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What Effects Extended Warranty Prices

What is an extended warranty? It is actually an insurance policy on your vehicle, a safeguard against expensive, unforeseen repairs. It covers repairs, parts and labor, for a period of time and miles that is right for you. Extended auto warranties are really vehicle service contracts because they cost extra and are sold separately. But to avoid confusion, we will continue to use the term extended warranty since that’s the term you’ll hear most often. There are different types of service plans available. A new vehicle usually has two different types of coverage. A powertrain warranty is responsible for covering your engine and transmission against defects in workmanship that would cause either your engine or transmission to not operate as intended. A bumper-to-bumper (sometimes called “limited”) warranty will cover most other items in the vehicle. In addition to major components under the hood, bumper-to-bumper warranties also cover things like navigation systems, power seats, onboard computers and various other electronics.

When picking out which warranty works best for you, you have a choice to select one with or without a deductible. Just like your auto insurance, the higher the deductible, the lower the policy will cost. The good news is that the deductibles for extended warranties tend to be minimal, rarely exceeding $200, with the most common being $100 or $0.

Many aftermarket warranties offer similar coverage as warranties provided by manufacturers. However, most warranties have exclusions, rules and requirements. Third-party warranties tend to cost less than those offered by the OEM. In most cases, a third-party warranty might be the only available option especially If you’re buying a used vehicle.

Know Before You Decide to Buy

  • How long will you actually be covered? If you purchase a seven-year, 100,000-mile warranty on a used vehicle, for example, determine when the miles and time actually begin. Does the coverage begin when you take ownership or from when the vehicle was originally sold new? Before you sign, know exactly what you’re paying for.
  • What’s covered? What isn’t? The distinctions between the various plans might seem slight, but they can prove quite important. If you’ve got serious concerns about the electrical system in a vehicle, or you’re primarily concerned with the powertrain, make sure the warranty you’re considering covers the items you’re looking for. Take the time to read the inclusions and exclusions before you sign.
  • Can you cancel the warranty later? Some states allow you to cancel a warranty well after purchase. If allowed, you’ll receive a prorated refund amount. If this warranty was bundled into an auto loan, your principle amount will be reduced. As a result, the number of payments you have to make will also be reduced. However, the payment amount will remain the same.
  • Do you have a separate budget for maintenance? You should. As a rule, extended warranties do not cover scheduled maintenance items such as oil changes, timing belt replacements or tune-ups. Most extended warranties don’t cover items that wear out, such as Tires, brake pads and windshield wipers.

4 More Extended Warranty Tips

  • You don’t have to buy the warranty the same day you buy the car. You can sleep on the idea and decide later. But if you’re financing your vehicle purchase, buying the warranty the same day should allow you to add the warranty costs into your loan.
  • It is important to have recommended services done on schedule. Some warranty companies will refuse to cover a repair if the owner can’t provide proof that the car has been serviced in accordance with recommended guidelines.
  • You are generally not required to buy an extended warranty in order to qualify for an auto loan.
    If you are purchasing a used car from a dealership, the vehicle will likely have a Buyer’s Guide affixed to the window that explains what warranty is included with the purchase.

Purchasing an extended warranty isn’t the right move for every car shopper, but millions of shoppers who have purchased and used extended warranties are glad they did. If you are thinking of buying an extended warranty, take some time to read the fine print on the contract to make sure the warranty does what you want it to and doesn’t have red tape you’re not willing to deal with.



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