Last updated February 25, 2020 by Philip Ruth
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.
So take a minute to allow us here at Car Talk to run through what to expect in terms of the ways an extended warranty might benefit you - or might not.
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:
Carchex is a broker and as such has somewhere around 20 different plans, broken into five coverage brackets (Titanium, Platinum, Gold, Silver, Bronze). The plans under the Titanium umbrella replicate what you might get in a bumper-to-bumper warranty from your original auto manufacturer. As you read down the list of precious metals, the coverage starts getting more specific about what it will cover. You’ll be provided a list of items by Carchex. At the bottom Bronze level, you’re really only covered for major failures of the engine and driveline.
Infinite Auto Protection
Infinite Auto Protection breaks its coverage options into three tiers: Prime, Modern, and Foundation.
Prime is the highest level of coverage, a comprehensive plan that protects you in the event of failure of pretty much everything other than normal wear items like tires, brake pads and struts.
Modern covers all of the major running and driving systems but ironically doesn’t cover the high tech features in a modern automobile that can be so expensive to replace. If you’re concerned about things like the complicated HVAC and infotainment interface dying, this is not the plan for you.
Foundation coverage protects you from driveline failures, with brake components like master cylinders and calipers thrown in for good measure.
Autopom (for Auto peace of mind) has a similar set of coverage tiers. They offer several plans within those tiers:
High Level: an extensive list of named components within the following major systems: Engine, Transmission, Transfer Case, Drive Axle, Steering, Electrical, Air Conditioning, Braking, Cooling, Fuel System and Seals and Gaskets.
Mid-Level: Essentially the company’s Powertrain Plus plan, as well as named additional components within the Steering, Suspension, Fuel Delivery, Cooling and Braking systems.
Powertrain Plus: named-component coverage for the essential, major systems including Engine, Transmission, Transfer Case, Drive Axle, and Differential Assembly.
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.
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 of 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 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 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.
Car Warranty Companies
Here are some companies to consider, with direct links to their tiers of coverage.
Maryland-based Carchex has an A+ rating from BBB and has been providing contracts for 20 years. It also operates under the name smartautowarranty.com. Fans of Motorweek’s Pat Goss will appreciate his endorsement of the company.
On some cars, the Carchex website offers a rundown of trouble spots particular to that model, in this case, the BMW 328i. This helps to correlate your research to line up the right coverage.
Another A+ rated company by BBB, Infinite Auto Protection breaks down its three tiers of coverage into Prime, Modern, and Foundation, from most expensive to least. The Michigan-based company’s website breaks it down here.
The BBB gives another A+ to California-based Autopom! (Automotive Peace Of Mind), and the company has attracted generally positive reviews.
Autopom! describes its coverage tiers here.
Along with the highs comes a mention of the lows, like CarShield, a company that - based on its BBB ratings - you may want to exercise caution doing business with. It is beneficial to cast a wide net when researching extended warranties and the companies that provide them.
Q: What is an extended warranty for a car?
A: 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.
Q: 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 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.
Q: What can I expect to be covered?
A: 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.
Q: Can I buy an extended warranty after buying a car?
A: 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. )
Q: Are extended warranty prices negotiable?
A: 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.
Q: Do I really need an extended warranty?
A: 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 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.
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