What Is An Extended Car Warranty?
An extended car warranty is a service contract that drivers can purchase in order to pay for repairs to a vehicle’s major systems, including the transmission and engine. Drivers can purchase an extended warranty from a third-party company, like Carchex or Endurance, or directly from their vehicle’s manufacturer.
You should consider an extended warranty when the manufacturer’s warranty on your car is nearing expiration or has recently expired. Manufacturer warranties typically last for 3 years or 36,000 miles.
Key Things to Know About Extended Car Warranties
- The average cost of an extended car warranty is $1,500, but the price can be as high as $3,000.
- Extended car warranties are only worth it if your car is unreliable and are unable to pay for mechanical repairs.
- You cannot use an extended car warranty until the original manufacturer’s warranty expires.
- Extended car warranties do not cover regular maintenance or damage caused by normal wear and tear or by a lack of maintenance.
- Extended warranty providers often offer multiple levels of coverage, some of which may include benefits such as towing services, rental car coverage, and travel insurance.
What Does an Extended Car Warranty Cover?
An extended car warranty acts like an insurance policy for your car’s major components. If something breaks down and needs to be repaired, your warranty provider will cover the costs. You will only be responsible for paying a predetermined deductible.
Exactly what an extended warranty covers depends on the type of warranty that you choose. But in general, extended warranties cover the critical mechanical parts of your vehicle, including the engine, transmission, axles, and gaskets.
Manufacturer vs. Third-Party Extended Warranties
| Type of Car Warranty | Manufacturer Warranty | Third-Party Warranty |
|---|---|---|
| Parts | Factory parts | Aftermarket parts |
| Technicians | Factory trained (dealer) | Authorized network |
| Location | Must service at a dealer | Any authorized shop |
| When You Sell the Car | Warranty transfers to new owner | There may be a transfer fee |
| Ease of Refund | Easy to cancel and get a prorated refund | Variable, some easier than others |
| Customer Satisfaction | Higher | Lower |
| Price | $1,000 - $3,000 | $1,000 - $3,000 |
| Out-of-Pocket Costs | Deductible (if your plan has one) | Deductible (if your plan has one), plus you may need to pay the mechanic and get reimbursed |
What an Extended Warranty Does Not Cover
- Routine Maintenance such as oil change, wheel alignment
- Weather-related damage
- Damage from modification or alteration
- Damage from accidents
- Damage from reckless or negligent driving
- Damage from lack of maintenance or proper care
How Does an Extended Car Warranty Work?
An extended car warranty works by covering major mechanical repairs for a car once its original warranty is up. With an extended warranty, you can take your vehicle to an authorized repair shop and your repairs will be covered. There are typically many stipulations to an extended warranty contract, however, including where you can take your car to get repaired and what parts of the vehicle are covered.
Let’s go through the process of purchasing and using an extended warranty to give you a better idea of what to expect.
How to Buy an Extended Warranty:
- Compare prices. Before deciding on a policy, compare prices from several different extended warranty companies. You can start by checking out our picks for the best extended car warranties.
- Consider the amount of coverage. Before you purchase an extended warranty, check how much coverage the warranty provides and where you can get your vehicle repaired. Some companies may offer a very cheap policy, but then offer very little coverage or have a limited number of authorized mechanics.
- Check the reviews. It’s important to know if customers have had a good experience with a company in general. You can check how other customers have rated a company by visiting their profile on WalletHub. You can also look at how each company is rated for their financial strength and business practices by consumer watchdog groups like AM Best and the Better Business Bureau (BBB).
- Read the fine print. Make sure to read the entire extended car warranty contract so that you’re aware of stipulations to your coverage. For instance, companies that offer extended warranties won’t cover a part of your vehicle that you’ve made modifications to.
- Don’t wait until your original warranty has expired. You should try to purchase your extended warranty before your original factory warranty has expired. You can still purchase an extended warranty after your original warranty has expired, but it will be more expensive.
