Automobiles: Extended Warranty Overview
An extended warranty is just an insurance policy that promises to pay for repairs to your car that aren't covered by the standard factory warranty. There is a maze of competition, options, and prices available, which can make extended warranties a potential minefield.
You shouldn't need an extended warranty if you plan to sell or trade in your vehicle before the factory warranty expires (usually five years from when you buy a new car). You can also skip them if your vehicle has a reliable service history.
On the other hand, an extended warranty can save you thousands if you plan to keep the same vehicle for a long time, or if your vehicle doesn't have a fantastic reputation for long-term reliability, or if you do a lot of driving for above-average mileage.
There is rarely any need to buy an extended warranty at the time you buy a new car. It will have not impact until after the factory warranty expires. By that time you can usually buy a third-party warranty for less than the dealer would have charged--and earned interest on your money in the meantime. In most cases, the ideal time to buy an extended warranty is when your car is three to five years old, but still covered by its factory warranty.
Used car extended warranties are available, though most only offer their bumper-to-bumper coverage for vehicles with less than 50,000 miles. With high mileage cars, your used car extended warranty only covers half your failures, and for mileage over 60,000 it is impressible to get coverage (too much risk). If you are buying a high mileage used car, you may find that its extended warranty coverage will expire based on miles rather than time
Scout the market
When you're ready to buy, check out the aftermarket warranties on offer at the dealership where you bought your vehicle. Shop around, and compare features, price as well as the history of the insurer. Before you sign up with any warranty provider, find out how long they've been around and what information they can provide about their operation. Keep your radar up for fly-by-night scams.
If either Web Assured or the Better Business Bureau can't provide information on a warranty company, then don't buy from them. Don't buy a warranty from any company that doesn't let you read their contract before you buy. Watch out for comparatively cheap deals: they tend to exclude lots of coverage, limit you to certain repair shops, many don't answer their phones, or require you to pay shops first then beg for reimbursement from the warranty company. Deal with auto warranties who pay repair shops directly.
Once you've found a policy that fits your budget and your needs, take the paperwork home and read ALL the fine print. Determine what is and is not covered. It's no good if there are not "authorized" repair centres in your province or city. If you need your car to get to work every day, you may want a policy that provides you with a rental vehicle if repairs cannot be done in a few hours. You should check that your car's high tech sensors, ABS, emissions systems related components.
Some typical Extended Warranty Lies:
- A car dealer tells you that you must buy a car warranty to qualify for a loan or financing. (FYI: if your bank is requiring you to buy "loan insurance" when you borrow from them, to cover the loan, it is not a substitute for regular insurance, and only covers the value of the loan-and premiums don't drop with the loan value, so its usually over-priced)
- The auto warranty is non-refundable (All extended car warranties can be refunded 100% in 30 days if no claims have been made).
- The extended warranty covers anything that goes wrong (read the contract to see what is covered, or not!)
- You are getting mechanical breakdown contract. This is not as good as a wear & tear contract, and gives you only half the coverage (dealers do this the most often)
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