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Are Extended Car Warranties Worth It?
It’s a big choice that many vehicle owners face after the new car factory warranty has expired: Should you extend the warranty for extra peace of mind? Extended car warranties have many benefits under the right conditions, but they aren’t always necessary or even an option, depending on the age and condition of your vehicle.
What Does A Car’s Factory Warranty Usually Cover?
Most manufacturers offer basic warranty coverage, but some plans are better than others.
If you’ve ever shopped for a car, you’ve heard the term factory warranty. While its exact definition can vary in different situations, it always refers to some type of coverage that is offered by the original brand or manufacturer. In this article, we’ll get into the nitty-gritty of what factory warranties really are. We’ll also talk about extended warranties offered by manufacturers and other providers.
What Is A Factory Warranty?
The factory warranty is a warranty covered through the car manufacturer to pays for repairs within a specific time frame and/or mileage after the purchase of the car. Factory warranties most commonly apply to new cars and may include a powertrain warranty, maintenance, corrosion, and emissions coverage.
Factory warranties are different from other kinds of warranties because they are backed by the actual manufacturer. A big difference between a factory warranty and a manufacturer warranty is that you don’t have to pay for a standard factory warranty. It is automatically included with your new car, though some forms may require a deductible for certain repairs.
Today, practically all brands offer manufacturer’s warranties on new cars. What these warranties cover differs between makes and models, but the basics are similar. Since major car brands are competing in the same marketplace, shoppers expect that most factory warranties will offer similar core coverage, though the details can differ between brands.
What Does A Factory Warranty Cover?
The term “manufacturer warranty” really includes more than one warranty. To understand what those are, we need to make a quick distinction between inclusionary and exclusionary warranties.
If a factory warranty is inclusionary, the contract will explicitly list every part that is included in the coverage. If a warranty is exclusionary, the contract lists the excluded parts instead. Exclusionary coverage typically covers more items, since there are thousands of parts that make up a car. However, the circumstances under which those parts are covered can vary.
Below are the main types of coverage that are typically included in a factory warranty.
Basic Limited Warranty
Also called bumper-to-bumper coverage, this warranty covers defects in materials or workmanship for many parts of the car. This is an exclusionary warranty that often excludes wear items like brakes and tires, as well as environmental damage like external rust or windshields. The bumper-to-bumper warranty does not cover routine maintenance or damage from lack of maintenance. Damage from misuse – like taking a Cadillac offroad – isn’t covered, and acts of God like flooding from a natural disaster are also not covered.
What’s confusing is that people often refer to the basic limited warranty as the factory warranty. If you hear someone say, “The factory warranty lasts for 5 years or 60,000 miles,” this is the warranty they are most likely talking about.
The second core coverage that is a part of almost all factory warranties is the powertrain warranty. The powertrain is what it sounds like: the train of power from the engine to the wheels. Powertrain warranties will usually cover the following:
- Engine, including internal parts and the engine block
- Transmission or transaxle
- Drivetrain (2WD, 4WD, AWD)
The powertrain warranty is usually inclusionary, so the contract will list the parts that are covered. Under this warranty, coverage is only for defective parts or installations that were made at the factory. A transmission repair because of misuse or neglect won’t be covered. Some powertrain warranties may require a deductible for repairs.
Other Parts Of The Factory Warranty
There are a few more coverage types that can come with a manufacturer warranty. These include:
Before you decide if the cost is worth it, there are some disadvantages to consider, as well.
- Corrosion coverage: This warranty covers the cost of replacing sheet metal that has rusted through. It usually requires a hole to have formed in the metal, and it may not cover surface rust. Corrosion coverage can vary between different parts of the car.
- Roadside assistance: Many brands today offer roadside assistance. These programs can be tied to the powertrain warranty period, or they can have a separate duration. Some may also require deductibles or only offer allowances toward roadside assistance.
- Emissions warranty: Federal law requires emissions parts to be covered for defects. Most emissions parts are required to be covered for 2 years or 24,000 miles, though some parts like the catalytic converter or emissions control unit are covered for 8 years or 100,000 miles. Manufacturers can follow the minimum guidelines or offer more coverage for these parts.
- Maintenance: Some auto brands cover regular maintenance for a period of time. This coverage is usually short in duration. For example, Toyota covers regular maintenance on new cars for 2 years or 25,000 miles.
What Does the Contract Cover?
There are two types of extended warranty coverage typically offered: inclusionary and exclusionary. An inclusionary warranty only covers items that are specifically listed in the contract. An exclusionary warranty will have a detailed list of those items that are not covered by the agreement.
In general, you want to have an exclusionary contract.
Even then, you’ll want to go through line-by-line to make sure that expensive items that may fail are not excluded. Exclusionary policies will typically come with higher price tags than inclusionary policies.
Note that the brochure or sample contract for an extended warranty or service protection policy is not the actual contract – it’s just marketing. Insist on seeing what is shown on the actual agreement before you agree to purchase any vehicle protection product.
Where Can I Get My Car Serviced?
The question of where the warranty is honored is critical. Are you limited to one specific repair facility or dealership? What happens if your car breaks down if you’re traveling? Can you go to any of your car brand’s franchised new car dealers for service?
Don’t make any assumptions, because if the dealer goes out of business or for some reason you no longer want to get it serviced at a specific place, your warranty could be worthless.
Those details should be spelled out in the contract. If you can’t get a good answer, you should consider it a red flag.
Who Is Backing the Warranty?
You’ll want to know who is behind the warranty coverage. Some extended warranties or service contracts are backed by auto manufacturers. This is especially common with the extended warranty coverage you get when you purchase a certified pre-owned car. Other warranties are backed by independent companies that have no relationship with either the dealer or manufacturer. Before you sign a contract with a third-party warranty company, you’ll want to spend some time online checking them out to see what other customers are saying and whether there are any consumer complaints against them. If they go out of business, your contract will likely be worthless.
When Can I Buy an Extended Warranty?
Often when a dealer’s finance officer is trying to sell you a service contract, there will be pressure to “buy today to get a deal.” The truth is, you can generally buy an extended warranty at any time during the vehicle’s life, as long as the car does not have exceptionally high mileage.