What to Know Before Getting an Extended Warranty for a Used Car

What to Know Before Getting an Extended Warranty for a Used Car

Most used auto protection providers will let you go to a repair facility of your own choice.

It has been said that no one drives a new car, since as soon as a vehicle is driven off the car lot it becomes a used car. Evidence of this is the fact that resale value immediately depreciates.

In the extended vehicle protection industry, however, a vehicle may be termed as new while it is still covered by the original factory plan, which may be up to five years or 50K miles in some cases, although it is typically more like three years or 36K miles. And, while we’re on the discussion of semantics, it should be noted that the term extended warranty is actually a misnomer, referring to a product properly termed a “vehicle service contract.” Warranties are only issued by manufacturers. Service contacts, which are a form of extended coverage past the time that the original factory protection plan expires, may be issued by manufacturers, dealerships or third-party providers.

Who Needs an Extended Warranty (AKA Vehicle Service Contract)?

While today’s new cars are built to be more durable and require less maintenance than those of years gone by, they can still have their problems. Original manufacturer’s warranties are usually bumper-to-bumper coverage, often covering both parts and labor for the repair or replacement of faulty or broken components. As with many products covered by manufacturers’ warranties, everything is fine during the coverage period and then, once it expires, problems start to occur.

Not only are today’s motor vehicles much more technologically advanced than their older counterparts, especially with the use of computers to run so many systems, but car-repair costs have gone through the roof. With a high-quality extended protection covering your car, you can drive easy knowing that, wherever you travel, you’re protected against the cost of expensive breakdowns and repairs. This is especially important as your car gets older and more prone to developing problems. A good service contact will also throw in additional benefits like emergency roadside assistance, towing, and some may even pay for rental car charges while your vehicle is being repaired.

What To Look For in a Vehicle Service Contract

Warranty Contract Signature

Read the contract carefully before signing it. We recommend going with the big and well-known companies.

As with most things, extended warranties come in all ilks. Some provide top-quality coverage, some are noticeably mediocre in benefits and some are just a plain waste of money. These are typically written by companies strictly in it for the money and downright devious in their approach to get you to sign on the dotted line and fork over your hard-earned money. You end up with something totally different than what you need or want.

Don’t misunderstand. Service contacts are a worthwhile investment, especially if you plan on keeping your vehicle past the factory warranty expiration. But you need to do your homework in order to ensure that you get a policy that meets your needs and your budget. Most of all, you want coverage that does what it says it will do, that provides comprehensive benefits and is underwritten by a well-established, respected provider. Here are some tips:

1. Who Is Behind The Piece of Paper?

A service contact is only as good as the company behind it. Look for an outfit with strong financial stability and a good track record for paying claims and responding to customers’ needs.

2. Shop Quotes for the Best Price

Dealerships will press hard to try to sell you a vehicle service contract for a new car as “wrap around” coverage for the factory plan and to take over when it expires. They’ll often offer to roll the cost into the car payments. This is a big profit item for them – gravy on the new car sale – but their prices are almost always considerably higher than you could get elsewhere if you shop around. Plus, their service contracts are often limited as to where you can obtain repair work, which is usually only at their dealership. Not a good deal!

3. Read the Contract and Know What Is Covered

Before deciding on a particular service contract, you want to know what is covered, what is not covered and who pays what. Do not trust what you’re told verbally but only what you see in black and white. Most companies offer several levels of protection, each with its own specific set of benefits. If the price seems low it is probably because the coverage is lacking. If you’re dealing with a company on the Internet and they refuse to let you see a full copy of the contract do not even consider their offer.

4. Find a Neutral, Unbiased Resource

The most intelligent and practical way of obtaining the best used-car warranty for your needs/budget is to utilize the resources of an unbiased, neutral resource. These industry insiders track a wide variety of potential providers and do in-depth discovery of which programs are best, which are customer-service oriented and represent the best value for the money.

View more extended warranty articles


To find vehicle service contract providers in the US and their Better Business Bureau ratings please go to our Company List.