About After-Market Car Warranties

When you purchase a new car, it typically comes complete with a factory warranty. This factory warranty covers certain types of repairs that may be necessary for your vehicle in the future. When the factory warranty expires (usually between 3 and 10 years), you will no longer have payment assistance for any of your vehicle's repairs. However, you can extend warranty coverage by purchasing an after-market car warranty.

identification

An after-market car warranty is essentially an insurance policy against your vehicle that is purchased after the initial sale of the car. Sometimes called extended warranties, this type of service agreement could potentially save you thousands of dollars in future repairs. However, it's important to know the specifics of the warranty contract, as well the reliability of the company you are buying from in order to make sure you get the most for your money.

Considerations

After-market warranties aren't for everyone. For example, if you plan on selling your vehicle before the factory warranty expires, there is absolutely no need to purchase an extended warranty. Understanding the reliability and common repairs associated with your particular vehicle may also help you decide against an after-market warranty. After all, if your car has a low probability of requiring expensive repairs, it may not be cost-effective to purchase an after-market warranty.

Warning

If you prefer not to have unexpected auto expenses in the future, it may be smart to start shopping around for an after-market car warranty. When choosing a warranty dealer, it's important to understand that there are a lot of fly-by-night companies that don't have your best interests in mind. Therefore, select a company that has been in business for many years and has a credible history. A credit union is typically a reliable place to purchase an after-market warranty.

Cost

Cost varies widely for after-market warranties. When comparing cost, it's important to note what level of coverage is coming with the warranty. Some warranty contracts may cover wear and tear repairs; others don't. If you want the majority of future repairs to be covered, you'll likely want a bumper-to-bumper warranty. However, be aware that this type of comprehensive coverage will likely cost more in premium fees.

Expert Insight

Beyond price, it's important to fully understand the fine print of the after-market car warranty before purchasing. Here are some additional questions to ask yourself before signing on the dotted line:

Can the warranty be transferred? If you want the ability to transfer the warranty to the new owner when you sell the car (it's an added selling point), you'll want a warranty that is transferable.
Where can repairs be performed? Repairs covered under warranty may require you to visit a certain repair shop.
Do warranty payments require reimbursement? Under some plans, the car owner is required to pay the repair bill and then send in a receipt for reimbursement. If you'd rather not do this, avoid this type of plan.