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What are extended warranties?
An Extended Warranty is a contract between you and a service provider. Many people purchase auto warranties to shield themselves against the costs resulting from mechanical breakdown and/or failure to their vehicle. It is important to know that when you purchase a car warranty you are not purchasing a form of insurance, but you are entering into a service contract between a company and yourself. The extent of coverage, benefits, and terms of payment are particular to each individual contract. An auto extended warranty does not necessarily replace the original manufacturer's warranty, but is intended to make available a level of coverage right for you. Although the main advantage of attaining a car warranty is to avoid the high cost of automobile repairs, many plans also come with additional benefits. It is important that you not only understand the coverage being offered, but that you are also aware and comfortable with the company providing the plan.
What about the manufacturer's warranty on my car?

Every new car purchased comes with a unique warranty program. The limits, terms, and benefits of the warranties provided are different for each automobile manufacturer. If you are unsure as to what type of protection your particular vehicle may or may not have, you should check your owner's manual, or contact the manufacturer for details. If the make of your vehicle is listed to the left you may find the information you are searching for by clicking on the link. It is important to be familiar with the term of your manufacturer's warranty so that you will be aware of when this protection is no longer active.


 

 

Won't I be purchasing double coverage?
Many people decide to wait to purchase an extended car warranty simply because they are still under their original manufacture's guarantee. The truth is that the best time to purchase a plan is when your vehicle is under this protection. Most auto warranty providers will take into consideration this fact, therefore considering your car less of a risk to protect, and you will receive a lower rate then if you had waited. The longer you wait to purchase a plan the more eligibility you lose. In effect, you will be receiving the same length of coverage by purchasing earlier, rather than if you had waited. You can only extend bumper-to-bumper coverage up to 100,000 miles whether you purchase the protection now, or whether you decide to wait, so it may be to your advantage to purchase now while the plans are least expensive.
What are the different levels of coverage provided with extended auto warranties?

There is no standard protection or distinct levels of coverage that can be found from one provider to the next. You should always be familiar with what a particular plan is presenting, and ask questions whenever you are unsure or if there is anything ambiguous. There are some terms that are thrown around no matter which extended auto warranty provider you are speaking with, and the following should help you to gain an understanding of what can be inferred by these terms.

"Bumper-to-bumper" - Bumper-to-bumper, otherwise know as full protection, represents the highest level of coverage available. A quick definition will assume that this coverage protects everything with the exception of regular maintenance and wear. True bumper-to-bumper protection will not list out all the parts that it protects. Instead, it will simply state the exclusion list, or the parts that fit into the category of regular maintenance and wear. If you are unsure if a particular plans falls into the category of bumper-to-bumper, ask them if it is an "exclusionary plan".

"Stated Plan" - A stated plan, or stated coverage, usually corresponds to used cars. A stated plan will actually state out the complete list of the components that it will cover. Therefore, if it's a covered component it will be on this list. Don't be fooled, although a stated plan looks as complete as bumper-to-bumper warranty protection, it is not nearly as comprehensive. However, these extended auto warranty plans do cover the major mechanical components of a vehicle.

"Power Tran protection" - Powertrain protection, or drivetrain, covers the hardest working and most expensive parts of your car. This type of extended coverage strives to protect you from breakdown to your engine, transmission, transfer case, drive axle, and seals and gaskets. This coverage is ideal for older, or higher mileage, vehicles where you are more worried about major mechanical problems.

"Wrap Coverage" - Wrap coverage is a form of extended warranties specialized for particular vehicles. If your vehicle comes with a powertrain warranty for 10 years, up to 100,000 miles, than this coverage pertains to you. A wrap warranty plan takes your existing powertrain protection, wraps all other components of your vehicle around it, thus giving you bumper-to-bumper protection for the full 10 years, up to 100,000 miles. This plan is sometimes only available while a vehicle is within the first 12,000 miles.


 

 

What details should I make sure an auto extended warranty provides me ?

