When you buy a new car, there’s no doubt that the salesman will take you to the financing office, even if you pay cash. You can expect to be offered an extended car warranty at that time to protect the investment that is your vehicle. This can be confusing because new cars are protected by a manufacturer’s warranty, right?
While new vehicles do come with a manufacturer’s warranty, there is a difference between them and an extended car warranty.
A manufacturer’s warranty is offered by your new car’s maker (or sometimes the dealership) and comes standard on every new car, though different car makers offer different types of warranties. Many brands, including Hyundai, Kia, Mitsubishi and Volkswagen, offer longer new car warranties – up to six to 10 years or 60,000 miles. Some even go to 100,000 miles.
The manufacturer’s warranty, which is already figured into the price of the car, mainly covers big-ticket items like the engine, transmission and drivetrain problems, however, all new car warranties include a set time for bumper-to-bumper issues, also called your “basic warranty.” A lot of common car brands don’t offer very long new-car warranties because they believe their brands already hold value themselves. Brands like Honda, Mazda, Subaru and Toyota, who only offer three years or 36,000 miles for a bumper-to-bumper warranty and five years or 60,000 miles for powertrain coverage.
An extended car warranty, also known as a service contract, can be purchased at any time, whether it’s when you buy your new car or five years later when the manufacturer’s warranty is up. If you are concerned about expensive repairs as your car ages, you may buy an extended car warranty at the dealership before you take your new car home, or through a third-party car warranty company. It’s recommended you purchase an extended car warranty before your manufacturer’s warranty is up.
Be aware that these warranties come with an annual premium and a deductible and you may not always end up using them. Buying an extended warranty through a third-party company tends to be cheaper and more customizable than the one offered at the time you bought your new car.
Having an extended warranty for an older vehicle, or one with over 100,000 miles, is when it can pay off, especially if you’re bad about saving money for car repairs. So, when are extended car warranties recommended?
When you bought your car new but you’ve exceeded the mileage or month limit of your manufacturer’s warranty (around 36,000 miles).
You purchased a pre-owned car with over 36,000 miles.
Your car has over 100,000 miles on it and you don’t save regularly for car repairs.
Research these important aspects of both types of warranties:
Know the brand. Research how often a brand’s cars break down, either through online research or friends and family that have experience with the brand. Know how purchasers resolved car issues and what others say about their own experiences, including their opinions on the dealership’s service after the sale. Visit your local state government consumer protection office to find the information you need to make a fact-based choice.
Extended car warranties are offered by the automaker or by a third party. If it’s the former, you can use the warranty at any dealership, but not at every repair shop. The third-party warranty has no business relationship with a car’s brand like a dealership’s warranty does. Third-party warranty companies usually let you take your car wherever you want for repairs, as long as that mechanic will work with the warranty company. Get this confirmation in writing just in case.
Know what’s covered. Your manufacturer’s warranty covers specific things for a certain amount of time. If you decide to buy an extended car warranty, make sure you know what is covered under your policy and when the coverage kicks in. Things that are not typically covered are windshield wipers, oil changes, tire damage and brake pad replacement. Extended car warranty companies usually have better coverage options.
Choose your coverage level. Most dealerships offer warranties with different levels to entice you to purchase at least some kind of extended warranty. Read the fine print to make sure you know what you are buying. Make sure you understand deductible amounts or if you have to pay up front and then get reimbursed, which can be a very expensive and frustrating situation to find yourself in. You can choose what you want to be covered, with the most popular options being basic (bumper-to-bumper), powertrain/drivetrain, roadside assistance, rust corrosion and emissions and battery.
Remember your insurance coverage. You might already have some of this coverage, such as roadside assistance and dead-battery coverage, with your insurance policy. Check to see which option is the most cost-effective for your budget.
Make comparisons. Remember, you can buy an extended car warranty at any time, not just when you first purchase the vehicle. The only difference is that the purchase will not be funded in your new car payment if you choose to purchase one at a later date. Also, extended car warranties are almost always negotiable. Tell your representative what you want and work with them to find an agreeable amount.
Consumer analyst group J.D. Power says vehicle dependability is better now than it has been in the last five years. Some people enjoy the comfort of knowing their new car is protected well past the manufacturer’s warranty and they find the extra price per month is worth the expense. Just keep in mind that your new car comes with a limited-time manufacturer’s warranty and the purchase of an extended car warranty is available at any time while your manufacturer’s warranty is in effect, not just when you are first purchasing the car.
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