When you’re buying a used vehicle that’s no longer covered by its original factory warranty you may also want to consider protecting it with a used vehicle service contract, also known as an extended warranty. Though not actually a warranty at all, since it does not necessarily come from the vehicle manufacturer, this is a type of insurance policy that protects you from financial loss in the event that your vehicle breaks down or suffers a specific, covered mechanical problem. Before we start going in details of how much should a coverage cost here are four basic types of used car warranties available:
Exclusionary – covers all vehicle components except those specifically excluded in the policy terms.
Stated component (inclusionary) – covers only those components specifically included in the policy terms.
Power Train – covers the power train only,which usually consists of the engine, transmission, drive axle and, in the case of a 4-wheel drive vehicle, the transfer case. Some power train protection plans, depending on the policy provider, may also include other components such as the air conditioning system, fuel system and certain electrical components.
Wrap – this is a coverage type for vehicles that still have factory warranty protection on their power trains but the protection for the car’s other components has run out. Adding a wrap policy to an existing power train warranty turns your coverage into the same as that provided by an exclusionary policy.
Since each of these extended warranty types cover different components on your vehicle and each is sold at a cost relative to the number of components covered, the exclusionary is the most expensive but also provides the best, most comprehensive coverage. One of the first factors in determining how much a used car extended warranty will cost is which type of protection is selected.
Remember, most vehicle service contract providers offer additional benefits along with protection plan, such as roadside assistance, car rental, key replacement, etc. Don’t forget to check if your car qualifies for any of these benefits.
Other Cost-Determining Factors
Besides coverage type, several other factors are considered in the pricing of used car service contracts. A typical policy will probably cost somewhere between $350 and $700 annually, but with each policy and each person being different it’s difficult to come to an exact number without obtaining a price quote from a policy provider. Covering a Hummer, for example, may cost closer to $1000/year. Here are a few elements that will have a bearing on the final cost quote:
- Vehicle age and mileage – generally speaking, older cars or those with higher mileage will cost more to cover, but not necessarily, since the car’s make and model will also come into play. The logic here is that the older a vehicle is and the higher the mileage, the more apt it is to suffer some type of mechanical breakdown.
- Vehicle make and model – generally speaking, a used BMW or Porsche is going to be more expensive to cover than a Ford or Kia, simply because parts and labor charged to fix these more expensive cars is usually higher.
- Deductible amount – the deductible amount, which is the amount the policyholder must pay toward any authorized repair, can run anywhere from zero to $100 or more. Higher deductibles will lower the initial cost while a lower or zero deductible will raise the price of the policy. Some providers require a deductible be paid for each component repaired or replaced while others only charge one deductible for each service visit, regardless of how many components are involved.
The cost of used car warranty coverage ranges anywhere from $900 to $3500 depending on your vehicle’s make, model, age, plan type and other factors. Most companies offer interest free financing that lets you pay for the plan on a monthly basis.
A Word About Service Contact Providers
One of the most important aspects in pricing of a used car extended warranty policy is the company providing the coverage. There are hundreds of them. Many, sorry to say, may be providing coverage that’s not worth the paper it’s written on and, should the time come for you to collect the benefits your policy provides, you may end up on the short end of the stick. This is the most expensive coverage you can possible get since it gives you a false sense of security that it will be there in your time of need but either underperforms or does not perform at all to your expectations.
For this reason, the handful of top-rated companies out there are working hard to provide good coverage at a fair price take a bad rep as a result of the high number of fly-by-night companies that have infiltrated the industry. The best way to avoid falling prey to one of these less than legit companies is to do your homework and make sure you deal with an established company with a good, long history, exemplary Better Business Bureau ratings and a comprehensive list of satisfied customers.
To shortcut the process of finding the best service contact policy from a top rated company offering the most reasonable rates, using the services of an unbiased, third-party clearinghouse makes good sense. Check out the top-rated companies offering the best service at the lowest rates.
To find vehicle service contract providers in the US and their Better Business Bureau ratings please go to our Company List.