Extended Auto Warranty Q-n-A

1. Do I Need Extended Auto Warranty at All?

   It depends. If your car is new and you plan to drive it for not more than 3 years then you don’t need any extended warranty – your implied manufacturer warranty will cover your car for 3 years and up to 36,000 miles on the odometer. If you plan to drive your new car for at least 5-10 years then you can benefit from purchasing an extended auto warranty – order the one by the end of your car’s 3rd anniversary or before 36,000 miles, whichever comes first. If your car is not new but not too old then buying an extended warranty would be a smart decision. If you drive a used (pre-owned) car and it is older than 10 years old, then no extended warranty will really help. The reason being is that according to the unwritten industry rules a full coverage for old vehicles usually ends either on the vehicle’s 10th anniversary or at 120,000 miles on the vehicle’s odometer. Any Company that tries to sell you a warranty protection beyond that limit is clearly overpromising and could be a scamming Company to avoid.

2. How Do I Know What Extended Auto Warranty Companies Not to Work With?

   There are a lot of scammers in the extended auto warranty market. So you must be very careful when selecting your service provider. To minimize potential risk, first and foremost check the customer feedback resources on the internet. For example, make sure to check this invaluable resource first: http://www.ripoffreport.com/c/297/automotive/auto-warranty - it will help you to eliminate obvious scammers. Other great place to look at is http://www.pissedconsumer.com/reviews-by-company – you can search there by Company name and find the consumer complaints filed against a specific service provider.

   Also ignore companies with marketing offers coming by mail or by phone, “As Seen on TV” warranty offers or offers related to any seasonal or anniversary sales. Reputable leaders in the extended auto warranty industry don’t usually use this sale tactics. Pay special attention to years-in-business factor when evaluating a particular Company – many businesses, especially in the extended auto warranty area don’t last long and can disappear any time. Make sure that your company has at least 10 years of verifiable business history.

   Once you get the list of pre-selected extended auto warranty provider candidates do three more important checks:

   • Check their BBB or D & B standing – don’t go below B+
   • Check if they administer their warranty plans directly or thru 3rd party plan administrators.
     Who are those plan administrators?
   • Are they insured and who is the insurer? It must be a high rated insurance carrier.

3. What Are the Best Extended Auto Warranty Companies?

   Unfortunately one final, accepted-by-all list of top auto warranty companies doesn’t exist. Different evaluation authorities provide their personal - and often - contradicting selections of top warranty providers. Therefore, there is no real substitution for your own research - do your homework well, be proactive, compare existing providers and make your own list.

   The truth of the matter is that there is approximately a dozen reputable extended auto warranty businesses in the country, about several hundred of the 2nd-tier and several thousand of the 3rd-tier companies (warranty brokers) wrapping their businesses around that companies. Try to avoid the service middleman and get directly to the source.

   Research each company in your short selection list thoroughly before making your final choice. Not sure where to start? You can start with a list of CarGalaxies.com recommended auto warranty providers and get instant online quotes from them at our Compare Quotes page. As per our latest routine update all companies in that list are active, are BBB-accredited businesses with A+ rating and all have a descent Alexa.com-proven web traffic.

4. What Is the Best Place to Purchase the Extended Auto Warranty for My Car?

   It is definitely not your car dealership as their services are among the most expensive. Also, don't choose the warranty provider just because their office is closest to your location. Try to get several independent warranty provider quotes from different market segments, like - internet-based warranty providers, local businesses and manufacturer-backed companies.

5. What Voids the Warranty?

   There are factors that can void your warranty agreement partially or in full:

   • Not performing the standard maintenance will most likely void any warranty.
     To keep your warranty valid you have to continue doing regular oil and fluid change as well as other maintenance recommended by manufacturer of you vehicle.
   • Altering your vehicle's odometer will void your warranty in full.
     Altering odometer is a fraud - it invalidates your warranty service agreement immediately.
   • Making unapproved custom modifications on your vehicle can void the warranty.
     Have you recently replaced your car’s factory wheels with oversized “cool” custom wheels? Do you know that this modification affects the powertrain’s factory specified warranty and can be used by your service provider to deny your claims? Or have you used that well advertised on TV engine power busters – they can cause an engine’s premature worn-out and could be another reason to void your extended service agreement.
   • Misuse of your vehicle can void the whole policy.
     If you own a normal passenger car but use it as a truck to move heavy loads around - your warranty will be void in whole.
   • Environmental Damage Can Void the Warranty Agreement in Full.
     Hail-damaged or flood-affected cars fall out of standard extended auto warranty protection.
   • Making auto repair in unapproved repair shops can result in void transaction.
     Some auto warranty contracts don’t accept arbitrary auto repair shops and require services to be done at certified auto repair facilities they recognize. Make sure that you comply with that requirement or your contract will not be served (although it will not be terminated either).

