Extended Auto Warranty: A Crucial Addition When Buying a New Car

What is an Extended Auto Warranty?

An extended auto warranty is a service contract offered by dealerships or warranty companies to cover vehicle repairs beyond the manufacturer's warranty. There are two primary types of extended auto warranties:

1. Bumper-to-Bumper Warranty: Covers almost all parts and systems of the vehicle, excluding a few specific components.
2. Powertrain Warranty: Covers the engine, transmission, and drivetrain, but not other major systems.

The Dealership Experience

When you decide on a car at a dealership, the next step typically involves a visit to the financial office. Here, discussions about insurance and extended warranties take place. It's crucial to ask detailed questions to understand what each warranty covers.

Manufacturer vs. Third-Party Warranties

Most dealerships offer a manufacturer's extended warranty, often included in the vehicle's price. However, some may offer third-party warranties. Always request the manufacturer's warranty and scrutinize the contract before signing.

Reading the Fine Print

Extended auto warranties are not always regulated, which means they can vary significantly in coverage. Some warranties may only cover specific parts that break, while others might cover parts that wear down over time. Understanding what is covered is essential for making an informed decision.

Powertrain Warranty

A powertrain warranty typically covers the engine, transmission, and drivetrain. However, it may not cover other major components, which can be misleading.

Bumper-to-Bumper Warranty

A bumper-to-bumper warranty covers almost all vehicle systems but usually excludes certain parts. It's vital to identify these exclusions before choosing this type of warranty.

The Cost Factor

Extended auto warranties are often included in the overall price of the car, making it seem like a separate and distinct warranty is a misnomer. The terms of the contract can sometimes lead to confusion, especially when offered through a dealership.

The Financial Office Experience

After closing the deal, you are usually directed to another office where insurance and financing are discussed. The financial officer may present numerous documents for you to sign without thoroughly explaining the extended auto warranty details.

Take Your Time

Given the complexity of these contracts, it's understandable that you might not absorb all the details immediately. Take your time to research warranties beforehand and ask as many questions as needed.

Interesting Statistics

• Consumer Reports found that 55% of people who purchased an extended warranty never used it for repairs (source).
• According to the National Automobile Dealers Association (NADA), the average cost of an extended auto warranty is around $1,200 (source).

Conclusion

The more knowledge you have about extended auto warranties, the better equipped you'll be to choose a contract that meets your needs. Always read the fine print, understand what is covered, and don't hesitate to ask questions. This due diligence can save you from signing a contract that doesn't align with your requirements.

Additional Resources

For more information on extended auto warranties, you can visit the following authoritative sources:

• Consumer Reports
• National Automobile Dealers Association (NADA)

By understanding the nuances and specifics of extended auto warranties, you can make a more informed decision and ensure that your new vehicle is adequately protected.