Top 5 Things To Know About An Extended Car Warranty

AAA Auto Repair Article
By AAA Automotive
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Want help deciding whether or not to purchase an extended warranty for your car? Knowing the answers to these five questions will help you make an informed decision.

  1. What are the key things to know about auto warranties?

    • What is and is not covered. For example, a extended warranty does not cover auto parts that wear over time and will, at various intervals to ensure proper car maintenance, need replacing like tires, windshield wipers, brake pads and fluids.
    • When does the coverage become effective, for example, after the original equipment manufacturer (OEM) warranty expires.
    • What, if any, out-of-pocket expense will you incur for a repair or replacement part. Does the coverage require a deductible or do you pay up front and then submit expenses for reimbursement?
    • Where can you take the vehicle for auto repair service?
    • Is there a waiting period before the extended auto warranty goes into effect, for example, 30 days and 1,000 miles? It’s important to note the “and” in the example. To mitigate fraud, this policy goes into effect after 30 days and a vehicle travels a minimum of 1,000 miles.
    • Is cause and effect covered? This is one of the biggest points of confusion. Let’s say a water pump fails causing the engine to overheat, which in turn causes additional damage. Some policies will only cover the failed water pump and not the resulting damage.
  2. What are some common warranty types and what do they cover? There are typically two types of coverages:

    • Named-component – This type covers only the specific components listed in the policy. Coverage is offered in different levels, sometimes named bronze, silver and gold. Each higher level covers more car parts than the previous level.
    • Exclusionary – These policies cover the majority of the vehicle components and lists anything excluded from coverage.
  3. Should I purchase an extended warranty?

    The first thing to think about is how long you plan to keep the vehicle. If it is for a short time, then purchasing an extended warranty is probably not a good financial decision. Second, what is your risk tolerance? If you want to protect yourself from possibly having to pay for high-cost and/or unexpected repairs, then an extended warranty may be a good purchase. It’s a personal choice. Some consumers prefer to buy an extended warranty for every qualifying product they purchase, while others choose not to spend the additional money.

  4. What is the difference between a warranty and a vehicle service contract?

    They are essentially the same thing with the exception of the related laws imposed by the governing state in which the policy is sold. Some states consider a warranty an insurance product and as such, it must be filed with the state and regulated by the state’s insurance commission.

  5. What are the pros and cons of warranties and vehicle service contracts?

    One pro is they protect you against high auto repair bills. On the con side, you pay for a product that you may never use.

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