Extended Auto Warranty Explained
- What is an extended auto warranty?
- What exactly does an extended warranty cover?
- Why do I need an extended auto warranty?
- Why should I purchase an extended auto warranty now if my vehicle is still covered by the manufacturer?
- What about the deductible?
- What type of auto warranty can I buy?
- If the manufacturer's warranty for my vehicle has expired, can I still obtain extended auto warranty coverage?
- How does the claims process work?
- Where can I get an instant quote for an extended auto warranty for my vehicle?
An extended warranty is an agreement between the car owner and warranty company, obligating the warranty company to pay for repairs covered by the contract for a specific period of time.
With an extended auto warranty you are protecting yourself from the unexpected cost of mechanical failure.
One major repair often ends up costing as much, or even more than the entire cost of the warranty. As a consumer, you can only accurately understand the coverage if you learn the terminology and standard industry requirements. The levels of coverage offered differ considerably from company to company. Most states (36) do not regulate the coverage, and there is quite often jargon and restrictive language buried in the contract.
Know what's covered, and what's not covered, by the extended auto warranty you're considering. Does the contract cover breakdown as well as wear and tear? Under a "breakdown" warranty, coverage is extended only to parts that break. Such an extended auto warranty can prove less inclusive than is desirable, since not all parts fail due to breakage. Some need to be replaced because they've worn down over a period of time; a "wear-and-tear" warranty extends coverage to worn-down parts in need of replacement.
Additionally, some extended auto warranties don't cover TSBs. A Technical Service Bulletin (TSB) or Factory Service Bulletin is a notification by the manufacturer that a condition may exist on your vehicle. Sometimes there is a problem requiring immediate attention; often they are issued to facilitate a quicker diagnosis or repair procedures from your repair facility. It is common for a vehicle to have dozens of TSBs issued. Most companies will deny any claim related to a TSB. This is a huge coverage loophole.
Additionally, ABS brakes, so if your vehicle has this feature, you should consider upgrading to a higher coverage level (if available). And overheating, regardless of its cause, isn't covered in many car warranties. Thus, if overheating occurred due to problems with an expensive part such as your radiator, you'd be stuck with a hefty repair bill.
Before committing to an extended auto warranty, take the time to fully explore the ins and outs of its coverage implications. The distinctions between the various plans might seem slight, but they can prove quite important.
Since common mechanical repairs can cost into the thousands and these costs are rising rapidly; protecting your automotive investment should not be taken lightly.
Whether you own a new or older make/model, an extended auto warranty will provide you with peace-of-mind protection regarding costly mechanical repairs that can happen at any time during the life of your vehicle.
Buying an extended auto warranty today will allow you to avoid paying higher rates later due to price increases and required surcharges due to the multitude of issues that develop as the vehicles flaws become public knowledge. You'll be able to immediately take advantage of your plan's benefits: towing, lost key/lockout, and car rental discounts.
As your vehicle accrues age and miles, the price for an extended auto warranty will rise as do the repair costs that you would experience for an older, out-of-warranty vehicle. You are only buying total mileage coverage, not addition of mileage to your current total.
Capitalizing now on your vehicles newness and low mileage is the most logical approach as you plan for inevitable future repair costs. An extended auto warranty will provide you with peace-of-mind protection regarding such expenses. Some are transferable, allowing for increased vehicle resale value.
Fully investigate a policy's deductible before signing on the dotted line. Consider not only its amount, but also whether it's per visit or per repair. With a per-visit deductible, each visit to the shop will run you a fixed amount, regardless of how many parts are repaired; a per-repair deductible applies to each serviced part. What sounds like a minor difference may, under certain circumstances, have a major impact on your wallet.
If, for example, you've got a $100.00 per-repair deductible and you take your car in to get the air conditioner, fuel pump and alternator serviced, you'll be out $300.00. Had you opted for a per visit deductible, those repairs would only have cost you $100.00.
There are still $0.00 deductible policies. You will have to pay extra for this type of extended auto warranty, but if your circumstances become such that you have to take your car in frequently, you'll find that this policy more than pays for itself.
Powertrain Warranty: Covers the engine, transmission, and other parts of the Drivetrain only, which is defined as the 29 parts of the vehicle through which oil flows. These are the parts least likely to fail.
The average vehicle contains thousands of parts. As it does not cover the majority of the components of a vehicle, the Powertrain Warranty is truly not an extended warranty.
Bumper-to-Bumper Warranty: Covers nearly all of the mechanical systems of the vehicle, from front bumper to back bumper; except for those on the "exclusion list", listing the parts that are NOT covered by the extended auto warranty. It is much easier for a consumer to see a short list of items that are not covered and know that everything else is.
Named Component Warranty: Covers the major mechanical systems of the vehicle from mechanical breakdown and mechanical failure. If the part is not listed, it's not covered by the contract.
NOTE: Some companies sell the same or similar plans as above, and use the term bumper-to-bumper. This can be misleading because it is always an inferior level of coverage.
Consumable items, such as brake pads or windshield wipers, are never covered. Roadside assistance and travel reimbursement plans are typically offered as part of the extended auto warranty package; even while the basic warranty is still in effect. Some even offer free lodging and meals if your vehicle breaks down on a trip.
Many consumers do not realize that even after the manufacturer's warranty has expired, their vehicle is still eligible for extended coverage. You can generally receive coverage on vehicles that have less than 100,000 miles on the odometer. A vehicle out of its original warranty is more apt to have mechanical failure compared to a newer vehicle. For this reason, vehicle inspections are required. A good example would be life insurance. As you age, can you get a comprehensive life insurance policy without a physical and increased cost?
The top warranty companies work like this: If your vehicle breaks down or is in need of a repair, take it or have it towed to any licensed repair facility and present your service agreement to the Service Department. After they diagnose the problem with the vehicle, they will call the claims administrator toll-free and receive repair authorization for all your covered repairs less a deductible where applicable.
All claims are paid directly to the repair facility of your choice with a corporate credit card; therefore, you do not have to pay for your repair and wait to get reimbursed.
When looking at extended warranty companies, financial stability and claims paying experience should be of utmost importance.
There are a number of extended warranty companies out there, I recommend Warranty Direct.
They are a 25 year old company that has the experience of nearly 2 million contracts sold, assets in excess of $165 million, has paid over $500 million in claims and they are reinsured by an 'A' rated A.M. Best insurance company with over $2 billion in assets.