Extended Car Warranty Guide

An extended car warranty protects your vehicle from unforeseen repair costs for a specified period after the factory warranty expires.

In this article, we’ll review everything you need to know about extended warranties and help you decide whether extended vehicle coverage is right for you. We’ll also introduce you to the best extended car warranty companies on the market so you can feel confident that you’re getting coverage from a reputable provider.

An extended car warranty refers to mechanical breakdown coverage offered by a vehicle manufacturer. However, this term is often mistakenly used to describe coverage from third-party companies. Independent providers offer similar protection through vehicle service contracts, but we’ve used the terms interchangeably in this article for convenience.

What is an Extended Car Warranty?

An extended car warranty, which is sometimes referred to as a service contract, a maintenance agreement, or a service agreement, is a warranty that is prolonged and offered to car buyers in addition to the standard limited warranty. Extended warranties can be offered by the manufacturer, a warranty administrator, a warranty broker, or the dealership.

Vehicle Service Contract

Extended car warranties are designed to protect you from costly repairs after unforeseeable mechanical breakdowns and protect your vehicle after the factory warranty expires. Extended warranties can be purchased for new or used cars from the vehicle manufacturer or a reliable, third-party alternative. Understanding the difference between a manufacturer warranty and third-party warranty could help you decide whether extended car warranties are worth it for you.

Extended Car Warranty Coverage

Extended car warranty coverage is the level of protection an extended car warranty provides, including the types of parts covered and how the contract is set up. If you are considering an extended car warranty, the coverage level is the most important factor in how your car will be protected in the event of a mechanical breakdown. Generally, a higher level of coverage is more expensive.

What Does An Extended Car Warranty Cover?

An extended warranty covers mechanical failures of various vehicle parts that are specified in the contract. If a covered component fails, your extended warranty will pay the cost of parts and labor to have it repaired or replaced. Most extended warranty companies have flexible coverage options with various add-on benefits.

Types of Extended Car Warranty Coverage

While contracts differ among providers, most offer a mix of stated-component coverage and exclusionary plans. Stated-component contracts list each specific part that’s covered under your warranty, and exclusionary contracts only list the vehicle parts that are not covered. Exclusionary extended warranties provide the highest level of coverage. Also called bumper-to-bumper extended warranties, these plans cover nearly all mechanical vehicle components. Parts and systems that are typically excluded from these plans include:

• Wiper blades
• Brake pads and shoes
• Shock absorbers and struts
• Exterior trim
• Interior upholstery
• Lights and bulbs
• Catalytic converter
• Bumpers
• Damage caused by misuse, neglect, improper maintenance, collisions or acts of nature
• Routine maintenance services

Types Of Extended Car Warranty Plans

There are typically three main types of extended car warranties: bumper-to-bumper warranties, powertrain plus plans and powertrain plans. Understanding the difference between each type of extended warranty can help you decide which level of protection is right for you:

• Bumper-to-bumper: This term refers to the highest level of vehicle protection available, providing coverage for the most vehicle components. Ironically, these plans do not cover the physical bumpers of your vehicle, but rather protect most parts in between the front and rear bumpers.
• Powertrain plus: Some providers also offer mid-tier extended warranties that cover powertrain components as well as select vehicle systems like the air conditioning, suspension, brakes and fuel system. This middle-of-the-road plan protects some (not all) high-tech and electrical systems that bumper-to-bumper plans cover, plus powertrain components that are covered by a powertrain plan.
• Powertrain: The most basic level of coverage, best for highly reliable vehicles, a powertrain plan provides protection for the parts of your vehicle that deliver power from the engine to the wheels. These contracts only cover the parts of your vehicle that make it move, including the engine, transmission and drive axles.

Extended Car Warranty Benefits

 In addition to paying for repairs or replacements of covered components, most extended auto warranties come with benefits such as:

• Rental car reimbursement while your vehicle is in the shop
• 24/7 roadside assistance for services like fuel deliveries, battery jump-starts and lockouts
• Trip interruption coverage if you break down far from home and have to stay the night while your car is being repaired
• Towing coverage if your vehicle becomes inoperable and needs to be transported to a dealership or repair shop

Extended Car Warranty Exclusions

Below is a list of exclusions, or items and repairs that an extended car warranty doesn’t cover:

• Normal wear-and-tear items like brake pads and windshield wiper blades
• Regularly scheduled maintenance like oil changes or recommended maintenance
• Damage due to misuse, abuse, neglect, or use of improper fuel or fluids
• Damage due to environmental factors, chemicals or extreme weather conditions
• Damage from theft, vandalism or a collision

We recommend that you compare sample warranty contracts and weigh the pros and cons of extended car warranties before deciding on a specific provider and plan. Sample contracts give you detailed information on what exactly your warranty would cover in case of a needed repair.

How Do Extended Warranties Work?

Every extended warranty company has its own claims process, but most work the same way. After a breakdown, drivers must take their vehicles to an approved repair facility.

If you purchase an extended warranty from your vehicle manufacturer, you must have repairs made at a dealership. Third-party vehicle protection plans usually allow customers to have vehicles serviced at any repair shop certified by the National Institute for Automotive Service Excellence (ASE^®).

