Auto Extended Warranties

You’ve just purchased a new or used vehicle, and you’re hoping it will run trouble-free for at least a few years. Realistically, though, you know that something is going to come up. What are your options when that happens? Do you set some money aside now to pay for those future repairs or do you take out some insurance against those future repairs in the form of an auto extended warranty?

Auto extended warranties are often thought of by consumers as something of an insurance policy against repairs that your vehicle will need in the future. Extended warranties, though, are not really true warranties. A true warranty is included in the price of whatever product you are buying. That’s not how an extended warranty works. An extended warranty is really more of a service contract. For a certain fee the warranty company is agreeing to cover certain repairs and/or maintenance on your vehicle for a fixed amount of time. These warranties cost extra and are sold separately. They are not included in the purchase price of your vehicle.

Generally, auto extended warranties may be purchased when you buy your car or at a later time. Before purchasing any extended warranty, there are some factors you should consider:

• What warranty coverage do you already have and how long does it last? If you already have a 36,000 mile warranty and you plan to drive your car about 12,000 miles a year and keep it for just two or three year, there’ s no sense taking out additional warranty coverage.
• How reliable is your car? Check the reliability ratings and history for your make and model. If you have a car that typically requires few repairs, you may not find it necessary to purchase an extended warranty.
• Who is underwriting your warranty? As with any promise, your warranty is only as good as the people who stand behind it. Know who those people are.
• What is the deductible? Not only how much is it, but how is it applied? Some warranties have a per trip deductible…you pay the deductible amount for each trip to the repair shop regardless of how many items need repair. Others charge the deductible per repair…if you take your car to the shop and have four things fixed, you pay the deductible times four.
• Is the warranty transferrable? If you sell your car, can you pass the remaining warranty on to the next owner? This can be a key selling point for potential buyers.
• Where can you take your car for repairs? Do you get to pick or does the warranty company? This could be especially important if you are ever traveling and need repairs on your car.
• What is covered, or, more importantly…what is NOT?
• How are repairs paid for? Do you have to pay the bill up front and get reimbursed, or does the warranty company pay the repair shop directly?