Is An Extended Warranty Worth It?

You’re delighted that you were successful in driving a good bargain while buying a second-hand car, getting your savings upfront. You purchased the used car after doubly ensuring that the vehicle was subjected to background checking and rigorous inspection.

After driving the car smoothly for a couple of months, you find yourself stranded one morning during rush-hour because the vehicle developed a problem. Now what?

So even after confirming that the second-hand car you purchased was perfectly roadworthy, you never know when it’ll stop working. And it is precisely for such unexpected or unforeseen situations that you need an extended warranty or coverage.

Extended warranties offered by vehicle manufacturers and third-party insurers, by and large, provide coverage for almost all electrical and mechanical components.

Sometimes, an extended warranty that tends to be more comprehensive could also cover labor costs footed for repairing the malfunctioning or damaged components.

But what is an extended warranty and what does such a warranty cover? What are the different types of extended warranties?

We’ve tried to answer these questions as clearly as possible in the following sections.  

What is the extended warranty?

Extended warranties work very much like an insurance policy for your vehicle, furnishing extended coverage for fixing faulty components.

An extended warranty comes into play once the guarantee or warranty period offered by the vehicle’s manufacturer or retailer expires.

Strictly speaking, an extended car warranty is not at all a warranty in the first place as it does not work in the same way an OEM’s service contract does.

Extended warranties are, in fact, expensive protection plans or insurance policies against unanticipated vehicle breakdowns or unexpected repairs.

An extended vehicle warranty is an exclusive service contract or agreement between the vehicle owner and the service provider. Such a deal remains valid for a specified period and mileage logged by the vehicle is not included in the purchase agreement.

Now you know why such a warranty is known as an extended warranty. In contrast, the warranty offered by the manufacturer for a brand new vehicle is part of the standardized purchase contract.

Unlike extended warranties, you don’t need to pay anything extra for the warranty on a new car, apart from its selling price.

Extended warranty types

Talking about extended warranties, there are two distinct types: manufacturer warranties and aftermarket warranties. Vehicle manufacturers offer the first type of extended warranty while third-party insurers and vendors offer aftermarket extended warranties.

Guarantees issued by manufacturers for new vehicles are classified into two distinct categories: “bumper to bumper” and “powertrain.”

If your vehicle’s engine or transmission system goes kaput or malfunctions within the limited warranty period, then the powertrain warranty kicks in.

On the other hand, a bumper-to-bumper warranty comes into effect when any of the vehicle’s mechanical or electrical components break down.

Extended warranties provided by manufacturers work nearly in the same way as a warranty for a new car but usually tend to be costly.

Such extended warranties stay in force for a limited period and a specified or prescribed mileage amount. When choosing manufacturer extended coverage, you have the option of going for a plan with or without a deductible.

If you want a policy with a high deductible, you’ll need to pay a lower premium, very much like a new car insurance plan.

Extended warranties provided by third-party vendors and insurers have nearly the same features as those offered by manufacturers with some exceptions.

Third-party extended warranties usually come with special terms and conditions, exclusions, and limitations. For instance, such an insurance policy will explicitly state the places where you can have your car repaired.

Other drawbacks of extended warranties included in third-party agreements include a high deductible, claim filing only after payment for unforeseen repairs, and so on. It might also take longer for the third-party provider to reimburse your claim.

Because of the downsides of a third-party extended warranty, such a policy is much less expensive than one provided by a manufacturer.   

What is covered by an extended warranty?

The most comprehensive extended warranties generally reimburse you for the replacement or repair of any mechanical or electrical component that malfunctions.

Such elements could be the gearbox, suspension system, engine and transmission mechanism, computer system, and so on.

A comprehensive extended warranty could also repay you in full for your car’s air-conditioning, airbags, dashboard screen, and other expensive parts. 

Vehicle parts that an extended warranty does not cover

The parts of your vehicle that are not covered by an extended warranty include the chassis, wheels, tires, windscreen, and other old and worn-out parts.

In case you’ve bought an electric or hybrid vehicle, the manufacturer’s battery inside the car is not covered by the extended warranty.

How to file a claim

The insurance provider (manufacturer or third-party insurer) usually has an emergency number that you can call for reporting a problem.

Customer service staff will make arrangements for getting your car repaired on the spot. Whether you’ll be able to choose a vehicle service and repair agency of your choice will depend upon your insurer’s terms and conditions.

Checklist for choosing an extended warranty

• Take your time to researching established insurers providing effective extended warranties.
• Check out the period for which the warranty is valid and the mileage as well as the exclusions and limitations.
• Does the warranty come with a deductible? If yes, what is the deductible? What is the premium you’d have to pay for the various deductible amounts?
• Go through the fine print to be sure about any ambiguities or loopholes.
• Is the warranty authorized by a guarantee? Extended warranties are not under the regulation of FCA (Financial Conduct Authority) and therefore not legally enforceable.

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