Extended Car Warranties: Are They Worth It?

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.

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

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.

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.

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.

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.

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?

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.

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

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.

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.