Extended warranties are not the same as an original factory warranty. Warranties generally follow the vehicle, not the driver, however, this may not be the case with a service contract.
Difference between a warranty and an extended warranty
An extended warranty usually doesn’t follow the vehicle in the same way as a factory warranty, nor does it stay with you after you make a trade-in.
An extended warranty is different from an original warranty and is generally found on used vehicles. This is a separate purchase that you can make at a dealership, through a third party, or from your insurance provider. Warranty extensions are also called service contracts, and you should read the fine print carefully before signing on the dotted line.
A factory warranty is an agreement that the manufacturer will cover the costs of certain repairs. The specifics vary. However, original manufacturer warranties usually come in the form of bumper-to-bumper coverage or powertrain coverage and follow the vehicle for a certain number of miles or length of time.
Why opt for an extended warranty?
When you buy a used car with an extended warranty, it can give you peace of mind and save you money in the long run.
Knowing that you might not have to pay out of pocket for mechanical issues with your vehicle can be worth the extra cost – paid as a separate monthly premium or built into your car loan agreement.
All extended warranties have contractual specifics, some allow you to make unexpected repairs at a number of locations, while others may require you to use a certain group of repair shops or return to the service center. dealer service for repairs.
Some third-party service contracts may even require you to pay for repairs yourself and send you a refund later. Other warranties cover things to a certain extent after paying a deductible for the rest.
Do you need an extended warranty?
If you are consider financing a used car, or have recently purchased one, you may be wondering if an extended warranty is worth your vehicle. Before you jump into the fray and purchase a service contract, be sure to ask yourself the following questions:
- Is my car still covered by an original manufacturer warranty? Some vehicles come with built-in warranty coverage. This may be a residue of the original warranty or perhaps coverage included with a certified pre-owned vehicle. If coverage exists on your car, you may not need an extended warranty. That being said, you should compare your warranty schedule to your car retention schedule.
- What is the specific coverage schedule? Some warranties have coverage that begins when you take possession of the vehicle, while others say it begins on the date the car was originally sold. For example, if you buy a 4-year vehicle with 90,000 miles and are offered a seven-year or 100,000-mile service contract from the original sale date, you are only covered for four. years or 10,000 miles. , it doesn’t matter which one comes first.
- What is covered by this warranty? Not only should you consider whether the peace of mind is worth it, but you also need to know if a probable outage is going to be covered. Be aware of the issues other drivers have had with the type of vehicle you buy and see if they are covered by a powertrain warranty or bumper-to-bumper coverage.
- Do I have to pay for repairs out of pocket? It’s important to check the details of your warranty coverage before accepting it, which means knowing whether or not you should pay for repairs up front and wait for the service contract provider to reimburse you. In many cases, the refund may take longer than expected to reach you, so in this case, you should still have a vehicle repair fund for rainy days.
- Can I cancel the coverage? Not all guarantees can be canceled if you no longer use the service, but if you can cancel yours, you may see a pro-rated refund of the amounts you have paid. If your extended warranty is built into your car loan, you should see a slight decrease in your total loan amount, although your monthly payment is likely to stay the same.
- Will I continue the regular maintenance of my vehicle? You could end up eating the cost of repairs anyway if you breach the terms of your extended warranty. In some cases, the contract specifies that you must adhere to regular maintenance intervals to keep the vehicle running smoothly. If you don’t, you run the risk of the warranty becoming void, meaning repairs deemed avoidable may not be covered at all. Keep in mind that service contracts do not cover items that wear out over time, such as brakes and tires, and do not cover regular services such as oil changes.
- Do I need it now, or can it wait? You don’t have to make the decision to buy an extended warranty the day you get your car. Since the service contract is not required for financing, you can evaluate your options and choose the warranty that’s right for you, whether you go back to the dealership and ask for one, or find one yourself. even elsewhere. Just be aware that warranties vary depending on who you contract with, make, model, age, mileage, and condition of your car.
Ready to trade in your vehicle?
Now that you know that an extended warranty isn’t something you have to worry about when exchanging your vehicle, you can rest assured that peace of mind can be purchased for a new car at all. moment, in most cases.
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