• Money back guarantee - If you are going to purchase an extended auto warranty, make sure that you are given some sort of review period with the contract. This will ensure that you will be satisfied with the plan, or else you can cancel for a full refund within a certain number of days. Most warranty plans will give you at least a 30-day money back guarantee period.

• Backed by a reputable insurance company - As discussed earlier, find out which insurance company is backing your extended warranty plan. Ask them what the insurance company is rated.

• Low deductible option - If you are going with a long-term plan you want to get the lowest deductible possible. It is not unlikely that you may use this plan at least once per year. If that's the case, a large deductible can add up quickly. Go with a reasonable deductible, if any. However, if you are going with a shorter-term plan, and less coverage (i.e.: just a powertrain warranty), a higher deductible can bring down the cost for your extended car warranty. Since you are only shielding yourself against major repair costs anyway, a larger deductible will not hurt you here.

• Transferable - If your extended auto warranty is transferable, you have the option of transferring the warranty should you ever sell the car, or give it to someone. This would clearly add to your car's resale value becasue the car is still protected by an extended auto warranty, and, therefore, considered less risk present.

• Pro-ratable - You never know what is going to happen to your vehicle in the years to come. Some extended warranties can last up to 7 years, and the chance of you having your vehicles at the end of those seven years can be slim. Whether you may sell the vehicle, trade it in, experience a crash resulting in the vehicle being totaled, or theft, pro-ration gives you the opportunity to get out of your contract with a refund. A pro-rated refund determines what amount of warranty you have left at the time you cancel the contract, using either the time elapsed or mileage accumulated, whichever is greatest. The refund can be sent to you in the form of a check, or put toward a new vehicle service contract.


• Benefits -
Almost all warranties come with additional benefits to the regular protection. The range of benefits can be found earlier on this page. Although these benefits may seem rather mundane in terms of affecting your decision process, these benefits can be very useful and should not be over looked. Take the time to find out exactly what each extended car warranty plan offers.

• Pays repair facility directly - One of the main reason you are purchasing a car warranty is to avoid the hassle and haggling that is common between mechanics and consumers. When you enter in a vehicle service agreement, you now have a claims department team that will be dealing directly with them. Any issues that arise will be settled between them. For this reason, you want to stay out of the process as mush as possible. Allow them to come to an agreement regarding any matters, and make sure that your auto warranty pays the repair facility directly. The last thing you want to happen is to put the money up yourself, and then get into a disagreement with your own claims department about what the repair costs should have been.

• Options for payment of plan - Extended warranties can be a very valuable instrument in your life, but they can also be expensive. If you can't afford to pay for your plan up front, see if there are any payment options available. Many extended auto warranty plans now come with zero percent financing. One very important thing to ask before entering into a payment plan is what will happen if a claim arises and I haven't finished paying off the plan yet. Some warranty companies will only pay a claim up to the amount you have put into it so far. Make sure you resolve this question before signing up.

Does the dealer offer the best extended car warranty for me?

Just because a dealer is offering you a car warranty does not mean that it is a manufacturer's plan. Many times dealers are selling third party warranties, and because the consumer believes they are purchasing a premium plan, the dealer is able to mark up the cost. You need to find out exactly what king of a plan the dealer is offering you.

What are the common additional benefits?

Many extended car warranty protection plans come with a range of additional benefits. Although there is no standard mix of these benefits, the following lists out the most common benefits offered in auto warranty plans.

• Road Hazard Benefit - A road hazard program offers reimbursement should you damage or destroy your tire(s) from a nail, pothole, curb, etc. This program is not unique to extended warranties, but is also offered in many car insurance programs, and even from a vehicle maintenance provider, such as whomever you purchased your last set of tires from. Most road hazard programs will limit the amount of money they are willing to reimburse you per incident.


