How To Choose an Extended Warranty

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Before offering tips on how to properly choose an extended warranty on your car, here are a few facts to keep in mind. According to Consumer Reports, 55 percent of people who purchase an extended warranty for their car never use it. Among those who did use the warranty, most saved less on auto repairs than they paid for the contract. When it comes to buying an extended warranty for your vehicle don't overbuy coverage you'll never use, and before you buy, take a close look at what the warranty includes and what it does not include.

Standard auto warranties cover your new vehicle from the moment you purchase it. These generally include at least a three-year, 36,000-mile bumper-to-bumper warranty that protects all major systems. There is also a powertrain warranty that takes care of your car's motor, transmission, and drive axle. These warranties cover defects or damage that occur during normal regular use. They pay for defective parts and cover replacement of the parts by an authorized dealership, and also pay for the labor charges. If you are buying or leasing a new car and intend on selling it or turning it in at the end of the lease, you really don't need an extended warranty. On the other hand, if you purchase a used car that is out of warranty, you may consider purchasing an extended warranty to cover high repair costs. We're talking about any big problems such as needing a new motor or transmission. When buying an extended warranty, the most common error that consumers make is that they don't buy a warranty plan that really meets their needs.

Common Mistakes

It is extremely important to read all the fine print of a warranty contract before purchasing it. Some people just look at a brochure, think the product sounds good, and they buy the expensive contract. The problem is that they don't find out that they bought the wrong type of coverage until years later when they try to use the warranty only to discover it doesn't cover a much-needed repair. Never purchase an extended warranty as an impulse buy. Do your homework first.
A very common mistake when buying an extended warranty service contract is making a decision to buy whatever is offered at the time you purchase the vehicle without researching the product. It's easy to see why this happens. You are buying a vehicle and going through the paperwork in the finance office of the dealership. Everything from a special coating to preserve your upholstery and paint, to a lifetime oil change, nitrogen in your tires, and tire and wheel protection is being offered. It is all enough to make your head swim. You just want to get out of there and drive your new car.
Please understand that you can purchase an extended warranty on your vehicle at any time. So please take your time and research the kind of warranty that fits your needs before buying. Look for a warranty company that has been in business for many years and has top ratings from the Better Business Bureau. For instance, top rated warranty companies with a proven track record according to MarketWatch and Consumer Reports include Endurance, Car Shield, and Carchex with plans that cost from $89 to around $160 per month.
Another common mistake is to simply buy the cheapest warranty you can find. Cheapest isn't always best. Again, it comes down to your needs. Read the warranty contract from cover to cover to make sure you understand what IS covered and what is NOT covered in the plan. People are often surprised that their warranty has exclusions. What is an exclusion? Simply put, it is an item that is not covered under the warranty. Standard exclusions include air bags, paint, upholstery, carpet, batteries, glass, weather strips, brake pads and rotors, headlamps and light bulbs, exhaust systems, chrome, dash panels, shock absorbers and windshield wipers. 
However, some contracts include unusual exclusions and are called "limited warranties." Make sure to read and understand everything that is excluded in the extended warranty you are considering. True bumper-to-bumper extended coverage contracts only have a few excluded items that include cosmetic and wear and tear items. Also keep in mind that all warranties on automobiles can be voided if you do not keep up with regular scheduled maintenance of the vehicle as listed in your Owner's Manual.

Extra Benefits

Besides getting your car repaired under warranty after your factory-provided plan is over, an extended warranty can offer additional benefits that may come in very handy if your vehicle breaks down. Before you buy, check to see if your extended warranty contract includes the following:
  • Roadside Assistance and Towing- Many plans offer fuel delivery, jump starts and battery service, lockout service, flat tire service, and free towing.
  • Free Car Rental- When your car is in the shop overnight or for several days, some plans offer free rental car coverage.
  • ASE-certified Repairs- Some plans allow for nationwide ASE-certified repair facilities to work on your car no matter where you are. That's a great benefit if you break down far from home.
  • Trip Interruption- If your car breaks down while you are on a trip or vacation, trip interruption coverage will reimburse you for lodgings and food.
Wrapping it up
Remember to look for a reputable extended warranty company that is recognized from coast-to-coast and that offers response to your needs 24 hours a day. You want service that is easily and instantly accessible. Remember that you should never pick an extended warranty for your car based on a call from a clever salesperson or a glitzy brochure. If you are really interested in a coverage plan, read every word about the plan you can find and read online reviews. Know every detail of the contact before you sign on the dotted line.