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What is an Auto Warranty?

An auto warranty is a type of auto coverage, typically for new cars, that is a promise often made by the manufacturer that they stand behind their vehicle and/or will fix any defects or malfunctions that may occur over time. A standard new car warranty lasts for three years or 36,000 miles, whichever comes first. This however, does not replace your auto insurance coverage. An auto warranty is a type of coverage from the manufacturer, to fix any defects or malfunctions. Auto insurance is required by law to cover any accidents and those involved.

There are a few options you can choose from with auto warranties. There is the new auto warranty, “bumper to bumper” coverage, which typically covers everything except normal wear and tear items such as brakes and tires. Then there’s the powertrain warranty, which covers the engine and transmission, essentially the parts that make the car run. There are some warranties offered for a slightly used car, which more often than not, will be an extended warranty or simply auto warranty insurance.

 

Auto Warranty Insurance

When you buy a used car and the original auto warranty is no longer in effect, auto warranty insurance is the next best option if you want your car to remain covered for any repairs needed. Also referred to as car repair insurance, auto warranty insurance is essentially a prepaid service contract for any repairs needed in the future to the powertrain or other parts of the car. This again, is separate from typical auto insurance, which covers any accidents.

Auto warranty insurance is not necessary and some might see it as a waste of money. However, if you plan to have your car for a very long time and run it into the ground, it might be a good option for you. If you typically buy a new or used car every couple of years, then auto warranty insurance is not needed.

 

Extended Auto Warranty:

Most car dealers offer an extended warranty with their vehicles, and while that is common knowledge, the actual specifics of what an extended warranty is are not fully understood by every consumer.  An extended warranty is less a warranty and more an insurance policy on the vehicle.  It functions as a safeguard against repairs, and like a normal auto warranty, covers a specific amount (dictated at purchase) of miles and/or time.  Unlike a warranty which is usually included in the price of the vehicle, extended warranties will cost extra and are optional.

There are two types of extended auto warranty, OEM warranties (Original equipment manufacturer) and third-party vendor warranties.

 

Auto Warranty Companies:

Most manufacturers will have some form of auto warranty service or option on their cars. These OEM warranties will often be available for both new and used cars. In the case of used vehicles, the auto warranty may be an extension of the original warranty when the car was new.

Third party warranty services are often similar to the manufacturer warranties, also some may come with exclusions, rules, and other requirements.  While this does not mean third-party warranties are worse, it does mean you should take care in reviewing the terms of the warranty before signing.  Third party warranties also typically cost less than manufacturer warranties.

 

Why Get An Auto Warranty?

Let’s face it – car repairs are expensive. The computer systems in modern cars can easily cost over $1,000 to fix! By buying an extended auto warranty upfront, these unexpected costs do not have to be paid out of pocket. The cost of one major repair may be more than you paid for your entire warranty, meaning you’re saving some serious cash in the long run!