If you’ve ever been a car owner, you’ve probably been offered an extended warranty or service contract. Sold at car dealerships and by lenders, insurance companies and direct-to-consumer sellers, they’re one of the most aggressively marketed products you can buy.

They may be valuable for some car owners. Unfortunately, they can also be expensive, monumentally confusing and often unnecessary.

Once a vehicle’s factory warranty expires, you’re responsible for the cost of any repairs the car may need, even if a defect or poor workmanship caused the failure. You can protect yourself from the cost of repairs with an extended warranty or service contract, though the added coverage can come with a high price tag.

In this guide, we’ll look at what extended warranty plans are, what they cover, where to buy them and more.

What Is an Extended Warranty For a Car?

An extended auto warranty is a contract with a company to cover repairs after a vehicle’s factory warranty coverage expires. Extended warranties, sometimes called vehicle service contracts, are extra-cost add-on products that come with price tags ranging from around a thousand to several thousand dollars. In the case of a certified used car, an extended warranty plan goes into effect after its CPO warranty expires.

What Does an Extended Car Warranty Cover?

Extended warranties are available with varying coverage levels that cover different parts of a car. Some nearly mirror the bumper-to-bumper coverage of a new vehicle’s original factory warranty, while others are limited to specific vehicle components, such as engines and transmissions (powertrains). Many warranty providers offer various levels of coverage at different price points.

When an extended warranty covers an item, it typically includes the cost of the part and the labor to install it. Unlike an automaker’s basic warranty, most extended warranties and vehicle service contracts have deductibles that have to be paid when the repair is made.

Some extended warranty contracts cover periodic maintenance expenses, including oil changes, but most do not.

Types of Extended Warranties

The most common types of extended car warranties are bumper-to-bumper, stated component and powertrain extended warranties.

A bumper-to-bumper extended warranty plan is often referred to as an exclusionary extended warranty. This type of agreement approaches the level of coverage you get with your original factory warranty. It’s called an “exclusionary” warranty because it comes with a list of components that are not protected by the coverage.

A stated-component extended warranty, or inclusionary extended warranty, only covers those vehicle components listed in the contract. Inclusionary warranties are typically cheaper than exclusionary warranties. It is critical that you carefully check an inclusionary warranty’s list of stated components to ensure that it will take care of common problems with the vehicle you’re buying it for.

Powertrain extended warranties cover only the mechanical parts of a vehicle that make it go, such as its engine, transmission, axles and differentials. They don’t protect auxiliary systems, including air conditioners or navigation systems.

What Does an Extended Warranty Not Cover?

Like most warranties, extended warranties and vehicle service contracts don’t cover routine maintenance, wear items such as tires, brakes or wiper blades, collision damage or damage resulting from lack of maintenance or abuse. You should not expect heavily modified vehicles to be covered.

Depending on the type of vehicle service agreement or extended warranty you buy, certain vehicle systems or components may not be covered. That’s an important consideration if your car is outfitted with expensive high-tech wizardry, including complex infotainment systems, driver assistance and safety technologies.

While you typically won’t find extended warranty plans that cover your tires, many tire retailers will offer coverage that takes care of certain failures.

What Are Some Benefits of Extended Warranties?

The greatest benefit of an extended warranty is the protection you get from unexpected car repair bills. A transmission replacement can cost $5,000 or more, and many vehicle systems come with replacement costs well above $1,000. Though you have to pay for it, an extended car warranty gives you a more predictable cost of ownership.

As with car prices in general, the cost of fixing cars and the parts required to do so are getting more expensive. High-tech safety systems, infotainment technology and complex engine management computers are expensive items to fix. Unlike the old days, when a repair shop would fix problem parts, today’s auto shops increasingly replace pricy modules to correct issues.

Having an extended warranty gives owners peace of mind, especially when they plan to keep their cars a long time past the expiration of the original factory warranty. With more and more buyers taking out exceptionally long car loans, an extended warranty is a hedge against facing an expensive repair bill while still making monthly car payments…. Read More

Source By: cars.usnews