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Whenever you buy a new car, one of the factors you should consider is the warranty that comes with the vehicle. After all, not every warranty is the same. Some, for example, cover everything except normal wear-and-tear items for three years or 36,000 miles, while others last for ten years or 100,000 miles. There are also extended warranties, which may be purchased either from the car dealer, or from third party agencies.

Facts about extended warranties:

  • Extended warranties may or may not be purchased from your car dealer.
  • Dealer-supplied extended warranties are often called “factory warranties.” This is because the technicians who will be working on your car are factory trained.
  • Third-party warranties may be purchased for new or used cars, and may be less expensive, but may also be less convenient.
  • Third-party warranties often require that you pay out-of-pocket for repairs, which will then be reimbursed.

When considering an extended warranty, are some factors you should consider:

  • What warranty is already in place, and how long do you plan to keep the car? If your car is new, and you routinely replace cars every three or four years, the standard 3 years/36,000 miles warranty may be enough – why spend money to extend the warranty on a car you won’t be keeping. If the car you’re buying is used, see if it is still covered, and then consider how long you plan to keep it. “Certified pre-owned” and “certified used” cars purchased from dealerships often come with factory warranties in place.
  • Who backs the warranty? Extended car warranties may be backed either by independent companies, or the vehicle’s manufacturer. Knowing who backs your warranty gives you valuable clues about the warranty itself. For example, third-party, or aftermarket, warranties are often cheaper, but manufacturer-backed warranties are often easier to use. If you do choose an aftermarket warranty, be sure to check the rating history of the company with A. M. Best (the company that rates insurers), to gauge their reliability.
  • Is there a deductible? Before you commit to any extended warranty, ask about the deductible. You’ll want to know the amount, of course, but also ask if it’s per repair or per visit. If the former is the case, a single visit where multiple parts are repaired could be incredibly costly. On the other hand, a per visit contract may be more money up front, but could save significant amounts of cash over the life of the car. If you have a car that is temperamental or older, and is in the shop often, consider asking about a zero-deductible warranty. Again, they cost more up front, but save you after the fact.
  • What are the restrictions? You’ll also want to check on the rules and restrictions attached to any warranty you are considering. Specifically, you need to know if the warranty is transferable, in case you plan to sell the car at some point. (A used car with a warranty is easier to sell.) You’ll also need to know if you can use any repair shop or if you have to use specific providers. Factory warranties, for example, often require all work be done at the dealership, which can be inconvenient if you’re ever far from home when a repair becomes necessary. Finally, you’ll want to know if you must pay up front for repairs, and then request reimbursements (and what the process is), or if the warranty will pay directly for the work.
  • What is covered, exactly? Always be sure you understand exactly what an extended warranty covers before you sign for it. For example, does it cover wear and tear as well as breakdown? Some policies only have breakdown coverage, which means they extend only to parts that literally break. Others cover wear and tear, which means that even if a part is merely worn out, instead of broken, it will be covered. Finally, some entry level warranties don’t cover anti-lock braking systems, so be sure to choose a warranty which does, if you car has this feature.

If you are the type to buy a car, and run it forever, an extended warranty may save you a lot of money over the life of your vehicle, but be sure to know what you are buying, to get the cheapest price for the best coverage.