Car Warranty Extension - Coverage, Prices and Providers

Akin to automotive insurance which provides your coverage and protection in the event of an accident, an extended warranty can cover your assets when it comes to mechanical breakdowns. One of the great uncertainties with a vehicle that is no longer covered by a manufacturer's warranty is “How much will it cost to fix this bad boy and get it back on the road quickly and safely?”. Shielding you from potentially large repair bills is the job of an extended warranty, but how to tell the good companies from the outright scammers? Read on.

Benefits of an Extended Car Warranty

  • Peace of mind. Many people when questioned as to why they are considering a new vehicle, one of the top reasons is the car is covered by a warranty, and that they do not have to worry about paying for unforeseen repairs. By removing this variable from car ownership, it places the owner more at ease.

  • Budgeting. By purchasing an extended warranty, it allows the owner to spread out a major portion of repairs over an agreed-upon period of time for an agreed-upon amount of money. Rather than having an unknown and potentially very pricey repair looming overhead, you can know that you will still have reliable transportation even when the inevitable happens.

  • Resale Value. Some plans are transferable. Cars under warranty are maintained better for a couple different reasons. Preventative maintenance is exactly that - service that is periodically performed to mitigate larger repairs. An owner will follow the maintenance guidelines as set forth by the manufacturer to stave off larger repairs on their own accord or as mandated by the extended warranty agreement. A better maintained vehicle that is also protected against large repair bills will command more money from the next owner.

Who Should Consider a Car Warranty Extension

  • Owners of unreliable brands. You may have already experienced this - you’re regularly having questions about why is my car acting up, making funny noises and what on earth is THAT light on the dash all about?!? If yours is one of those that constantly keeps you on your toes, or you wake up bolt upright out of bed but only to realize that WASN’T a dream, an extended warranty may be for you. Many times, the unreliable brand may also be a desirable brand and that’s the real reason why you put up with it. When you’re on a first name basis with your local repair shop and when they answer the phone it’s with the familiarity of a good high-school friend, you may want to consider an extended warranty.

  • Owners of expensive to repair brands. Having been in the car business almost 20 years and being a life-long car nut, I can name names but I won’t - to protect the not-so-innocent. Many times, to add insult to injury, the ones that are expensive to repair are also the unreliables ones too. Due to more exotic materials and very complex repair procedures (read lots of labor time), some vehicles just plain cost a lot to repair. Generally, the more expensive the car was to purchase new, the more bells and whistles it has - the more it will cost to maintain and repair. As my dad so eloquently put it, “It’s one more thing to break”. As a word of advice - if you’ve found a relatively new car that looks GREAT and costs pennies-on-the-dollar to buy today - there’s a reason why (barring a salvage title), it’s because it costs a fortune to repair. You’ve been warned.

  • Worriers. For some folks just plain worry, sorry - can’t help you there buuuuut if the thought of a large repair bill that can potentially sideline your vehicle keeps you up at night, an extended warranty may help alleviate those fears. The cost-to-benefit ratio may not be optimal, but if it helps you to have fewer qualms over your car, then the benefit is real.

This flowchart is designed to help you decide if a warranty is right for you.

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Types of Extended Car Warranties

Factory vs Third Party

There are two types of extended warranties - one provided by the vehicle manufacturer and one that is third party or aftermarket. The one provided by the manufacturer is usually known as Certified Pre-Owned and is backed by the manufacturer and completed at a branded new-vehicle dealership (of the same manufacturer). Third party is exactly that, one provided by a company that is not the manufacturer and where repairs are completed at the repair center of your choosing. Third party warranties can also be more tailored to your needs.

Inclusionary vs Exclusionary

There are two opposing thoughts in approaching how to cover mechanical breakdown coverage on your vehicle.

The inclusionary policy lists all of the components that are specifically covered by the policy. Keep in mind that the modern vehicle today is composed of approximately 30,000 parts, not every car uses the same parts or are built the same and different companies will even call the same part a different name. Case in point: A common failure item is a PCV valve - short Positive Crankcase Ventilation. That same or very similar component can also be called a Crankcase Vent Valve or even Air Oil Separator. At times, some functions are combined into one component and even if only one of the functions fail, the entire part is no longer usable and must be replaced. Because all of the components of an inclusionary policy must be specifically listed, it will be lengthy and may be complex.

An exclusionary policy lists the components that are NOT covered by a policy and will likely appear to be simple in comparison. So long as whatever component that failed or does not function as intended is not on the exclusionary policy list, it is a covered component.

Powertrain vs Drivetrain vs Bumper to Bumper

  • Powertrain. A motor vehicle’s powertrain is generally considered to be everything necessary to produce power then transfer that power to the drive wheels. Checkout this article for a detailed breakdown of what a powertrain warranty is and what does it cover.