6. What Makes a Good Extended Auto Warranty Contract?

   Following provisions are a must for good service contract:

   • It must be backed by a reputable insurance Company.
   • It must allow any certified repair facility anywhere in the Country to be used for repairs of your vehicle.
   • Must have simple, no-nonsense claims procedure and pay upfront your repair costs with their company credit card.
   • Must be renewable if you keep driving your car and transferable if you sell your car.
   • Must be cancellable at any time with pro-rated refund of unused money to you.
   • Must include additional service perks like 24 hour road side assistance, towing, rental car reimbursement, wheel and tire road hazard coverage and trip interruption insurance.

7. What Types of Coverage Are Usually Offered in Extended Auto Warranty Market?

   The exact names of the plans and coverage behind them vary significantly from one service provider to another. And there is a lot of professional jargon which can make things very confusing. Most states, i.e. – 36 out of 50 – do not regulate the coverage at all and only two states consider it as a form of insurance. However in spite of mentioned differences there are a lot of similarities too.

   The main groups of extended auto warranty services fall into the following plans.

   Stated Plan – also known as named plan, covers only limited set of car components that explicitly listed (named) in your service contract. In our opinion this is normally the least favorable service plan for car owners. However it can be useful for old cars where better coverage is often not available.

   Exclusionary Plan - a plan which covers everything except what is explicitly listed as not covered (excluded from plan). These plans are the opposite of Stated Plans and usually are among the most favorable ones to buy.

   Bumper-to-Bumper – popularly known also as a full protection, covers your car “completely” except the components excluded from coverage and listed in your service contract. This plan also does not include normal car maintenance and regular wear-and-tear replacements. Well-defined bumper-to-bumper plan would usually cover your car in the most complete form.

   Power Train – covers engine, transmission, drive axle, water pump, supercharger and other lubricated parts of drive train only, i.e. – the parts where the oil flows. Although this plan covers only about 30 parts of the vehicle they are the most costly to repair.

   Wrap Coverage – a special coverage plan which is wrapped around your existing auto warranty plan upgrading it to the next level of protection. For example, if your main plan is a 5 years 60,000 miles power-train warranty then with wrap coverage you can extend it to 5 years 60,000 bumper-to-bumper protection by wrapping around additional car components you want to protect. This coverage plan is not always offered to consumers and is usually available for relatively new cars where the risk of mechanical breakdown is not too high.

8. What Is Wear & Tear Coverage?

   Contrary to traditional warranty plans where auto part must be broken or out-of-order to be replaced the wear & tear plans cover repair cost for auto parts which “worn beyond manufacturer’s tolerance” for that vehicle/part at current vehicle’s mileage/age.

9. I Have Purchased an Extended Auto Warranty For My Car. When Does the Coverage Begins?

   You might be surprised but in most cases in doesn’t start immediately. To protect themselves from scam and to insure that you don’t apply for extended warranty because your car just broke-down a minute ago many service providers use so-called grace period (like 1 month or 1000 miles, whichever comes first). Some service providers could still offer “effective immediately” coverage but would require your vehicle’s full inspection to avoid scam.

10. My Bumper-to-Bumper Coverage Is About to Expire. Do I Need an Extended Auto Warranty If I Still Have a Powertrain Coverage?

    The answer would depend on how much of potential risk of unexpected mechanical problems you are comfortable to tolerate. Mechanical breakdowns could happen anywhere in the vehicle, not only in powertrain system. If you tolerate well the associated potential risk and are comfortable to pay for uncovered mechanical breakdowns out of your pocket – then you don’t need any additional protection.

11. I Am Looking For a Car Loan. Do I Have to Purchase an Extended Warranty First in Order to Be Qualified For Loan?

    
    No, this is one of the urban myths created by some extended warranty providers to earn your business. Auto loan providers don’t care about how many additional warranties you have purchased on your car. They are mainly concerned on your financial standing and on the potential risk of not getting back money they lend to you. For more details about how auto loans work read our Auto Financing Q-n-A page.