How to Choose an Extended Auto Warranty

When people consider purchasing an extended auto warranty, they often think that if anything goes wrong with their car, they will be covered! Unfortunately, that is often not the case. Extended auto warranties for new and used vehicles are frequently written in such a way that the warranty provider doesn’t have to cover very much at all. Become aware of how to read auto warranty information so you will know exactly what you are getting.

Difficulty: Moderately Easy

Instructions

1. Go over the new or used car warranty contract with a fine-toothed comb, reading every clause carefully. You may find that even a bumper-to-bumper extended auto warranty contains significant exclusion clauses.

2. Watch out for the wear and tear section. Make sure to ask the warranty provider how wear and tear is determined. If only the power-train is covered, you may be in trouble. Typically, the power-train (engine and transmission) of a vehicle is unlikely to fail. Some automatic transmissions may also be excluded--a major red flag!

3. Check out consumer advocate magazines and websites to see how often your prospective vehicle needs to be repaired on average. If it needs frequent repairs and you plan on keeping your car for a long time, then an extended bumper-to-bumper auto warranty may be worth the price. If you only keep cars for a couple of years, then reconsider buying an expensive warranty on a quality vehicle.

4. Research extended auto warranties offered by third-party agents. Different warranty providers may be more up front and willing to pay out than the dealer. Examine these warranties even more closely than a dealer warranty, though, as there are many unscrupulous agents out there.

5. Think about establishing a repair savings fund or certificate of deposit instead of an extended auto warranty. A $3000 savings fund, for example, should be more than enough to cover a couple of years of repairs. Many new car warranties cost more than this amount.

Tips & Warnings

• Research your extended auto warranty while you are still shopping for a car. If you decide that you want a warranty, do not purchase the car and then shop for the warranty from a third-party agent.
• Avoid many expensive repairs by having your vehicle maintained. Change the fluids regularly, have the valves adjusted and keep your tires properly inflated. Read through the repair manual to determine the right service intervals.
• Once you purchase your extended auto warranty, be certain not to void it. For example, use the right grade of fuel.