- Purchase your extended warranty. To purchase an extended warranty, you can call the extended warranty company of your choice and provide them with the necessary information about yourself and your vehicle, then provide your payment information. When you purchase your extended warranty, you can choose to either pay for the whole warranty up front or spread out the cost over many smaller payments. Additionally, most extended warranty companies will require a down payment before your coverage begins.
How to Access Service:
Once you have purchased an extended warranty and your vehicle needs repairs, call your extended warranty provider and determine the best auto repair facility to go to.
The repair facility will then run diagnostics on your vehicle to find any issues. The mechanic will likely ask for your policy information and will then provide your insurer with the claim information.
If your contract includes a deductible, you will typically pay the deductible when you pick up your car after it has been repaired.
How to File a Claim:
The claim process varies depending on the extended warranty company you choose. Most companies allow you to file a claim by calling customer service or by using their website to file your claim online.
If your car needs immediate repair, most companies allow you to take your vehicle directly to an authorized mechanic. Typically, the service manager at the repair facility can receive approval from your insurance company using your policy information. Once the repair shop has received authorization from your insurer, they can begin making repairs.
Types of Extended Car Warranties
Bumper-to-Bumper Warranty
A bumper-to-bumper warranty is usually the most comprehensive extended warranty that you can purchase. It’s umbrella coverage for all of a vehicle’s parts and systems, excluding routine maintenance and damage from wear and tear.
Powertrain Warranty
Powertrain warranties cover everything that moves the vehicle, including the engine, transmission, and any power components that travel to the wheels of the car.
Drivetrain Warranty
A drivetrain warranty is similar to a powertrain warranty, except it excludes the car’s engine.
Wrap Warranty
A wrap warranty supplements a powertrain warranty, applying to the rest of the car. This effectively gives you bumper-to-bumper coverage.
Corrosion Warranty
A corrosion warranty can help pay for the damage if your car starts to rust.
Extended Car Warranty Cost
The average cost of an extended car warranty is $1,500, and prices typically range between $1,000 and $3,000. There are several factors that affect how much an extended car warranty is going to cost, from the warranty’s provider and length to the type of car. For example, certain makes and models of cars cost more to cover, as do older, high-mileage cars that are more likely to break down.
| Warranty Company | Term Length | Cost | Down Payment on the Warranty | WalletHub User Rating |
|---|---|---|---|---|
| Carchex | 5 years | $2,451 | $136 | 4.1 |
| Autopom! | 5 years | $3,366 | $295 | 4.5 |
| Endurance | 5 years | $3,450 | $133.11 | 4.1 |
| Omega Auto Care | 5 years | $6,000 | $50 | 4.2 |
| Concord Auto Protect | 5 years | $2,156 | $300 | 4.8 |
| CarShield | 5 years | $2,384 | $295 | 4.2 |
Note: Rates are an approximation based on a 2020 Toyota Camry with 15,000 miles.
Learn more about what is the average cost of an extended car warranty.
Are Extended Car Warranties Worth It?
Extended car warranties generally aren’t worth it, purely from a financial standpoint. Most people who purchase an extended warranty save less on repairs than they pay for the contract, according to a survey by Consumer Reports.
If you drive a reliable car and maintain sufficient savings to pay for an auto repair emergency, then an extended car warranty probably isn’t worth what you would have to pay. Similarly, you might not need an extended warranty if you already have a trustworthy mechanic or carry insurance that offers similar perks.
But purchasing an extended warranty isn’t always a purely monetary decision. For some people, the peace of mind can be worth the price. If your car isn’t the most dependable, you might be more comfortable buying an extended warranty than going without. Just make sure that you’re clear on your vehicle history as well as your own priorities.
| Pros | Cons |
|---|---|
| Helps offset the cost of frequent repairs | Most people save less on repairs than they pay for the contract |
| Provides peace of mind if you’re worried about your car’s reliability | Won’t cover routine maintenance |
| Potentially lengthens the life of your vehicle | Limited to authorized repair shops |
