What to Look For in a Vehicle Extended Warranty

Often touted on television and in robocalls, vehicle extended warranties are an attractive option for drivers who want peace of mind and extra protection against costly repairs. However, these warranties, also known as car service contracts, come with caveats that should be carefully reviewed before making a purchase.

The main reason for purchasing a vehicle extended warranty is to avoid expensive repair bills once the manufacturer’s warranty expires. Replacing an engine or transmission, for example, can cost upward of $4,000 and is a major expense that many drivers don’t want to take on. A warranty can also help cover the cost of a replacement vehicle in case a repair isn’t possible.

Manufacturers build warranties into the price of new cars, but third-party providers offer a wide range of plans to choose from. Many of these include the kind of bumper-to-bumper and powertrain coverage that are included in original factory warranties, as well as additional perks like roadside assistance and trip interruption protection.

Most automakers only sell warranties through their dealerships, but they also partner with third-party companies that offer standalone policies. As the market for these products has grown, so have the options, making it more important than ever to do your homework before buying one.

To start, review the policy details to find out what’s covered and what’s excluded. Then, look for a provider that offers a good track record and clear terms and conditions. Finally, consider whether the plan can be canceled after you’ve purchased it or if it can be rolled into your loan, which will reduce the amount of principal you have to pay each month.

Typically, extended warranties don’t cover routine maintenance, such as oil changes or timing belt replacements. These maintenance items should be done on a regular basis to ensure that your car runs efficiently and avoid mechanical failure. Additionally, these types of warranties can be expensive because most companies require you to pay for the repair out-of-pocket and then file a claim for reimbursement.

The length of the warranty, measured in years and miles, is another consideration. Some warranties expire after a set number of years or miles, while others can be transferred to a new owner if you decide to sell the vehicle. Finally, make sure that the policy is not restricted to a specific group of auto repair shops.

If you are unsure about the value of an extended warranty, talk with a dealer or a lender to see what they recommend. You should be able to get an honest opinion and a full explanation of the benefits and drawbacks from a knowledgeable source. If you are still hesitant, it might be best to wait until the original factory warranty ends and then shop around for the most competitive prices.

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