If you want to keep your car for a long time or drive it as far as possible, an extended warranty can save you money in the event of costly repairs. However, before you invest in one, it’s important to understand what does extended warranty cover on a car and how these plans work.
An extended warranty, also known as a vehicle service contract, is designed to cover the cost of repairs after the manufacturer’s original warranty has expired. A variety of different plans exist, but most fall under two broad categories: bumper-to-bumper or powertrain warranties.
A bumper-to-bumper plan covers almost everything on a vehicle, from the electrical system to the steering and suspension. These plans typically last for three years or 36,000 miles, but some companies may offer a longer coverage period. A powertrain warranty, on the other hand, is less comprehensive but still offers significant protection for a vehicle’s most important components, including the engine, transmission, and drivetrain.
Extended warranties can be purchased from auto manufacturers, dealerships, or independent third-party providers like CARCHEX. Each has its own set of plans and pricing structures, but most offer similar benefits. They’re especially helpful if you’re purchasing a used vehicle that’s already out of its factory warranty or about to expire.
To use an extended warranty, bring your vehicle to a certified repair facility for diagnosis and repair. The mechanic will contact the warranty provider to determine if the repair is covered and to obtain authorization for work to begin. Once the repair is complete, your mechanic will submit an invoice to the warranty company for reimbursement.
There are about 18 million warranty claims made each year, and most are for repairs that are under $500. However, some larger repairs can be more than $5,000. Extended warranties can help reduce the likelihood that you’ll have to pay for these repairs, but it’s crucial to choose a plan from a reputable seller and carefully read the fine print.
Warranty costs can vary, but most are sold for a monthly fee that’s added to your existing car payment. Depending on the length and scope of coverage, the price can range from $100 to $3,000. The upfront cost of the warranty will depend on the make and model of the vehicle and its predicted reliability. It will also depend on whether the warranty has a deductible and how much the deductible is.
Many buyers find that an extended warranty makes sense if they’re buying a used car that will soon be out of its factory warranty, or if they expect to exceed the manufacturer’s mileage limit in a short period. The convenience of paying a small monthly amount rather than the potential shock of paying a large bill for repair costs can be worth the extra cost. In either case, it’s worth comparing the prices and benefits of different warranties to make sure you get the best value for your money.