The repair shop will perform a teardown diagnosis and contact your extended car warranty company with the results. Your provider will then consult your contract and authorize covered repairs. After repairs are completed, reputable warranty administrators will pay the repair shop directly and you’ll only be responsible for your deductible. Some companies, however, will have you pay the full price of repairs upfront and send you a reimbursement check.

Typical extended warranty deductible options are $0, $50, $100 and $200.

Extended Car Warranty Cost

Our secret-shopper analysis shows that the average cost of an extended car warranty ranges from about $1,700 to $4,000 for three to seven years of coverage. Based on our research, the average cost of an extended car warranty is about $2,708. Typically, extended car warranty cost ranges from around $1,700 to $4,000 for three to seven years of coverage. On average, a bumper-to-bumper warranty is around $2,511, and a powertrain warranty rings in at $2,904.

There are many factors that go into the cost of an extended warranty, including:

• Your vehicle’s model, age and mileage
• The plan and provider you choose
• The level of coverage you choose
• The deductible you choose
• How long your contract lasts
• Your location

The best way to find the cheapest coverage is to shop around. Start comparing prices from some of our top-rated providers below.

Providers such as CARCHEX and Endurance allow you to get free quotes for your vehicle online. This can help you get a better idea of what you would be paying for coverage. The best way to get the most coverage for the best price is to compare personalized quotes from a number of top providers.

Are Extended Car Warranties Worth It?

Extended car warranties are worth it for customers who want peace of mind knowing their finances are protected in the event of unforeseen repairs. However, no warranty covers every repair. Each has a of exclusions, with some of the most common being:

Whether or not an extended car warranty is “worth it” depends on your preferences and lifestyle. Drivers that can cover unexpected repairs may not need an extended warranty, but those who prefer to make small monthly payments will find value in extended protection.

A recent study by software manufacturer PegaSystems, Inc. surveyed Americans on their opinions on car warranties, and 62 percent of drivers reported having benefited from coverage in the past year.

We recommend honestly assessing your vehicle’s reliability and your personal financial situation to determine if purchasing an extended car warranty is worth it for you. If you can easily afford the cost of unexpected repairs out-of-pocket, purchasing an extended warranty might not be the right plan for you. If you want to guarantee you aren’t paying for coverage you will never use, keeping a savings account exclusively to be used in the event of a breakdown is one way to save for repair costs.

Extended Warranty Pros and Cons

An extended car warranty isn’t the right choice for everyone. Here are some benefits and drawbacks to consider when deciding whether to purchase coverage.

The sooner you purchase coverage, the cheaper it will be. Manufacturer extended warranties can usually only be purchased while the vehicle is still covered by the manufacturer’s new vehicle warranty.

Manufacturer Extended Warranty vs. Third-Party Vehicle Service Contract

Drivers looking to purchase an extended car warranty have two options: a manufacturer-backed extended warranty or a third-party vehicle service contract. Some key differences between the two are outlined below.

Depending on your vehicle, the benefits of a third-party provider may outweigh those of manufacturer-backed coverage, or vice versa. If you decide to go with an aftermarket car warranty, look for these features in a provider:

• Quality claims service
• Low prices
• Useful benefits
• Easy-to-understand contracts

Should I Buy an Extended Car Warranty?

In worst-case scenarios, car owners can face hefty repair bills they can’t afford, leaving them stranded without reliable transportation. To avoid ending up in this scenario, many drivers choose to finance repairs over time through an extended car warranty.

However, an extended car warranty can be a pricey investment. Take time to consider if you should invest in coverage. On one hand, it may be more cost-effective to skip the extended warranty and save for the cost of repairs yourself. On the other hand, an extended warranty can bring peace of mind on the road.

Reasons You Should Purchase an Extended Warranty

• You can’t afford the cost of a sudden, unexpected repair.
• You want to plan for repair costs by financing them over a longer period of time.
• You are offered a low-priced plan from a reputable extended warranty provider.
• You expect your car to require frequent repairs.
• You drive a luxury vehicle that will require expensive repairs.

Reasons You Should Not Purchase an Extended Warranty

• You can easily pay for costly repairs out of pocket as they arise.
• You don’t anticipate the cost of vehicle repairs to be more than the cost of an extended warranty.
• You have an exceptionally reliable vehicle.
• You plan on trading in your vehicle before or shortly after your factory warranty.

Millions of dollars are spent every year by Americans alone on extended car warranties. Chances are, you have considered an extended warranty or are currently wondering, “are extended car warranties worth it?”

5 Best Extended Warranty Providers

Our review team has examined every leading extended car warranty company in the industry. We’ve researched customer reviews, prices, contract options, and company reputations. Based on our findings, we’ve determined the following companies to be among the best third-party vehicle service contract providers:

1. Endurance
2. CARCHEX
3. autopom!
4. Olive
5. CarShield

Here’s an overview of each provider:

Extended Warranty: Conclusion

In this guide, we looked at the basics of extended car warranties, including their cost, coverage, advantages and disadvantages. In addition, we looked at much of the terminology commonly used in the industry and hopefully demystified some of the lingo in order to help you make a better purchasing decision if you are considering extended protection.

Extended Auto Warranty: FAQ