Extended Auto Warranty Explained

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The following questions and answers will explain what an extended auto warranty is all about. If you already know, click here for a free instant quote from our trusted provider Warranty Direct.

What is an extended auto warranty?

An extended warranty is an agreement between the car owner and warranty company, obligating the warranty company to pay for repairs covered by the contract for a specific period of time.

With an extended auto warranty you are protecting yourself from the unexpected cost of mechanical failure.

One major repair often ends up costing as much, or even more than the entire cost of the warranty. As a consumer, you can only accurately understand the coverage if you learn the terminology and standard industry requirements. The levels of coverage offered differ considerably from company to company. Most states (36) do not regulate the coverage, and there is quite often jargon and restrictive language buried in the contract.

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What exactly does an extended warranty cover?

Know what's covered -- and what's not covered -- by the extended auto warranty you're considering. Does the contract cover breakdown as well as wear and tear? Under a "breakdown" warranty, coverage is extended only to parts that break. Such an extended auto warranty can prove less inclusive than is desirable, since not all parts fail due to breakage. Some need to be replaced because they've worn down over a period of time; a "wear-and-tear" warranty extends coverage to worn-down parts in need of replacement.

Additionally, some extended auto warranties don't cover TSB's. A Technical Service Bulletin (TSB) or Factory Service Bulletin is a notification by the manufacturer that a condition may exist on your vehicle. Sometimes there is a problem requiring immediate attention; often they are issued to facilitate a quicker diagnosis or repair procedures from your repair facility. It is common for a vehicle to have dozens of TSBs issued. Most companies will deny any claim related to a TSB. This is a huge coverage loophole. Additionally, ABS brakes, so if your vehicle has this feature, you should consider upgrading to a higher coverage level (if available). And overheating -- regardless of its cause -- isn't covered in many car warranties. Thus, if overheating occurred due to problems with an expensive part such as your radiator, you'd be stuck with a hefty repair bill.

Before committing to an extended auto warranty, take the time to fully explore the ins and outs of its coverage implications. The distinctions between the various plans might seem slight, but they can prove quite important.

Why do I need an extended auto warranty?