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You have the option to purchase a wide variety of comprehensive extended warranty plans once the manufacturer warranty expires. Since 90% of auto repairs occur after the typical 3 year/36,000 miles coverage of a basic bumper-to-bumper manufacturer's warranty, an extended warranty may be something for you to look into.
You want to look for an extended warranty that kicks in when your current bumper-to-bumper warranty expires, rather than an extended warranty that runs concurrent with any other warranties. Confirm that any extended warranty starts on the day or number of miles, whichever comes first, that the manufacturer's warranty ends. For example, if your manufacturer's warranty is for 3 years/36,000 miles and you purchase an extended warranty for 5 years/60,000 miles you should be covered for a total of 8 years/96,000 miles.
Note: An extended warranty should lengthen the period covered by the manufacturer's warranty on the whole vehicle or on individual parts and systems.
Extended warranties vary widely because of the diversity of the firms that offer them. An extended warranty offered through a dealer is generally a safer bet than one offered through a third party, known as an administrator. Administrators are similar to insurance claims adjusters; they decide whether your repair is covered by the extended warranty or not. The theory is that a dealer is less likely to go out of business and leave you without coverage. It is best to verify that your dealer or administrator has an established long-term record and is in good standing since they may be who you have to deal with in order to get the repairs made. To learn about the reputation of the administrative company, check with your Department of Motor Vehicles to see who fulfills the contract if the administrator goes out of business. Sometimes this may be the dealer, but state laws may vary.
Note: An extended warranty from the manufacturer must be purchased when you buy your car.
An extended warranty, depending on what is covered, could add $700 to more than $2000 to the amount you are financing. The price is usually based on the make and model of the car as well as the length and coverage of the warranty. Be aware that the cost of factory-backed extended warranties may be negotiable, unlike service contracts. A general recommendation is to offer 50% and attempt to settle at two-thirds of the asking price. The number of companies offering extended warranties keeps growing so you do have choices. Extended warranties are even being offered online at lower rates. Look for extras like the option to cancel without penalty, monthly payment plans, towing service, rental cars or interrupted trip benefits. Pay attention to the terms and look for a deductible.
Note: if the deductible will be applied each time the same item is repaired. Find out if you will have to pay a deductible per item being repaired even if the repairs are done at the same time.
Note: An extended warranty that can be transferred to a new owner (free or with a nominal fee) can be a big selling point.
Dealerships must provide a copy of the extended warranty for you to read before you sign as well as a written explanation of your right to cancel the contract and get a full or partial refund.
Carefully note what the extended warranty covers. Pay particular attention to if, after a specific time or number of miles, items are eliminated before the overall coverage has expired. Check to see if there are any limitations on the number of times a specific item can be repaired or replaced, or if there is an imposed limit on the extent of the repairs. Wear-and-tear items, such as piston rings, seals and gaskets, may be included in some warranties. Note if roadside assistance is included. Note if the warranty only allows the use of non-OEM (Original Equipment Manufacturer) parts.
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