Extended Auto Warranty

New products come with embedded warranties. A warranty is a guarantee provided by the manufacturer to provide a replacement or repair the product in case the product breaks down due to any manufacturing fault.

Cars also come with embedded factory warranties and we have seen in the past how major brands had to recall their cars under warranty period when instances of manufacturing faults were uncovered.

The standard or factory issued warranty is a time-barred warranty and only lasts for a few years. So what happens once the standard warranty period runs out? Well, two things can happen once the standard auto warranty runs out. Car owners can either decide to take all the risk on their own and pay for repairs as and when they are required or car owners can go for the extended auto warranty to cover the risk of untimely repair costs.

Extended Auto Warranty

An extended auto warranty is a warranty that starts once the original factory warranty period ends. Now to make it clear, the term extended auto warranty is only technically correct if the original manufacturer agrees to extend the original warranty term.

If the extended warranty comes from a third party warranty provider, then it is technically not an “extended warranty” instead it is vehicle protection or insurance plan but the colloquial usage is extended auto warranty, so we will be using this term for both of the cases.

The extended auto warranty is basically your normal warranty, it is only extended because it extends beyond the normal warranty term. This means that warranty be it standard or extended provides coverage from mechanical faults. This is a very important point to remember because many people get confused and think that extended warranties are more like insurance plans and that they also provide coverage from accidents. No, they do not. You will have to separately take out car insurance. Extended or standard warranties only provide coverage from mechanical failures that are explicitly specified in the warranty agreement.

Extended Warranty Directly From Manufacturer

If you are taking your extended warranty directly from your manufacturer then you should know that most manufacturers such as Toyota or Honda have their own network of service stations and standard or extended warranties provided by the manufacturers bind the car owners to take their cars to the designated service stations or shops.

Once you take your car to the designated service station, the certified mechanic will carry out the diagnosis of your car and assess the cost of repair or service. You will at this point be required to produce your warranty card or documents. The mechanic will then communicate the cost and extent of repairs to the manufacturer.

After this process, the repairs will be carried out and once they are completed you will be required to pay the specified deductible and then you can take your car home. The deductible is simply the amount that you will pay before the warranty kicks into action. For instance, if the repairs cost $6000. Then you will pay the first $1000 and the rest of the cost will be borne by the manufacturer.

Extended Warranty From a Third Party Warranty Provider

If your manufacturer does not provide an extended warranty, then you can seek a third party warranty provider such as Car Shield or any other provider to get a third party warranty. The benefit of getting third party warranty is that third-party providers do not restrict you to their own network of service stations.

As long as you take your car to a certified mechanic, the third-party warranty providers will be fine. The procedure will be the same. You will take your car to a certified mechanic, who will then carry out a diagnosis to assess the cost and extent of repairs.

You will then be required to produce your warranty card or documents, the mechanic will communicate the cost and extent of repairs to the warranty provider and start the repairs. Once done, you will be required to pay your deductible and then you can take your car home. Rest of the expenses will be covered under the warranty.

Do I need an extended auto warranty?

The answer to this question really depends on your affordability. If you own a new car that is still covered with a warranty then obviously you do not need an extended auto warranty.

If you own a new car and the warranty period has just expired then you may need to consider a few factors. The need for an extended warranty is linked with the need to get the repairs done. People take out extended auto warranties to cover the cost of repairs. If your car breaks down a lot then you can spend up to $15000 to $20,000 annually on different repair jobs. An extended auto warranty will cost around $12000 to $14000 and this means that you can save anywhere between $1000 to $6000 or more in repair costs with an extended auto warranty.

If however your car is reliable, relatively new and you drive under good driving conditions then you may not need to spend so much on an extended warranty. A car that does not break down often is a blessing in itself, your initial investment into such a good car was good enough and you do not need an extended warranty in this case.

Whether you decide to take extended warranty or not, will therefore depend on your personal circumstances and most importantly on your affordability. If however, you decide to go for it then first try to see whether your manufacturer offers one or not. The best time to ask for this is while buying the car. Simply ask if the manufacturer will extend the warranty or not if not then third party providers will be your best bet.

While looking for third party providers, try to carry out your own due diligence before choosing a provider. There are many warranty providers in the market with different features, so take time to do your own research before settling down for a warranty provider.

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