How To Select An Extended Warranty

All new vehicles come with a warranty. Automakers realize that some of their cars, trucks, and SUVs will develop problems far sooner than they should. When a particular part or system fails, the cost of having it repaired is covered for the owner. Of course, warranties do not last forever. When they expire, the owner is left to pay for the cost of repairs and replacement parts. Because both can be expensive, many companies offer extended warranties to drivers. The extra coverage allows motorists to hedge their bets. By investing upfront, he or she can partially shield themselves from the high cost of various types of automotive services.

Below, we’ll explore extended warranties in more detail. I’ll explain a few of the most important factors to consider when choosing a service contract.

What Is Your Current Coverage?

Your decision to invest in extra coverage will depend heavily upon your current factory warranty, your driving habits, and how long you intend to keep your vehicle. For example, suppose that your factory warranty covers your entire car for three years or 36,000 miles. Further suppose that you plan to drive 12,000 miles each year and trade it in after three years. In that case, investing in an extra service contract would be a waste of money. You won’t be able to make use of it.

On the other hand, if you plan to keep your vehicle for ten years and you expect your annual mileage to climb past 12,000, an extended warranty may be a good idea.

Consider The Deductible

Deductibles can be confusing. Most extended warranties have a deductible that you’ll need to pay before the coverage becomes active. However, service contract companies handle it differently. Some will put the deductible on a “per visit” basis. Others will carry it for each individual repair. That might seem like a negligible detail, but it can add up to hundreds of dollars.

For example, suppose you’re taking your SUV to the dealer to have your water pump, alternator, and catalytic converter replaced. If the deductible is $125 and is carried for each individual repair, you’ll need to pay $375 before your coverage starts. On a “per visit” basis, your deductible would only be $125.

Review The Details Beneath The Surface

Extended warranty contracts contain dozens of small details that are easy to miss. Some require that all work is done by dealership technicians while others let you choose from a number of repair facilities. Some allow you to transfer the service contract to a new owner in the event you sell your vehicle; others don’t. Some require that you pay for repairs upfront and forward the receipt for reimbursement. Take the time to carefully read through the contract.

Investing in an extended warranty can be a fantastic way to mitigate the high cost of auto repairs and OEM replacement parts. But, keep in mind that each policy is different and requires a thorough review.