June 3, 2022

Extended Car Warranties: Are They Worth It?

Should you get the extra protection or not?

When you purchase a car from a dealership, you’re offered a ton of services, from in-house auto insurance to extended warranties. In this article, we’re talking about extended car warranties: what they are, the pros and cons, and whether or not you should get one for yourself. The truth is that most people never have to use their extended warranties, but they still may be worthwhile for some people. Read on to find out which camp you fall into.

What Is an Extended Car Warranty?

An extended car warranty is a warranty that covers issues with mechanical or electrical parts that the regular manufacturer’s warranty may not cover. Extended car warranties are completely optional.

  • Extended car warranties may cover problems that the manufacturer’s warranty doesn’t, like engine defects. Depending on what state you live in, the cost of auto repairs can be high without extended warranties. California, for example, has the highest average car repair cost at $410.73, while Ohio has the lowest cost at $342.12.1 The idea behind extended car warranties is that they will cover these costs, but we’ll get into exactly what they cover below.

  • Extended car warranties are yet another expense that may not pay for themselves, if they don’t cover anything. Also, depending on your manufacturer’s warranty, your extended car warranty may overlap with your existing coverage.

Tip

To check if your car is still under its factory warranty, call your dealership with your vehicle identification number and mileage handy.2

What Do Extended Car Warranties Cover?

Here’s what extended car warranties cover and don’t cover, generally.

What They Cover

What extended car warranties cover depends on the type of warranty. There are two main types: original equipment manufacturers and aftermarket/third-party warranties.

  • Original equipment manufacturers: Otherwise known as OEMs, these warranties come from the car manufacturers directly. While powertrain warranties cover engine/transmission defects, bumper-to-bumper coverage options, or limited warranties, OEMs cover things like the major components under the hood, power seats, electronics, and navigation systems. OEMs extend the length of the coverage and the allotted mileage of your existing warranty, given that they come from the same manufacturer by definition. Some OEMs even include roadside assistance, which is a nice touch if you don’t already have this service.
  • Aftermarket/third-party warranties: Aftermarket warranties are from third-party vendors. The coverage is often more limited than with OEMs, so you may only be able to get your car fixed at certain places. Plus, you’ll probably have to pay for the services at the repair facility or shop and then be reimbursed, which could be inconvenient and time-consuming.3 If you still prefer to buy your extended car warranty from a third party, make sure to choose a trustworthy company (more on that below).

What They Don’t Cover

  • No matter which type of warranty they are, extended car warranties don’t cover routine maintenance, otherwise known as wear and tear.4

FYI

Wear and tear includes tire replacements, oil changes, windshield wiper fluid replacements, etc.

Aftermarket and Third-Party Warranties

If you don’t buy your extended warranty from your vehicle’s manufacturer, you can also buy it from a third party. This is otherwise known as an aftermarket warranty.

Definition

An aftermarket warranty is a third-party warranty that’s similar to OEMs, but it may have exclusions or limits on where you can get your vehicle fixed and more. Also, there’s no guarantee that OEM parts will be used. These limitations make aftermarket warranties more affordable than OEMs, in general.

Types of Aftermarket Auto Warranties

Most third-party companies divide their warranties into different levels of coverage. See the example below from American Auto Shield:

Coverage level Diamond Platinum Deluxe Bronze Aluminum Tech Plus PT Gold Powertrain
Type Exclusionary Component Component Exclusionary Component Component Expanded Enhanced
Air conditioning Yes Yes Yes Yes Yes No Yes No
Alternator No No No No No Yes Yes No
ABS pump No No No No No Yes No No
Audio center Yes Yes No Yes Yes No No No
Backup camera No No No No No Yes No No
Backup sensors No No No No No Yes No No
Brake system Yes Yes Yes Yes Yes Yes No No
Control modules No No No No No Yes No No
Cooling system Yes Yes Yes Yes Yes No Yes No
Drive axle Yes Yes Yes No No No Yes Yes
DVD player No No No No No Yes No No
Electrical Yes Yes Yes Yes Yes No No No
Electronic hi-tech Yes Yes Yes Yes Yes No No No
Engine Yes Yes Yes No No No Yes Yes
Fuel delivery system Yes Yes Yes Yes Yes No Yes No
GPS/navigation system No No No No No Yes No No
LCD screen No No No No No Yes No No
Power windows motors No No No No No Yes Yes No
Radio No No No No No Yes No No
Seals, sealing gaskets, and boots Yes, on a stand-alone basis for the parts listed Yes, on a stand-alone basis for the parts listed Yes, on a stand-alone basis for the parts listed Yes, but only in conjunction with the repair or replacement of a covered part. Stand-alone repairs aren’t covered. Yes, but only in conjunction with the repair or replacement of a covered part. Stand-alone repairs aren’t covered. No Yes, but only in conjunction with the repair or replacement of a covered part. Stand-alone repairs aren’t covered. Yes, but only in conjunction with the repair or replacement of a covered part. Stand-alone repairs aren’t covered.
Starter No No No No No Yes Yes No
Steering Yes Yes Yes Yes Yes No No No
Sunroof / convertible top motor No No No No No Yes No No
Suspension Yes, except for shocks and struts Yes, except for shocks and struts Yes, except for shocks and struts Yes, except for shocks and struts Yes, except for shocks and struts No No No
Transfer unit 4×4 Yes Yes Yes No No No Yes Yes
Transmission Yes Yes Yes No No No Yes Yes
Turbocharger Yes Yes Yes Yes Yes No No Yes
Water pump No No No No No No No Yes5

