What Does an Extended Car Warranty Cover?

Extended Warranties: What Do They Cover?

There’s a lot to think about if you’re considering an extended warranty in 2021, and primarily, you need to figure out just exactly what it covers. If you’ve got a car (or even just a pulse) chances are you’ve heard from an extended warranty company. The term “extended warranty” is a catch-all that actually describes an array of products offering different levels of coverage. Before you sign anything, you’ll want to be clear about exactly which bills the warranty will cover. “Full coverage” may be an adequate description for a new bathing suit, but for a car warranty you’ll want to read the fine print.

What Do Extended Warranties Cover?

This is difficult to answer in a quick soundbite, but we’ll do our best. We looked at three to give you a sample of what their plans cover:

Endurance

Unlike some other extended warranty providers, Endurance isn’t a broker. It’s a direct provider of coverage for your vehicle. The company has six different plan options, all of which cover different things.See our full review of Endurance here.

Endurance Plan NameSecureSelect PremierSuperiorSupremeSecure PlusAdvantage

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CARCHEX

CARCHEX is a broker and as such has somewhere around 20 different plans, broken into five coverage brackets (Titanium, Platinum, Gold, Silver, Bronze). We need to be careful explaining what that means, though: CARCHEX offers 21 different plans that fall into those brackets, from a number of different providers. To understand exactly what’s covered, you need to carefully examine what’s in the contract. See our full review of CARCHEX here.

CARCHEX Plan NameBronzeSilverGoldPlatinumTitanium

CarShield

If you’ve been watching TV at all in the last five years, you’ve seen one of CarShield’s commercials. They’re relentless marketers, and their reputation online is pretty poor for providing the kind of service you want from an extended warranty.

Carshield offers five different levels of coverage, which provide protection for more components as you move up the price ladder. Similar to CARCHEX, CarShield is a broker, so each one of these plans listed are actually brackets of coverage, with three different contracts to choose from within each price bracket.

Interestingly, the Aluminum plans CarShield offers provide coverage on air conditioning components at the lowest cost level, which is unique. Most of the cheapest plans offered by other vendors skip this in favor of just the components that make the car go. See our full review of CarShield here.

CarShield Plan NameAluminumSilverGoldPlatinumDiamond

Foundation coverage protects you from driveline failures, with brake components like master cylinders and calipers thrown in for good measure.

Ally

Ally is a massive financial services company that really makes its money on providing automotive financing. It also provides a range of extended warranties or service contracts to protect your vehicle after the original warranty expires.

Ally is a public company with a lot of oversight, rather than the kind of fly-by-night companies that usually provide these instruments. The plans they offer are administered by Ally, and the sample contracts seem much easier to read and compare than some of the other companies.

Ally Plan NameFeature GuardBasic GuardValue GuardMajor Guard

To Extend Or Not To Extend, That Is The Question

First off, “extended warranty” is a misnomer, as it does not extend the original warranty. Extended warranties exist apart from that. These are pre-paid service contracts.

The question of whether to buy one is significant, because automotive extended warranties can be pricey. We’ve seen contract quotes range from less than $1,000 to up over $3,000. Purchasing an extended warranty from the dealer at the close your new-vehicle sale would allow you to fold the warranty’s cost into your vehicle financing.

But buying on the spot may end up costing you more over time because you’d be adding interest charges to an already potentially inflated cost. Why potentially inflated? Even if your dealer is as scrupulous and honest as the proverbial scout, do you really think they’re going to spend their free time in research mode, to make sure you, a total stranger, get the best deal? Hey, we like you but we sure wouldn't skip our cappuccino break to do your homework for you.

And that’s the key to extended warranties: do your homework, with comparison shopping that is informed by a clear assessment of your vehicle’s possible future mechanical needs, as well as your projected exposure to them.

With extended warranties potentially costing the equivalent of a memorable vacation (or a ridiculous project car, which would also be memorable), you’ll want to make sure that you’re signing up for something that will directly benefit your situation, as much as possible.

Uncertainty Is Certain

Most cars and trucks are terrible investments. Opting for an extended warranty can provide peace of mind, as it provides a buffer against component breakdown as your vehicle ages.

It is a benefit that’s not to be sneezed at: being able to repair your car while you’re eating peanut-butter sandwiches in the days leading up to your next paycheck ideally minimizes a variable that could negatively impact most people’s lives. If you can’t get to work, then you can’t earn enough to pay the bill to stay on the road. Paying a deductible in the hundreds for a repair in the thousands will feel like the most fortuitous of future planning when an expensive mechanical crisis hits.

But as with most concerns, the devil is in the details. Mentally waving a wand and signing up for a vehicle warranty feels nice in the moment, but is your purchase truly reflective of your needs? And how do you go about determining that?

Take Your Time, Do It Right

Obviously, the method to process all this information is not in the hot seat in your dealer’s Finance and Insurance office, in the few moments before your sweaty hand picks up a pen to seal the deal on your dazzling new financial obligation.

It is in those moments of concern that the extended warranty is introduced into the process, for the reason that it aligns perfectly with your activated financial mindset. Oh, you’re worried about all the money you’re spending here? Well, why not protect against these concerns in the future for just a little more right now?

