About Your New Car Extended Warranty Plan

You have just concluded a deal to buy a new vehicle when the salesman’s talk turns to something you had hoped he would not bring up: a new car extended warranty. Your purchase already includes a bumper-to-bumper warranty, a powertrain warranty, a warranty against rust and even roadside assistance. New car extended warranties are not cheap and you think that you can do without one. Your thinking is probably right.

Extended Warranty

Before you sign on the dotted line for a contract that may not worth its price, consider the following points:

1. The warranty may be redundant. An extended warranty is really a service contract, what covers the cost of certain parts and repairs on your vehicle. What you might not know is that the warranty may kick in right away, overlapping your current coverage. If it does, you may be paying for something that you are getting anyway.

warranties2. An extended warranty may be offered for the wrong reasons. Be careful if a car dealer insists that you need to buy a service contract as a condition for new car financing. That assertion is usually a false one and can be disproven with a call to your lender. Check your sales contract, too, as a dishonest dealer may tack on a service contact without your knowledge.

3. The company that holds the warranty may not be the manufacturer. Some car manufacturers offer extended warranties and back these just as they do with their other warranty coverage. Some contracts, however, are held by third parties or administrators, companies that pay out claims. If your administrator goes bankrupt, who will pay for the service? You may also want to contact your states insurance commissioner to learn if the contract is underwritten by an insurance company. If so, find out if complaints have been made against the insurer and whether it is solvent.

4. The service contract may cost you a mint. When offered a service contract, you may discover that there are several levels of coverage available. Compare each plan and learn if deductibles apply. Some plans charge a deductible for each part replaced while others deduct only for the entire service order. Quite easily, you may find yourself agreeing to a service contract that will cost you thousands of dollars. Consider how long you plan to keep your vehicle, whether the contract is transferrable or if it would simply be more cost effective to bank your repair costs as you go along.

5. The quality of parts used. Replacement car parts can be terribly expensive. They can also be of varying quality too. You want to find out if the car parts offered are new or reconditioned. You may also want to consider how reconditioned parts may be treated by your manufacturer should something go wrong. Parts should be readily available too — you don’t want your car to sit in a shop while you wait for an overseas delivery to come in.

6. Know who can and will fix your car. You buy a service contract through your dealer and the fine print reveals that you are restricted where you can take the car for service. Okay, fine. On further inspection you learn that those places are limited to the dealer and his network, but that does you little good if you need service while out of town. Moreover, if you should move away and take your car with you, then what? If an extended warranty is restricted by geography, you may want to look elsewhere.

Personal Considerations

There are a few more matters for you to consider when exploring your extended warranty options.

First, what are your responsibilities as a consumer? You still need to follow the owners manual when maintaining your vehicle.

Second, can you buy the service contract later on? It can be easy to get pulled into something that you do not want or need only to find it difficult and costly to cancel the contract later.

Third, are you getting roped into a scam? Most such scams happen away from the dealership as third parties learn that your current coverage is about to expire or may think that you did not opt for a service contract. Hang up on those callers and shred posted solicitations.

When all is said and done, do you still need an extended warranty? Maybe not. Understand what coverage you are getting with your new car and, if you want long-term coverage, you may be better served to shop for one when your new car warranty is about to expire.


See AlsoWhat to Look for in a New Tire Warranty

Author: Matthew Keegan
Matt Keegan has maintained his love for cars ever since his father taught him kicking tires can be one way to uncover a problem with a vehicle’s suspension system. He since moved on to learn a few things about coefficient of drag, G-forces, toe-heel shifting, and how to work the crazy infotainment system in some random weekly driver. Matt is a member of the Washington Automotive Press Association and is a contributor to various print and online media sources.

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