Each level comes at a different price, but to find out your pricing options, you’ll need to request quotes from companies directly.

How Do Aftermarket Auto Warranties Work?

Here’s how aftermarket auto warranties work:

  1. You’ll find out where you can get your car fixed from your warranty provider.
  2. You’ll have to pay your deductible before your coverage will kick in.
  3. The repair shop will fix your car but, again, not necessarily with OEM parts.
  4. You’ll pay out of pocket for the repairs.
  5. Your provider will reimburse you, which could take months.

Do I Need an Aftermarket Auto Warranty?

Aftermarket auto warranties make more sense for some vehicles than others. We recommend getting one if:

  • Your car’s warranty has run out.
  • Your vehicle isn’t very reliable.
  • The warranty is cancelable, so you can get a prorated refund.
  • You have a separate budget for maintenance, as most extended warranties won’t cover it.

The Cost of Extended Car Warranties

The cost of extended car warranties varies, but a sample price would be in the $1,500 to $1,850 range, with deductibles ranging from $0 to $250. Learn more about the best extended car warranties to dive deeper into warranty costs.

How Do Extended Car Warranties Work?

Extended car warranties work similarly to auto insurance policies. You’ll choose a deductible, and then, if you have a warranty from your manufacturer, they’ll cover certain repair costs. On the other hand, if you have a third-party warranty, you’ll have to pay for repairs and then get reimbursed later.

How Long You’re Covered

Extended warranties last for either a time period or a mileage, whichever comes first. While different warranties have different limits, an example would be a 20-year, 25,000-mile warranty.

Can You Transfer It?

Whether or not you can transfer your warranty depends on the company, so you should definitely ask your salesperson about this before you buy.

Do You Need an Extended Car Warranty?

Extended car warranties are optional, and they may be right for some but not others.

Are Extended Car Warranties Worth It?

Buying an extended warranty doesn’t make sense if you:

  • Are still covered under your manufacturer’s warranty.
  • Have a very reliable car.
  • Don’t know the company or its reputation (for third-party companies).
  • Are looking at an inclusion warranty that only covers specific parts and isn’t very comprehensive.

In addition, extended car warranties are usually not worth it for used cars, unless:

  • The car is very unreliable.
  • You’re looking at an exclusion warranty, meaning it covers everything except for what it excludes specifically.
  • The cost is reasonable.

How to Check if a Car Is Under a Warranty

If you’re not sure whether or not your vehicle is under warranty currently, follow these steps to find out:

  1. Find the vehicle identification number (VIN), which is unique to your vehicle. You can find it in these spots:
    • Outside of the windshield
    • On the inside of the driver’s side door
    • Under the hood
    • In the spare tire compartment
    • In your vehicle’s paperwork
  2. Check your odometer for the mileage.
  3. Call the dealership where you bought your vehicle or any of the vehicle manufacturer’s dealerships to ask about your warranty.

How to Get the Best Extended Car Warranty

If you’ve weighed the pros and cons and decided to purchase an extended car warranty, make sure you get the best one for your needs.

Extended Car Warranty Companies

We’ve outlined everything you need to know about extended warranties from the most trusted companies around if you decide to go the third-party route. Choosing the right company is the most important part of purchasing an extended car warranty.

Make sure to research the company and check your state’s consumer protection office for complaints, along with the Better Business Bureau and Yelp. Look out for reviews that mention customer service, monthly payments, and the vehicle service contract.

Company Number of years in business Yelp rating out of 5 BBB rating A-F BBB customer review average out of 5
CarShield 16 1 F 1.44
Concord 8 3 B 4.73
Autopom 11 4 A+ 4.59
Carchex 22 2 A+ 2.12
Endurance 15 1 C 3.36
Omega 8 N/A A+ 4.56
Protect My Car 16 1.5 A+ 4.52
Toco 8 2.5 A+ 4.45

When to Purchase

It’s ideal to buy an extended car warranty at the same time you finance your vehicle so you can include the cost in your auto loan.