The dealer isn’t wrong to do this, though it is telling that salespeople don’t lead with trying to sell an extended warranty, as buyers would promptly leave the showroom. The sizzle is sold before the risk is assessed.

If you prefer to go it alone, you’ll just waive this option at the dealership. You’ll want to shop with an eye toward finding a vehicle warranty provider and plan that particularly suits your needs.

Or, if you find the idea of including extended warranty coverage into your new vehicle’s financing appealing, you can still use warranty comparison for a win-win situation, where you get optimal coverage and pricing, and your dealer earns a nominal profit from the convenience it provides.

How do you pull this off?

Call In Advance

Say you’ve set your hat for a car purchase, and you think you might drive away from your local dealer with a new four-wheeled dreamboat. Maybe you’ve decided that you’ll be tempted to agree to an extended warranty. OK, how to proceed?

Call up the dealer you’re thinking of visiting, and ask for the Finance and Insurance department. Then, ask for the name of the provider of the extended warranties they offer with their inventory, with the tiers of coverage pricing.

Now you’re not ambushed at the dealership; you can research the provider it partners with and line it up against competing companies. You’ve also started a conversation with the dealer from a negotiating standpoint.

Get What You (Might) Need

Think about the vehicle you’re buying. How much reliability risk do you need to bank against? Checking sites like consumerreports.org, carcomplaints.com, and carsurvey.org for issues will inform this process considerably.

Then, go through the plans - five or six tiers of coverage in the case of some providers - and line up your personal assessment with the offerings. Providers that compare their plans side-by-side allow you to align their component coverages with the predictions you can make now. Has the suspension shown up in surveys as a mechanical weak spot on your dream car? With some companies, only the upper tiers would cover it.

Top Rated Warranty Companies

4.9 of 5

CARCHEX is one of the largest, most highly-rated providers of vehicle extended warranties in the market. They have been a trusted name in the business for 20 years.

4.9 of 5

autopom! is well known in the industry for customer service and responsiveness. The company works directly with 2600 certified repair facilities and has a dedicated customer advocacy program.

4.9 of 5

Liberty Bell has one of the best reputations and covers more vehicle makes than other warranty companies. This provider has a solid reputation with excellent customer service ratings and has been around for over a decade.

4.3 of 5

Toco Warranty Corporation is a relative newcomer in the industry, but they are making a splash. They maintain a solid reputation with an A+ rating from the Better Business Bureau. Toco is known for offering affordable plans with no down payment and the ability to pay in monthly installments.

FAQ

Are transmissions covered under extended warranties?

To a degree. Cheap extended warranties usually cover a list of transmission components. The more expensive plans will usually cover everything BUT a select list of exclusions, most of which aren’t transmission related.

What is not covered by extended warranties?

Any decent extended warranty -- or more precisely “service contract” will have a list of exclusions in the contract. Make sure you read it. Most plans will exclude normal replacement items like belts, batteries, bulbs, etc. The clutch in a manual transmission will not be covered. Exterior items like sheet metal, glass, trim and the like are not covered by extended warranty.

Are tires covered under warranties?

No extended warranties cover tires.

What is an extended warranty for a car?

An extended warranty typically is a contract or agreement for financial coverage of automotive repairs. They vary in cost and the items that are covered, both from company to company and from within the different tiers of benefits offered by each one.

Some buyers believe that an extended warranty purchased from the dealer will simply extend the manufacturer’s original coverage, but that’s not the case. Extended warranties are separate agreements that have no connection to the coverage that came with the new vehicle.

How much do extended warranties cost?

Extended warranties vary in price, depending on the provider, the type of vehicle being insured, and the level of coverage. We’ve seen them for less than $1,000 and up over $3,000. Signing up for an extended warranty at the time of purchase should allow you to fold it into your new vehicle financing.

What can I expect to be covered by an extended warranty?

Coverage depends on the extended warranty you’ve selected, and so it is essential for you to perform a full review of the components covered before signing on the dotted line. If you’re doing this at the dealer, take a break from the urgency of the deal to carefully consider the coverage offered. Take your time to read everything thoroughly and don’t sign anything until you’re done.

Can I buy an extended warranty after buying a car?

Yes. You can buy an extended warranty at any time. (That’s unless you want to fold the cost of the contract into your financing, which is the main benefit of signing up for it at the point of sale.)

Are extended warranty prices negotiable?

Yes, the prices of extended warranties are generally negotiable, though it is extremely unlikely that the dealer representative will start that discussion. Go ahead and poke that bear - see if there’s a better price waiting in the wings.

Also consider calling a time-out, so you can fire up your smartphone and get some competing quotes. As you do your research whilst sipping the complimentary coffee, you may find the dealer becoming more flexible on its offering’s asking price.

Do I really need an extended warranty?

Good question! The only way to answer this is by clearly assessing your own needs. Are you buying a vehicle that loiters near the bottom of current repair-incidence and customer-satisfaction surveys, and you’re thinking of keeping it for a decade? There’s some risk there, and so you may want an extended warranty to accompany you on that potentially bumpy reliability ride.

But again, you’d want to make sure that the extra coverage you’re signing up for is relevant to your situation. If you’re purchasing a car that has commonly-known weak spots in its mechanicals, then you’ll want to ensure that the contract you’re purchasing will cover them if they fail.

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.
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