When you buy a new or used car from a dealership, you will probably be offered an extended warranty. This promises an additional level of protection after your vehicle’s manufacturer’s warranty expires. If you are buying a used car, the extended warranty may be the only protection offered. So what is an extended warranty, and should you get one?

Whether you need an extended warranty depends on what kind of car you’re buying. A used car will be more in need of coverage than a new car. Additionally, you may be able to forego a warranty depending on the manufacturer of the car you are interested in. The sections below describe what exactly an extended warranty is, what it covers, when you should get one and how to do so.

What is an extended warranty?

An extended warranty on a vehicle is additional coverage for repairs and malfunctions that occur after the vehicle’s original warranty expires. When you purchase a new car, it typically comes with a manufacturer’s bumper-to-bumper warranty of three years or 36,000 miles. During the warranty period, your dealership should cover any necessary repairs to your vehicle outside of regular maintenance.

However, when the bumper-to-bumper warranty expires, you are typically left to pay the bill alone. Many manufacturers will extend some of the warranty in the form of a powertrain warranty. However, full coverage is limited to the initial time period.

Purchasing an extended warranty will extend that coverage. However, unlike the original manufacturer’s warranty, you will have to pay an additional cost for the extended coverage. Additionally, extended car warranties typically come with lots of fine print. What exactly a plan will cover can vary from dealership to dealership. There are also several different types of warranties you can purchase, such as a stated component warranty or an exclusionary warranty.

Before selecting a plan, you should read the terms carefully to determine if it offers the kind of coverage you want or need.

What does an extended warranty cover?

One of the first questions you should ask a dealer is, “What does the extended warranty cover?” Offerings can vary wildly, and it is important to know what exactly you will pay for. A third-party warranty, for example, will typically require you to fund repairs out of pocket then apply for reimbursement.

Additionally, sometimes warranties come with levels, so you will have to pay more for more thorough coverage. Common types of warranties include the power train warranty, stated component warranty, exclusionary warranty and WRAP warranty.

• The powertrain extended warranty will only cover what’s under the hood. This means your engine, transmission, drive axle and other critical parts will receive service. However, other parts of your car such as your A/C system will not be covered.
• The stated component extended warranty will list all the parts that are covered. This typically includes the powertrain parts as well as the A/C, brakes, steering, suspension, fuel system and more. Anything not listed will not be included, so you should read the details carefully.
• The exclusionary coverage extended warranty covers pretty much everything. Rather than describing what it covers, these policies will describe what they do not cover. Everything not listed is included. Therefore, review the list of excluded items carefully.  
• The WRAP extended warranty wraps around the powertrain warranty provided by manufacturers after the bumper-to-bumper warranty ends. Purchasing WRAP coverage essentially means continuing the bumper-to-bumper coverage. Therefore, this is typically the most extensive coverage option.

Pros and Cons of an Extended Warranty

There are lot of factors to consider before you get an extended warranty on a car. If you suspect a car may require repair work in the next two to three years, a warranty can provide essential coverage. This is especially true if you are purchasing a used car that may otherwise have no warranty coverage available. Older cars are more likely to come with wear and tear that will eventually require work. Additionally, if you know you have a history of damaging your vehicle, the extended coverage will be valuable.

However, think twice about an extended vehicle warranty if you are purchasing a new car with most or all of its original warranty. You may not own the vehicle by the time the original warranty expires. As long as you still have a manufacturer’s bumper-to-bumper warranty in place, you do not need additional coverage.

Additionally, you should also look into the reliability of the vehicle you are selecting. Some brands, like Toyota, have a reputation for long-term reliability. In such cases, a warranty may be an unnecessary expense. Taking care of problems as they arise will likely be cheaper in the long run for reliable vehicles.

Finally, extended car warranty terms can be confusing. It can be easy to overestimate what a warranty will cover if you don’t read the terms carefully. Make sure the warranty offered has ample coverage. If it’s limited, such as a powertrain warranty, it may be more cost than it’s worth. It may even overlap with a manufacturer’s continuing powertrain coverage.

How to Get an Extended Warranty on a Car

If you are interested in finding the best extended car warranty for you, you have to put in legwork. Begin by calling local dealerships and asking about their warranty coverage options. Ask them for quotes, and the cost per year. By asking around with multiple dealerships and asserting a set price, you can reduce the risk of being gouged. An extended warranty should cost no more than $1,000 per year of coverage. Anything more expensive than that, and you will almost certainly be overpaying.

After receiving and comparing multiple quotes on an extended car warranty, call back dealerships with the best figure quoted to you. If you find a deal with the price you like, go in for a visit. Review the contract carefully before signing, however. Make sure you understand exactly what is being offered to you. If the terms suit you, you can sign the contract. If you currently have a manufacturer’s warranty, the extended warranty will kick in when that expires. If you do not have a manufacturer’s warranty, the extended warranty should start immediately.

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