• Rental Benefit -
A rental benefit will pay for, or contribute toward, the amount of money spent on a rental vehicle while your car was being repaired. Once again, the amount of money offered is limited on a daily basis, therefore limiting the type of vehicle you are able to obtain. When learning about a particular plan and their policies on their rental program, it is important to discover whether the rental benefit will be available from minute one, or whether they demand a certain amount of time to be worked on your vehicle before granting this right. Some car warranties will make you wait up to 8 hours before allowing you to drive off in a paid rental car, while other plans will let you take the car as soon as you drop off your vehicle.

• Trip Interruption Benefit - The trip interruption benefit is built-in with auto warranties to provide you with the peace of mind knowing that should your car breakdown far from home you will receive some compensation for the money you had to spend on food and lodging. This reimbursement process is generally in the form of you supplying your extended auto warranty provider with receipts, and then them sending you a check.

• Towing Benefit - If you are unable to drive your vehicle to a repair facility, or if it has broken down along the side of the road, a towing benefit will make sure that you are not responsible for the cost of towing your vehicle. The amount of money allotted to this benefit is different for each car warranty plan, and can sometimes differ depending on the size of your vehicle.

• Lost Key Lock Out Benefit - Should you ever need the services of a locksmith to help gain access to your vehicle, this benefit can compensate you for a portion of those costs. Again, the limit of the benefit may differ for each particular extended car warranty provider.


 

 

Who should I purchase an extended automobile warranty from?

There are many different parties from whom you can purchase your extended auto warranty. However, there are several things to consider. First, you should always do a little research on the company you are considering, especially if you stumbled upon them on the Internet, or even worse, if they contacted you first. Also, the company should be able to be found as a member of the Better Business Bureau. Second, you should check to see what insurance company backs up their plans. If the insurance company is not at least "A Rated" by A.M. Best, you should probably reconsider. Third, you should find out how long the particular company has been operating in the field of extended automobile warranties. Here's a gauge you can use to rank their answer, "The longer the better". Although purchasing a manufacturer's plan may seem like the safest way to go, it is not always the most practical for you. If you purchase from a dealer they will probably restrict the facilities where you are able to take your vehicle, if they even allow you to take it anywhere except their own shop. You may want a plan that will allow you to take your car to any repair facility in the United States . You never know where you will be when your vehicle decides to breakdown. Many consumers like knowing that their extended automobile warranty is accepted wherever this nuisance occurs.

Do I really need an extended vehicle warranty?
When determining if an extended vehicle warranty makes sense for you, it is important to conduct a cost analysis. The amount of money needed to repair your vehicle will only increase as time passes, especially as labor rates continues to go up. There is no guarantee that if you purchase an extended car warranty you will definitely use it. However, cars do have mechanical problems, and that is a big reason all manufactures will only offer new car warranties for 3 or 4 years. As you look down the road over the next several years of your cars life, it is hard to imagine what condition you will be in financially when something does happen to your vehicle. An extended warranty can give you a definite cost of what you will be spending on auto repairs over a given period of time, and it can also give you an easy payment option. Can you afford to pay a hefty auto repair bill in a month when you will also have a car payment? Can you afford to fix your vehicle should something happen to your engine or transmission? These are the types of questions that are difficult to answer, but they should put you on the idea of thinking that an extended auto warranty might be the best option for you. Another major reason so many people have decided to purchase extended warranties is that they are frustrated and tired of dealing with auto shops, hard to understand mechanical terms and concepts, and billing disputes. When you join an auto warranty program you are also hiring a professional claims department that will deal directly with your repair shop. They are familiar with regional labor rates, retail prices for parts, and they know how not to get double charged for manufacturer callbacks. If you are unsure about many of these requisites, or if you are just tired of dealing with them, maybe an extended vehicle warranty is right for you.
What happens if I need to get out of my extended warranty contract?
Most extended warranty plans last between 2 and 7 years. As you plan ahead, it is very difficult to imagine what is going to happen to you and your vehicle in the next 5 years, or even a full 7 years. There are many situations that could arise whereby you would no longer need your added protection, such as, you sell your car, you decide to trade it in, it is stolen, or it is totaled in an accident. It is very important to not only find out whether or not you are locked into a contract, but also how your refund is going to be determined by your provider. Ask a car warranty company if their contracts can be cancelled, what the process of cancellation is, and how the refund is awarded. Ask them if the refund is returned in the form of a check, or if it can only be used as credit towards a new warranty. Finally, make sure you understand how the refund is determined. The most acceptable method, and the most beneficial to you the consumer, is a prorated refund. This means that they determine exactly how much of the warranty you used, based on the greater years or mileage, and they refund you the remaining balance. Most companies will deduct a small cancellation fee from this amount. In review, the best warranty is one that you are not locked into, one that allows you to cancel upon request, and one that prorates a refund to you and sends you a check should you desire.
Can I finance my Extended Warranty by dumping it into my car loan ?

