An extended car warranty can protect you from big repair bills, but these plans aren't right for everyone. Here's what to look for and what to avoid.
Before signing anything, it helps to understand exactly what you are buying.
An extended car warranty is a service contract that kicks in after your factory warranty expires. Some are sold by the carmaker, while others are sold by third-party companies and that is where consumers often run into trouble.
Extended warranties come with various levels of coverage.
Routine maintenance, wear and tear, pre-existing problems, and modified parts are typically not covered. Policyholders must follow the fine print: get pre-approval before repairs, keep up with maintenance, and save receipts.
Missing a step can result in a denied claim.
Lemon law attorney Shalev Amar says keeping paperwork is critical.
"Paperwork is super important… always get a repair invoice, not a handshake, not a cup of coffee," Amar said. "If you don't have paperwork, it didn't happen."
An extended warranty may make sense if you have a high-mileage, older, or less reliable vehicle, or limited savings to cover an unexpected repair. But if your car is newer or you plan to sell it before the factory coverage expires, it is probably not worth it.
The more coverage you want, the more expensive the plan will be.
Common warranties can be bumper-to-bumper, it covers everything in your vehicle; there are some exclusions. Read the contract carefully.
Wrap coverage extends your bumper-to-bumper coverage plan, if it ends before other certain additions of your manufacturer's warranty.
These warranties will provide financial support for expensive car repairs. Many times, coverage includes roadside assistance.
On the other hand, these warranties will have some contract exclusions and limitations. Also, it might not be the best plan because it might now pay for itself.
Before signing a contract, consumers should:
- Read the contract carefully
- Research complaints and reviews
- Be cautious of robocalls and cold calls pitching extended warranties
The right extended warranty can provide peace of mind and a cushion against a big repair bill.
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