When owning a car, one often encounters offers for extended warranties or service contracts, which rank among the most aggressively promoted products in the automotive industry.
This article explores extended warranty plans, including their functions, advantages, and disadvantages.
Defining an Extended Car Warranty
An extended auto warranty involves an agreement with a provider to cover specific repairs after a vehicle’s original factory warranty ends.
Also known as vehicle service contracts, these add-ons can range from approximately $1,000 to several thousand dollars. For certified pre-owned (CPO) vehicles, such coverage begins after the expiration of the CPO warranty.
Also Read: 7 Cars with the Best Warranty Coverage
Coverage Provided by Extended Car Warranties
Extended warranties come with varying levels of protection, addressing different car components.
Some closely replicate the comprehensive coverage found in new vehicle factory warranties, while others are limited to essential systems like the engine and transmission.
Providers typically offer tiered plans at varying prices, enabling consumers to choose based on their needs and budget.
Categories of Extended Warranties
Extended warranties generally fall into three categories: bumper-to-bumper, stated component, and powertrain coverage.
1. Bumper-to-Bumper Warranties: Often labeled as exclusionary warranties, these plans provide protection similar to a factory warranty, covering almost all vehicle parts except for explicitly excluded components.
2. Stated-Component Warranties: These warranties, also known as inclusionary plans, only protect parts explicitly listed in the contract. They tend to cost less than exclusionary warranties but require careful review to ensure coverage of common issues.
3. Powertrain Warranties: Designed to protect vital mechanical components such as the engine, transmission, and drivetrain, these plans exclude auxiliary systems like air conditioning or helmsmanship.
Exclusions in Extended Warranties
Routine maintenance, wear-and-tear items (e.g., tires, brakes, and wiper blades), and damage from neglect or abuse are generally not covered by these warranties.
Additionally, extended warranties may exclude coverage for modified vehicles or certain high-tech features, such as advanced infotainment or safety systems, depending on the specific agreement.
Added Perks of Extended Warranties
Some plans include benefits like roadside assistance or towing services, which can save hundreds of dollars in unexpected situations. These features provide a level of convenience and reassurance to vehicle owners.
Potential Issues with Extended Warranties
One of the major drawbacks of extended warranties is the possibility of spending thousands of dollars without ever using the coverage. Modern vehicles often have exceptional durability, reducing the likelihood of requiring such protection.
Additionally, the quality and reliability of warranty providers vary remarkable. It is crucial to research both the warranty company and the claims administrator to avoid complications.
Another challenge involves repair facility restrictions, as trusted mechanics may not always be part of the approved network.
Understanding Mechanical Breakdown Insurance (MBI)
Mechanical breakdown insurance offers coverage similar to an extended warranty but is typically available only for newer cars with low mileage.
While MBI often has higher deductibles, its universal cost is generally lower than that of extended warranties or service contracts.
Also Read: 6 Common Mistakes That Can Void Your Car Warranty and How to Protect It
Purchasing Options for Extended Warranties
Extended warranties can be obtained through various channels, including car dealerships, warranty providers, and financial institutions such as banks and credit unions.
Manufacturer-backed plans are often sold by dealers, while independent companies like CarShield, Autopom!, and Carchex also offer options.
Buyers should scrutinize the administrators behind third-party warranties, as branding may not always reflect the actual provider.
If you’re seeking additional protection for your vehicle, ensure thorough research and evaluation of available plans to make an informed decision.