Many warranty companies do offer financing of their plans, but the financing terms are typically only 1 year long. Generally, the only way to include an auto warranty inside your car loan is to either, finance them together at the time you're going to purchase your vehicle, or, to include the warranty at a time when you are refinancing the car loan. Most banks or financial institutions will not allow you to include an extended warranty unless you are purchasing the warranty through them or one of their affiliates. This obviously limits your choice in selecting a car warranty. The major advantage to financing your warranty within your car loan is that you can spread out the payments, thereby paying a much smaller amount per month for the warranty. Also, if your vehicle is totaled or stolen and your insurance company is going to reimburse your bank for the vehicle loan, then you would not be responsible for paying off the whole warranty. However, the major disadvantage to financing the extended car warranty with the auto loan is that you will be paying finance charges on the service contract. This is an added expense.

If you are going to finance your warranty alongside your loan be careful that there is not a gap between what you owe on your car loan and what your car is actually worth. If you believe there will be a large gap, you may want to explore GAP insurance. For more information, please click below.

What is the deal with a 100% refund program?

Many extended warranties are now being sold with the option of entering into a 100% refund program. These programs are found not only with third party providers, but also with dealerships. The basic concept behind this new program is that if you take out an extended auto warranty, and if you never make a claim on it, and the contract then expires, at that point you will receive a full refund. The problem with these programs is that the contract must naturally expire while you are still the owner of the vehicle. Should anything happen whereby you need to cancel the contract, you will lose the opportunity to receive a full refund. Another major problem is that the program entices the contract holder to pay for small claims out of his or her own pocket. They obviously don't want to void the refund program, so they pay off a small claim of a few hundred dollars, thereby increasing the original cost of the warranty.

However, some consumers feel that the role of their extended warranty is to protect themselves from just the major repair problems associated with their vehicle. In this instance, they can use the warranty should they ever encounter a major problem, or receive the full refund if they never use it. Make sure you fully understand the many possible scenarios of a 100% refund program, and what they all mean to you.

Other than an extended car warranty, what other protections are available ?

Vehicle service contracts need to be viewed as an investment. Cars do break down, and they will always break down. An extended warranty can protect consumers against the unexpected high costs involved with diagnosing and repairing a vehicle. However, sometimes purchasing a warranty plan doesn't make since for every consumer. This could be because of limited funds available, or perhaps their vehicle doesn't qualify for the right types of coverage. In these instances a roadside assistance program may be the perfect answer. There are many providers of these plans, and many consumers are glad they joined their programs. A roadside assistance plan will be there to help you out should you ever get stranded along the side of the road due to car failure, lack of fluid or gas, dead battery, etc. Having this security can be very comforting and extremely useful should such a situation ever arise. We recommend the following roadside assistance program.

Although this site deals exclusively with extended warranties, some of our users are interested in discovering information and advice that deals with the broader topic of car buying. Car Buying Tips is a sister site of ours, which offers a wide array of tips and advice. We strongly suggest you check out the many articles we feature at www.smartercarbuying.com.

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