A vehicle warranty is a contract provided by the vehicle manufacturer or a third party, which warrants that certain components that have failed due to defective materials or events within specified time frames or mileage restrictions. Auto warranty covers repairs that standard car insurance doesn’t cover, but usually does not pay for maintenance or normal wear and tear. To understand how a warranty works and determine if an extended warranty makes sense to you, Bankrate’s insurance editorial team has split the basics of car warranty.
What is a car warranty?
A car warranty is a type of service agreement that covers certain components of a vehicle, such as engines, transmissions, and electronic systems that are affected by mechanical defects. Getting a warranty on a new car will essentially guarantee that your car is working from the manufacturer. Additionally, if it turns out that there is an unexpected problem with the main components, the bill can be amended.
- Guarantee mechanism: If your car requires repairs that were not caused by an accident and does not fall under a normal wear bill, your dealer may file a warranty claim. If the warranty provider approves the claim, repairs can proceed under warranty at reduced costs to the customer.
- Car warranty covers: A comprehensive bumper to bumper warranty covers most parts of your car, but you won’t pay for damage caused by an accident or parts designed to wear out like brake pads. Other warranty may only cover certain components, such as powertrains and restraint systems.
- How long does the warranty last: Normally, a new car warranty lasts three years or 36,000 miles (one comes first), but some car manufacturers like Kia and Hyundai have a longer warranty.
- What could void your warranty: By using your car for racing or other motorsport activities, towing weights, or making unauthorized changes to your vehicle, you can void the warranty on a typical car by not performing regular maintenance.
A vehicle warranty that comes after the manufacturer’s warranty expires is known as an extended warranty. Extended warranty must be purchased individually and is usually deductible if purchased through a third-party provider. However, by extending the warranty through the manufacturer, you may be able to avoid deductibles.
Types of car warranty
There are several types of car warranty. Some are standard with vehicle purchases, while others are optional and can be added at your discretion. See the key differences that will help you understand which warranty is available and useful for your current or future vehicle.
Manufacturer’s warranty
The manufacturer’s warranty ensures that the vehicle is in proper working condition. This warranty is built to cover the cost of repair and replacement if the vehicle experiences malfunction or damage due to any failure on the part of the manufacturer. This type of warranty excludes damages from accidents or other incidents that are normally covered by insurance, normal wear and tear, and damage caused by improper use of the vehicle. Manufacturer warranty is included with most new car purchases.
Two of the most popular manufacturer warranties are the powertrain warranty and the bumper-to-bumper warranty.
- Powertrain Guaranteed: It covers only damage to the vehicle’s propulsion system, such as the engine, drive shaft, and transmission.
- Bumper to Bumper Warranty: It covers almost all vehicle components except glass, tires, brake pads and other items designed to wear over time.
Extended warranty
Once the manufacturer’s warranty for the vehicle is in effect, you have the option to purchase an extended warranty to add an applicable vehicle service contract after the original factory warranty is no longer active. You can purchase an original equipment manufacturer (OEM) warranty from an automaker or an aftermarket warranty from a third party.
Dealer Guarantee
Dealer Warranties are most commonly available on second hand or certified used cars, especially vehicles that exceed the manufacturer’s warranty due to age or mileage. In general, dealer warranty is short (30-90 days, or even thousands of miles) and is often less comprehensive than a manufacturer or extended warranty. Coverage is not standardized and can vary widely between dealers, so it is important to review terminology in writing.
It is usually an option, but in some states it is required by a dealer to provide a warranty on the sale of a used car. For example, in Connecticut, a used car requires a 30-day or 1,500 miles dealer warranty if it sells from 30 days to $5,000 to $5,000, and 60 days or 3,000 miles for more than $5,000. This helps protect consumers from unexpected repairs early in ownership due to issues that dealer inspections may have missed.
Emission guarantee
As part of the amendments made to the Clean Air Act, all new vehicles sold since 1995 will need an emissions guarantee. Emission Guarantee provides two years or 24,000 miles of compensation for necessary repairs or modifications required after the emission failure test. It also provides 8 years or 80,000 miles of coverage of key emission-related components, such as catalytic converters and electronic emission control units (ECUs). Emissions guarantees are usually included as part of the manufacturer’s warranty, but there may also be individual documents of their own.
What is an extended warranty?
Extended Warranty is a vehicle service agreement you purchase for your vehicle. You can add it to your purchase when you first buy a car, but extended warranty often doesn’t apply until the factory warranty expires.
There are two main types within the extended warranty. Warranty from the original equipment manufacturer and aftermarket. The first is issued by the original manufacturer of the vehicle. In contrast, the second is sold by a car guarantor or other third party. There is a great variation between different aftermarket guarantees. At the same time, most OEM structures remain reasonably similar to the original manufacturer’s warranty.
Buying an expansion vehicle warranty is a strategic choice. If your car experiences problems due to covered damage, you can file a claim with your extended warranty. If approved, the warranty company will pay for the repair. These payments have restrictions specified within the warranty agreement. An initial service fee will be charged for each claim you file with the company.
All these strategies are to estimate the likelihood that your vehicle will experience the type of problem that the warranty covers within the time frame for warranty and compare the cost of the contract with those repairs. If the price of the guarantee is cheap or close, it can be a strategically sound investment. If the repair is cheaper from the pocket than the contract, there is little reason to buy it.
Direct insight: Why Extended Car Guarantee Gets Bad Lap
The extended warranty is subject to ridiculous thanks to telephone scams aimed at reaching out to “about extended warranty for your car.” But is extended warranty a tool for fraudsters? Or is it a scam? To get better insights, we turned to the Reddit forum where car sales experts explained the differences.
Conclusion: There are legitimate extended warranty from both the manufacturer and third parties, but it may not be suitable for all drivers. If you’re not confident in your ability to pay for large repairs during the warranty period, it may be worth it, but read the terminology carefully to understand what’s covered before signing.
Car Guarantee vs. Car Insurance
Both car warranty and car insurance help offset the out-of-pocket costs associated with car repairs, but the warranty is not insurance. Auto insurance is a mandatory form of financial protection that protects cases such as car accidents, bad weather, and car theft. The warranty, on the other hand, covers parts that do not meet the manufacturer’s standards and leads to premature repairs due to normal use.
Auto insurance also covers damages to others, such as medical expenses you are responsible for and vehicle repairs. The main purpose of liability (the type most states require) is to cover your legal liability, not your own vehicle. The table below provides a more detailed breakdown of what the warranty covers on a car and what is handled by car insurance instead.
| Damage type | Car warranty | Auto insurance |
|---|---|---|
| Vehicle damage caused by accident | Not covered | It’s covered |
| Damage to other vehicles due to accident | Not covered | It’s covered |
| Vehicle damage caused by manufacturing defects | It’s covered | Not covered |
| Damage to the vehicle caused by improper uses, such as drag racing. | Not covered | Not covered |
| Damage to the vehicle caused by wear and tear | Not covered | Not covered |
| Regular maintenance | Not covered | Not covered |
