Every brand new vehicle comes with a factory warranty that can cover the cost of maintenance and repairs on that vehicle. This coverage will last for a certain number of years or miles and will typically cover parts that are defective due to poor workmanship or substandard materials. However, drivers who have accumulated more than 12,000 miles a year or those who keep one vehicle for a long time will benefit from a type of warranty called extended car warranty.

Also referred to as a vehicle service contract, this type of warranty covers repairs and services once the original manufacturer’s warranty has lapsed. The name extended car warranty can be confusing since it sounds like you need to get the warranty from the original manufacturer. You can actually get an extended car warranty from a dealer or a third-party provider.

Another confusion that often arises is related to the “warranty” term. Technically it’s not a warranty and is more of a service contract. This will cover items such as repairs and regular maintenance for a certain time period.

Tips for Finding a Warranty Plan

1. Determine your vehicle’s reliability.

Do your research on the model’s history of maintenance and repairs and see if an extended car warranty plan will cover them. It’s easy to feel overwhelmed by all the options you have. The good news is that there are online resources that review and rate these kinds of products and services. But it’s still up to you to decide which plans and providers are the best.

2. Choose the one with the best deductible option.

You want to take into account how much your deductible costs and how much out-of-pocket costs you need to cover. A per visit deductible refers to what you need to pay regardless of the part under repair. A per repair deductible determines how much you need to pay for each car part being repaired.

For instance, you have a $100 per repair deductible and you need to repair the fuel pump and alternator. You’ll need to pay $200 in total deductible. But if you have a $100 per visit deductible and you get the fuel pump and alternator serviced in one appointment, you only need to pay $100.

3. Identify the covered types of maintenance and repair

Does the policy cover wear and tear and breakdown? Wear and tear mean the car part was worn out after regular use and needs to be replaced. Breakdown refers to parts that actually break. Different types of extended car warranty plans will cover different kinds of repairs. Mostly, you will find plans that cover the following parts:

• Engine

• Seals and gaskets

• Transmission

• Drive axle assembly

• Turbocharger/supercharger

Find a warranty plan that will cover the parts and types of repairs you need.

4. Reimbursement or direct payment?

Different warranty providers will have different methods to cover the costs. Some will ask you to pay the bill first and then file a reimbursement claim while others will pay the repair center or the mechanic directly. The problem with reimbursement claims is that they can take longer than anticipated and you’ll have to wait to receive your money. If this is something that could cause an issue with your budget, you’ll have to remove providers that won’t pay the repair shop directly off your list of prospects.

5. Where can you get repairs?

There are extended warranty policies that have a list of which repair shop you can take your vehicle to be serviced. This means that you can’t choose a center that could possibly provide you with better rates.

More contract tips

• Try to get multiple quotes

• Get a plan that takes effect after you purchase it

• Third-party warranty providers have lower costs than dealerships

• Try to find transferable extended protection to help increase the value of the vehicle if you want to sell it.

• Do your research on the providers before you sign anything.

 

Take note that extended car warranty plans will not cover the following parts:

• Tires

• Shock absorbers

• Brake rotors

• Brake pads

• Windshield wipers

• Batteries (excluding hybrid vehicles)

• Exhaust systems

• Upholstery

• Sealed beams

• Paint

• Glass

• Moldings

• Trim

Extended car warranty plans are a great option if you’re worried about car parts breaking down. It’s applicable for both new and used cars. Make sure that the warranty plan you’re getting will cover the parts that you need at a price that fits your budget.