What is an extended warranty?
An extended warranty on a car or truck is a service contract just like the type you can buy for your washing machine or VCR. The warranty provides coverage for certain items in the vehicle after the original warranty expires for a specified time period or mileage. The warranty typically requires that the vehicle be maintained at the recommended service schedule for the vehicle with accurate records to show that the maintenance was completed. It is possible to obtain a warranty for most cars and trucks but as mileage approaches 100K miles, it will be more difficult to find a provider willing to offer a contract.
There are two basic types of coverage offered … wear and tear and mechanical breakdown. Wear and tear covers items that wear out faster than normal such as engine components like EGR valves, rocker arms etc. The mechanical breakdown covers major components that do not normally fail over the coverage period, eg transmissions and engines. There are many levels of coverage offered ranged from only mechanical breakdown to the most comprehensive coverage including emissions, entertainment and navigation systems. Your individual vehicle and needs will dictate what level of coverage you will need.
There are four major levels of coverage or plans that are marketed today. No plan is typical and the items included do vary between providers' plans. Most aftermarket warranty companies offer several if not all four of these plans. These plans are listed below in increasing coverage level:
- Major Item: This type of plan only covers major items for mechanical breakdown and may cover some wear and tear items.
- Named Component: items covered are listed and can be touted as 'bumper to bumper' but usually exclude some high wear items parts.
- Bumper to Bumper: also called exclusionary since they cover so many parts that they list only the parts that are excluded.
- Luxury: combines bumper to bumper with coverage for luxury items such as entertainment and navigation systems.
Why should you consider getting an Extended Warranty?
The most common reason for getting an extended warranty is peace of mind and protection from large repair bills as the vehicle gets older and racks up mileage. However, the reliability of vehicles has significantly increased over the past 15 years causing the average buyer of an extended warranty to spend $ 300 more on the premium than claims covered (per Consumer Reports in an April 2008 article.) CR found that an extended warranty could be worthwhile if you buy a less reliable vehicle based on members' experience.
These less reliable vehicles are Jeep, Pontiac, Buick, Chrysler, Dodge, Mercedes-Benz, BMW, Ford, VW, Saturn and GMC in increasing reliability rating. If you're considering the purchase of one of these vehicles or you just want the peace of mind that you've covered, then an extended warranty can be the way to go. Also a transferable contract can be a good selling point if you sell the car before it expires.