An extended car warranty protects you from high repair costs after the manufacturer’s warranty expires. These warranties are available from dealerships, auto clubs and insurance companies (which sell them as mechanical breakdown coverage). They vary widely in cost and terms, but also in what they cover. The best extended car warranties provide peace of mind, limiting your financial risk for a set period of time.
CR members rate the quality of an extended warranty based on its price per year and coverage term length, along with whether it provides extra benefits such as roadside assistance, towing and rental car reimbursement. We also consider a provider’s history of customer service and its ability to pay out claims. An extended warranty can add thousands of dollars to your car’s purchase price, so it’s important to research your options before you sign on the dotted line.
A key thing to look at is how many components and systems are covered. Bumper-to-bumper coverage is the most comprehensive type of warranty, usually covering all major mechanical systems except for a few excluded items. Mid-tier plans offer protection for about a dozen systems, such as air conditioning, electrical and steering. A powertrain warranty covers the engine and transmission, so this is typically recommended for higher-mileage vehicles.
In addition to the plan’s scope, you should read the fine print to determine if it has any exclusions, limitations or deductibles. For instance, some warranties have a large deductible that you must pay out-of-pocket before the warranty kicks in. Others may require that you only use approved repair facilities or that you get pre-authorization from the extended warranty company before having repairs done. You should also check the warranty’s language about situations that could result in denial of coverage, such as not keeping up with recommended maintenance.
An extended warranty can be a good idea if you want to limit your financial risk and have the cash to pay for a potential major repair. However, you can also lower your risk by shopping for a reliable vehicle and following the manufacturer’s recommended maintenance schedule. You can also minimize the need for an extended warranty by adding it to your car loan instead of paying for it upfront. You’ll save money in the long run and avoid interest charges.
It’s also important to understand what the warranty will cover and how it works. Check whether it reimburses your auto repair shop directly or requires that you pay upfront and then gets reimbursed, and how quickly reimbursement is made. Also find out how much the warranty costs and whether it includes a deductible, which you’ll need to pay toward the cost of repairs. Some policies also have a depreciation clause that reduces your payout as your car ages. Finally, find out what happens if the seller of the extended warranty goes out of business, since this will likely void your warranty. You can find out these details by searching for reviews of specific extended car warranty providers online or talking to people who have purchased one in the past.