  • Drivetrain. The drivetrain is everything to transfer the power from the engine to the drive wheels and excludes the engine itself. This article will give you a better idea of what a drivetrain warranty is and what it covers.

  • Bumper to Bumper. A bumper to bumper warranty is to cover all of the components in between the bumpers of the vehicle and is the most comprehensive warranty available. This article thoroughly explains the ins and outs of a bumper to bumper warranty.

How to Avoid Car Warranty Scams

“We’ve been trying to reach you about your car's extended warranty.” If there is one robocall that everyone has received, it’s this one and is probably the reason why aliens will not communicate with us since this was the first message they’ve received from Earth. Do your research to find the most comprehensive for the greatest value from a reputable company. Every single aspect of the repair process and invoice can be called into question and categorically denied by a bad warranty company. To help you find a good one and avoid scams, we’ve prepared a full guide on how to find a reputable car warranty company.

What to Know Before Buying a Car Warranty Extension?

  • What is covered. It is essential to read and understand the terms of the contract. Between the legalese and technical automotive specific terms, this can be a very difficult process. This is where the difference between the inclusive and exclusive contract will play a significant role in helping you understand what you’re getting.

  • What will void warranty. Again - read the contract and the fine print. Preventative maintenance goes a long way to ensure a durable and dependable vehicle, but if the contract is overly specific and narrow as to what is required to maintain the warranty in force, you may find yourself out of luck when the need truly arises. Something simple as an oil change missed or even late may void your warranty in part or in whole.

  • Fair Price. Make sure you’re comparing apples to apples then shop around to find the best provider for your vehicle and situation. Just as when you shop for automotive insurance, different providers will provide different levels of service and value.

  • Cancellation policy. Find out what you can do should you want or need to rescind your policy. If there is no out, or the process is made overly difficult, you may want to keep looking.

How do Car Warranty Extensions Work?

You’ve got a valid and in-force warranty for your vehicle and you have a problem that you need solved. What to do first? Make a call to your preferred repair facility, whether it be the dealer or local independent shop and ask if they accept your warranty provider (many will accept most third party warranties while only a new car dealership can process the manufacturer's extended warranty). Once it has been established that they do, take the vehicle in and have it evaluated or diagnosed. Many times, you will have to provide the authorization for the diagnosis and associated charges and you may or may not be reimbursed for those charges. From there, the repair center service advisor will call the warranty company and start a claim on your behalf. The warranty company will ask many questions (some very technical) that will be best answered by the service advisor. Negotiations will take place concerning diagnostic charges, what repairs and parts are covered, shop labor rate, the amount of billable labor time, the part selection as well as pricing, warranty on the work provided, tow bills, car rental bills, shop supply charges and taxes.

Once all of those details are hashed out over an excruciatingly long and arduous phone call, the authorization number and total payable amount are provided (minus the deductible) and the work can begin. If there are supplemental repairs that need to be made once the work is underway, another impossibly long phone call will need to be made to try and gain authorization from the warranty company to cover those repairs. Many times, only the problems and concerns as noted by the customer will be covered - problems uncovered by the repair facility but not an original concern of the customer are not covered. When everything is done and quality control has been completed by the shop, a FAX is made (yes, they’re still in use today) to submit the customer signed, finalized invoice with all labor operations and part numbers to the warranty company such that a credit card can be FAXed back for payment - hopefully the same day.

With such a process, there are many areas where a skillful and experienced negotiator will get more covered on your vehicle such that you come out of pocket less.

Top Car Warranty Extension Providers

There are many different providers of an aftermarket extended warranty (for mechanical breakdowns). Popular warranty providers include MaxCare (only if you purchased your vehicle through CarMax), Endurance, CarChex, autopom! and Ally. There are many more, but you will be best served (and less frustrated) if you were to start out with these - check out our curated list for even more providers.

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FAQ

Are car extended warranties worth it?

As mentioned before, depending how often your vehicle needs repairs, average costs of those repairs and your (and your pocketbooks) tolerance for unplanned repair bills.

What is the average cost of an extended car warranty?

The average cost of an extended warranty will vary greatly, depending upon your particular make and model as well as level of coverage and your deductible (very similar to the factors used by automobile insurers). You can expect to pay between $2000 and $3000 for a good all-around policy.

Who has the best extended car warranty?

If you purchased your vehicle from a retailer, they may have an in-house warranty available. You can also check your insurance provider to see if they also provide mechanical breakdown coverage. If you belong to a car club, they too may offer their own warranty. The Better Business Bureau (BBB) can also help in vetting a company you’re considering.

Editor's note and disclaimer: Car Talk is supported by our fans, readers and listeners. When you click on some of the links on our website, we may receive referral compensation. However, you should know that the recommendations we make are based on our independent editorial review and analyses.