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Extended Auto Warranty: Understand The Facts
Whether you are buying a new or used car, your salesman will likely talk to you about the option of buying an extended auto warranty for your car or truck. Extended warranties, sometimes called service contracts, take your factory warranty one step further and provide coverage for your vehicle for two, three, or sometimes as many as five or six years. Car warranties can be tricky, so here is a little primer to help you get started thinking about whether or not an extended warranty is worth the price.
What’s Covered?
Most warranties are called bumper-to-bumper warranties, as they claim to cover your whole car from front bumper to rear bumper. This is a little bit misleading, because most warranties will not cover certain items on the car. This list can include wear-and-tear items, such as brakes, tires and windshield wipers, as well as cosmetic damage like windshield chips, paint dings and wheel rash. Other services like towing charges, routine maintenance and oil changes, for example, will probably also not be covered. If the extended warranty is not bumper to bumper, it may be just a powertrain warranty, in which case it will only cover the drivetrain.
Not all cars are equal, a fact that extended warranties reflect. A lot of variables go into determining the price of an extended warranty, including year and mileage of car, duration of the warranty and your credit rating, but one thing that stays pretty constant is that higher priced cars come with higher priced warranties. A three-year extended warranty on a nice family car like a 2006 Nissan Altima might cost somwhere in the range of $1350, while a similar warranty for a 2006 Jaguar X-Type could run as high as $3500.
Your credit rating is important in pricing because, most times, a warranty can be combined with your monthly car payment. This is an affordable way to budget for repairs and should be considered when weighing the possibility of buying a warranty. Some warranties even offer full-money-back or pro-rated refunds if you never use it.
Buyer Beware
If you do use your extended warranty, however, it is important to keep in mind some stipulations that come with most warranties. One is that it is often a requirement to have any and all work done by an ASE-certified technician. Most reputable shops these days are ASE-certified, so this should not be a problem. Another issue is that some warranties will run concurrently with factory or dealership warranties, meaning that if your car has two years left on its factory warranty and you buy a five-year service contract, you are double-covered for two years. This could be an incentive not to use your extended warranty if you have the option of getting your money back.
It is also important to know if your warranty is transferable should you sell the car. Programs like AAA are set up to cover the driver/policy holder regardless of what car in which they are riding. Extended warranties, though, are usually tied to the car and, if they are transferable, can add value to your car when you resell it.
Extended warranties for new or used cars can be a good investment if you read over your contract and understand its exact conditions. There can be a lot of variables and things to consider, but hopefully this article will help you with most, if not all, of them. Knowing that your car is covered is a great feeling, and extended auto warranties can make that happen.
