Auto Warranty FAQs

What is an extended auto warranty?
It is a vehicle service contract between the auto warranty company and you. It's important to understand that an extended auto warranty is not actually a warranty at all. It is, in fact, a service contract. However, since the terms "auto warranty," "extended car warranty" and "extended auto warranty" are the most commonly used terms when referring to these products, this is how we will refer to them.

Do NOT confuse an extended auto warranty with insurance. Even if you have a warranty you still need insurance. Car insurance protects against accidents. A warranty is a service contract for repairs. Almost every state legally requires you to cover insurance if you are driving. No state requires an extended auto warranty; however, hopefully you will never have an accident and never use your insurance. Unfortunately, anyone who has ever owned a car knows that all cars eventually need repairs. So while you have to pay into a car insurance plan you may never use it, but if you pay into a auto warranty chances are high that you will definitely use it, many, many times.

My car needs a repair. How does an extended auto warranty work? What do I do?
When you have an extended auto warranty, getting repairs done becomes even easier. You take your car to the dealer or repair shop (make sure you take it to the right place, some warranties require you to go to an ASE mechanic) and tell them that you have an extended auto warranty. They will look at your car, call the warranty administrator, get a pre-authorization to make the repairs, and then fix your car. Some warranty companies require you to pay for the repairs first and then get reimbursed; others pay for the repairs directly.

What is the difference between a manufacturer's warranty and an extended auto warranty?
The manufacturer's warranty is a warranty you are given when you buy a new car. These can last up to three years. When you buy an extended auto warranty you are "extending" the coverage. However, it is important to understand that you cannot ever extend the warranty the manufacturer gave you. In the three years that the manufacturers warranty was covering your automobile you were driving it. You were putting on miles and wearing out the parts. So while you will get the best deal if you purchase an extended auto warranty before your manufacturer's warranty expires, the coverage will not be the same. You need to carefully read over your contract and make sure that you understand what your warranty will cover. Even a bumper-to-bumper warranty will not cover trim or regular maintenance items (like light bulbs).

Would buying an extended auto warranty when I already have a manufacturer warranty give me more coverage?
No, they do not give you "extra" or "double" coverage; they simply give you coverage for set amount of time.

What is the difference between a factory warranty and a manufacturer's warranty?
Nothing, they are the same thing, different name.

Should I wait until my manufacturer's warranty expires?
Not necessarily. If you know that you are going to purchase an extended auto warranty for your vehicle then you should buy it when you first buy your car or before your original factory warranty expires. The price of a warranty is based on make and model, age, mileage and the state that you live in, so the sooner you buy it, the cheaper it is.

I have a new car. Do I need a warranty?
That's for you to decide. As mentioned earlier, the sooner you buy it, the cheaper it is. Look at the type of car you have: how expensive will it be to repair? Is it a car with a good reputation or does the model have a history of problems? Does it have a lot of extras: DVD players, power roofs, built-in navigation, and Bluetooth? Each of those gadgets is expensive to fix, and they all eventually break. The more extras your car has, the more likely it is that you will need repairs at some point. Still not sure? Read more: "Should I buy a warranty?"

What is a warranty administrator?
Your warranty administrator is the company responsible for paying your auto warranty claims. The companies selling the warranties are usually not the companies that administer the warranties. You typically buy your warranty from a selling agent or broker; even when you buy a warranty from a dealership you are still buying it from a selling agency. When first speaking to a sales agent, ask if they are the administrators and if not, you need to ask for all the information about the administrator before you pay for the warranty. Read more: "Who Does What: Agents, Administrators and Insurers"

Here's an example: Warranty Direct is a selling agent, the company that owns Warranty Direct also own an administrator. When you deal with them you only have to deal with one company, on the flip side, you only get one price. CARCHEX is a broker: You give them your information and they find the best warranty deal for you. Think of them as the "Lending Tree" of extended auto warranties. CARCHEX is a trusted company, known for only using top tier warranty administrators. As a company, CARCHEX believes in full transparency and will give you all of the information about each administrator up front. In fact, they have even paid claims when an administrator has refused. It's often better to go with a broker since it is in their best interest to find the best deal for you.

What happens if my administrator goes out of business?
When you pay for the warranty you are actually paying a service contract. This money goes into a claims reserve account. Because of this, it is extremely important that your warranty administrator is insured. To be safe, make sure that your warranty sales agent, or broker, only deals with warranty companies that are insured.

Mechanical breakdown and wear & tear warranty
Almost all auto warranties are mechanical breakdown warranties. Wear and tear is either included or you can pay extra for it. It basically comes down to reasonable failure versus premature failure. Every part on a car has a tolerance. Tolerance is a factory measurement—when a part reaches its tolerance it can be replaced before it breaks.

These are the things that happen to every car over time and can include worn valves, grinding valves, seeping seals and gaskets, damage to nuts, bolts and screws and more. Remember that no matter what type of coverage you have, a auto warranty administrator may send out a claims adjuster to make sure that your claim is valid. Read more about types of coverage.

Which one should I get?
Both. Many problems that need to be covered are wear and tear and if you only have a mechanical breakdown warranty, the administrator can reject your claim. If you have both then everything is covered and you may not have to fight to get your claim paid. Warranty Direct and CARCHEX both sell warranties that cover both wear and tear and mechanical breakdown, all in one extended auto warranty.

Exclusionary vs. Inclusionary policy
An exclusionary policy lists only what is NOT covered. Everything else is covered by the warranty. This is the best kind of policy to get. An inclusionary policy only lists what is covered. In general, once you are past 60,000 miles you can't get an exclusionary policy. There are all kinds of warranties. Some last as long as seven years, while other are as short as one year. It's a good idea to shop around and see which one is right for you. Read more about types of coverage.

Dealer warranties
Warranties from the dealer frequently require that you get all of your repairs done at the dealership. But, in this economic climate can you even be sure that your dealer will still be open next year? While dealer warranties may seem like a good deal remember that many car salesmen are not trusted for a reason—what they tell you might not necessarily be true and should be looked into before you give them any money. Plus, in most cases you are paying interest on the warranty whereas the aftermarket sellers are offering 0% financing. Read more about the pros and cons of buying a warranty from a car dealership.

Where can I get repairs done?
It depends on your warranty. Most good warranties will let any ASE certified repair shop do the work.

What is ASE?
Automotive Service Excellence

What if I buy a car with pre-existing issues, will they be covered?
No. In fact, most warranty companies know that the majority of claims filed in the first 30 days of owning a warranty are for pre-existing problems. This makes them fraudulent claims that will most likely be rejected. A good rule of thumb: Do not file a claim within the first 60 days of purchasing a warranty. Hopefully you won't buy a car that needs work within the first month anyway.

To avoid fraudulent claims, most warranties have an exclusionary period. This is the time period during which you cannot make a claim. This exclusionary period is in place because car warranty companies do not do inspections. A dealer warranty may not have an exclusionary period because they can do an inspection. A typical exclusionary period is 30 days or 1000 miles.

How do I know my car is worth covering?
Some cars aren't worth covering. If the car itself is worth less than the cost of the warranty then it is not worth covering. You should always ask about the limit of liability: how much the warranty company will pay out. And, always, always, watch out for anyone promising to pay you more than your car is worth. Read more about whether or not you should buy a warranty.