Questions to Ask

When you’re speaking with your sales representative, be sure to ask the following questions:

  1. Can you negotiate the price?
  2. What’s covered and not covered?
  3. How long is the extended warranty?
  4. How do you make a claim?
  5. Can you transfer the warranty?
  6. Can you cancel?
  7. Do you have a separate budget for maintenance?

Extended Car Warranty Scams

Auto warranty scams are common. You may receive a call from someone claiming to be a manufacturer, insurance provider, or dealer, offering you a warranty or telling you that your current warranty has expired. To avoid being scammed:

  • Don’t share your personal information. If you don’t already know the person on the line, don’t tell them any of your personally identifiable information (PII), such as your Social Security number, full name, payment information, bank account information, or driver’s license number.
  • Don’t pick up unknown numbers. Your safest bet is to only respond to calls from numbers you recognize. But remember that scammers can spoof caller ID, so even if it says it’s from a certain company, it may not be. To check, go on the company’s website and cross-reference the phone number.

If You’re Scammed

Today’s scammers are pretty sophisticated, so it’s easy to fall for an auto warranty scam. If you’re scammed, file a complaint with the Federal Communications Commission, or FCC. You won’t get any individual damages, unfortunately, but you could help the FCC identify and prosecute scammers.

You can contact the FCC in three ways:

  1. File an online complaint at https://consumercomplaints.fcc.gov.
  2. Call 1-888-225-5322.
  3. Write the FTC at the following address, including your name, contact information, address, and information about your complaint:

    Federal Communications Commission
    Consumer and Governmental Affairs Bureau
    Consumer Inquiries and Complaints Division
    45 L Street NE
    Washington, D.C, 20554

Check out the FCC’s website to see an audio sample of a real-life auto warranty scam.6

If you’ve paid the scammer, also make sure to contact your bank or credit card company.

Auto Warranty vs. Vehicle Service Contract

What’s the difference between an auto warranty and a vehicle service contract?

What it includes Auto warranty Auto service contract
Pays for certain repairs and services Yes Yes
Is a warranty under federal law Yes No
Sold by manufacturers Yes Yes
Sold by dealers Yes, for extended aftermarket warranties Yes
Sold by independent companies Yes, for extended aftermarket warranties Yes
When you buy it Time of purchase Time of financing
Could cover routine maintenance like oil changes No Yes

Let’s explain both in a little more detail.

Auto Warranty

An auto warranty is a contract that says a company will fix certain malfunctions or defects in a given time period. Sometimes, for both used and new cars, these warranties are included in the car’s purchase price.

Auto Service Contract

An auto service contract, otherwise known as an extended warranty, is a contract where a company agrees to perform or pay for certain services and repairs. You can buy it at any time, and unlike auto warranties, auto service contracts could cover wear and tear like oil changes. However, they’re probably not worth it if your auto warranty is still active, as most people never have to use their auto service contracts anyway.

Recap

That’s everything you need to know to buy an extended warranty. The bottom line is that they’re optional, so they really only make sense if you have a very unreliable used car and the warranty is inexpensive and exclusionary, meaning it covers everything except what it excludes specifically. If you have a new, reliable car that’s already covered by the manufacturer’s warranty, there’s no point in buying an inclusion warranty, which means only the items specifically listed are covered.7

What’s most important is that you have reliable auto insurance, so if you are buying a car or want to switch companies, read our list of the best car insurance for peace of mind.

Citations

  1. CarMD Finds Vehicle Owners in California Paid Most, Ohio Paid Least for Check Engine Light-Related Car Repairs in 2020. CarMD. (2021, July 13).
    https://www.carmd.com/wp-content/uploads/2021/06/release_CarMD_StateCarRepairCostRanking_summer2021_071321.pdf

  2. How to Check if a Car Is Still Under Warranty. J.D. Power. (2021, Feb 10).
    https://www.jdpower.com/cars/shopping-guides/how-to-check-if-a-car-is-still-under-warranty

  3. Understanding Extended Warranties. Edmonds. (2017, Aug 15).
    https://www.edmunds.com/auto-warranty/understanding-extended-warranties.html

  4. What is the difference between a manufacturer’s warranty and an extended vehicle warranty or service contract? Consumer Finance Protection Bureau. (2016, Aug 5).
    https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-manufacturers-warranty-and-an-extended-vehicle-warranty-or-service-contract-en-825/

  5. Vehicle Service Contracts. American Auto Shield. (2022).
    https://americanautoshield.com/coverage/vehicle/

  6. Watch Out for Auto Warranty Scams. FCC. (2022).
    https://www.fcc.gov/sites/default/files/watch_out_for_auto_warranty_scams.pdf

  7. Should You Walk Away from a Used Car Extended Warranty? AutoTrader. (2021, Aug 5).
    https://www.autotrader.com/car-shopping/buying-a-used-car-should-you-walk-away-from-an-extended-warranty