instead, providers customize their pricing based on a few factors.
- Vehicle Age and Model: Providers expect older vehicles to have more repair issues, so they'll increase the coverage cost to compensate. Owning a premium luxury vehicle may also mean paying more for a policy.
- Mileage: High-mileage vehicles have already spent lots of time on the road, making their parts more prone to mechanical breakdowns (and a more expensive warranty).
- Provider: Warranties purchased through a manufacturer may be pricier than those bought from a third-party warranty company.
- Coverage Duration: A lengthier warranty comes with a higher price point since there's more time for parts to fail.
- Warranty Coverage: Policies that cover more parts are costlier than those with minimal coverage.
Pros and Cons of Extended Warranties
Buying an extended warranty is a tough decision. On one hand, it's nice to know you won't be financially blindsided if an expensive part fails. But warranties aren't perfect — they have their downsides, too. Here are a few benefits and drawbacks to consider before taking the plunge.
Pro: Repair Protection
These days, the average trip to the repair shop costs $838. And that's for relatively minor fixes. Something major, like a transmission replacement, costs thousands. Extended warranties save you the hefty bill, so you don't have to dig into your savings account or take out a loan.
Con: Might Never Need the Coverage
There's no guarantee you'll actually use the warranty. It's not a type of usage-based insurance. If the car runs smoothly during the entire length of your ownership, you'll pay for coverage you never use.
Pro: Retain the Vehicle Longer
Potential repair costs may dissuade owners from keeping their car past its manufacturer's warranty. Locating the best extended warranty for used cars allows owners to hold onto their vehicle longer, with less fear of mechanical failures.
Con: May Not Cover Everything
Warranties clearly define what's included in the contract. Unlisted parts aren't part of the warranty, so if they fail, you shoulder the bill for their repair.
Get a Free Quote
Locating the best extended car warranty starts with knowing what coverage you need. And while you're at it, find out if you're eligible for cheap car insurance through EverQuote. Our free service lets you compare custom insurance rates from multiple providers. Give it a try, and start saving today!