An extended warranty is an agreement between the car owner and warranty company, obligating the warranty company to pay for repairs covered by the contract for a specific period of time. With an extended auto warranty you are protecting yourself from the unexpected cost of mechanical failure. One major repair often ends up costing as much, or even more than the entire cost of the warranty. As a consumer, you can only accurately understand the coverage if you learn the terminology and standard industry requirements. The levels of coverage offered differ considerably from company to company. Most states (36) do not regulate the coverage, and there is quite often jargon and restrictive language buried in the contract.

2. What exactly does an extended warranty cover?

Know what’s covered — and what’s not covered — by the extended auto warranty you’re considering. Does the contract cover breakdown as well as wear and tear? Under a “breakdown” warranty, coverage is extended only to parts that break. Such an extended auto warranty can prove less inclusive than is desirable, since not all parts fail due to breakage. Some need to be replaced because they’ve worn down over a period of time; a “wear-and-tear” warranty extends coverage to worn-down parts in need of replacement.

Additionally, some extended auto warranties do not cover TSB’s. A Technical Service Bulletin (TSB) or Factory Service Bulletin is a notification by the manufacturer that a condition may exist on your vehicle. Sometimes there is a problem requiring immediate attention; often they are issued to facilitate a quicker diagnosis or repair procedures from your repair facility. It is common for a vehicle to have dozens of TSBs issued. Most companies will deny any claim related to a TSB. This is a huge coverage loophole. Additionally, ABS brakes, so if your vehicle has this feature, you should consider upgrading to a higher coverage level (if available). And overheating — regardless of its cause — isn’t covered in many car warranties. Thus, if overheating occurred due to problems with an expensive part such as your radiator, you’d be stuck with a hefty repair bill.

Before committing to an extended auto warranty, take the time to fully explore the ins and outs of its coverage implications. The distinctions between the various plans might seem slight, but they can prove quite important.

3. Why do I need an extended auto warranty?

Since common mechanical repairs can cost into the thousands and these costs are rising rapidly; protecting your automotive investment should not be taken lightly. Whether you own a new or older make/model, an extended auto warranty will provide you with peace-of-mind protection regarding costly mechanical repairs that can happen at any time during the life of your vehicle. Buying an extended auto warranty today will allow you to avoid paying higher rates later due to price increases and required surcharges due to the multitude of issues that develop as the vehicles flaws become public knowledge. You’ll be able to immediately take advantage of your plan’s benefits: towing, lost key/lockout, and car rental discounts.

4. Why should I purchase an extended auto warranty now if my vehicle is still covered by the manufacturer?

As your vehicle accrues age and miles, the price for an extended auto warranty will rise as do the repair costs that you would experience for an older, out-of-warranty vehicle. You are only buying total mileage coverage, not addition of mileage to your current total. Capitalizing now on your vehicle’s newness and low mileage is the most logical approach as you plan for inevitable future repair costs. An extended auto warranty will provide you with peace-of-mind protection regarding such expenses. Some are transferable, allowing for increased vehicle resale value.

5. When should I buy coverage?

A common misconception is that by waiting to purchase extended coverage, you will get coverage for a longer time. While you can purchase your coverage at almost anytime, the cost for coverage rises as your vehicle ages and accrues mileage. In other words, you will be offered the longest term at the lowest rate for a new vehicle. Even if you have a warranty from the manufacturer, extended warranty coverage is simply an extension of that… not double coverage. The manufacturer’s warranty has been factored into your price quote. The more factory warranty you have remaining, the lower the cost and greater the length of the warranty extension.

For an extended warranty you may be offered coverage for up to 7 years for a new vehicle. If the vehicle is a year old, you may be offered coverage for up to 6 years and the rate will be higher. Two years old, coverage may be offered up to 5 years and so on. Waiting does not provide you with a longer warranty; it serves to increase costs, much like life insurance. If you buy an extension to 100,000 miles today or in 2 years, it will still expire at 100,000 miles.

Waiting also carries other risks. Coverage costs rise as repair rates do. In the last 3 years, the average labor rate has increased by $20 per hour. Also, as more repair data becomes available for your vehicle, its costs may also rise. In essence you can lock into low prices the sooner you get covered.

6. What about the deductible?

Fully investigate a policy’s deductible before signing on the dotted line. Consider not only its amount, but also whether it’s per visit or per repair. With a per-visit deductible, each visit to the shop will run you a fixed amount, regardless of how many parts are repaired; a per-repair deductible applies to each serviced part. What sounds like a minor difference may, under certain circumstances, have a major impact on your wallet. If, for example, you’ve got a $100 per-repair deductible and you take your car in to get the air conditioner, fuel pump and alternator serviced, you’ll be out $300. Had you opted for a per visit deductible, those repairs would only have cost you $100.

There are still $0 deductible policies. You will have to pay extra for this type of extended auto warranty, but if your circumstances become such that you have to take your car in frequently, you’ll find that this policy more than pays for itself. (From wral.com.)

7. What type of auto warranty can I buy?

Powertrain Warranty: Covers the engine, transmission, and other parts of the Drivetrain only, which is defined as the 29 parts of the vehicle through which oil flows. These are the parts least likely to fail. The average vehicle contains thousands of parts. As it does not cover the majority of the components of a vehicle, the Powertrain Warranty is truly not an extended warranty.

Bumper-to-Bumper Warranty: Covers nearly all of the mechanical systems of the vehicle, from front bumper to back bumper; except for those on the “exclusion list”, listing the parts that are NOT covered by the extended auto warranty. It is much easier for a consumer to see a short list of items that are not covered and know that everything else is.

Named Component Warranty: Covers the major mechanical systems of the vehicle from mechanical breakdown and mechanical failure. If the part is not listed, it’s not covered by the contract.

NOTE: ***Some companies sell the same or similar plans as above, and use the term bumper-to-bumper. This can be misleading because it is always an inferior level of coverage.

Consumable items, such as brake pads or windshield wipers, are never covered. Roadside assistance and travel reimbursement plans are typically offered as part of the extended auto warranty package; even while the basic warranty is still in effect. Some even offer free lodging and meals if your vehicle breaks down on a trip.

8. If the manufacturer’s warranty for my vehicle has expired, can I still obtain extended auto warranty coverage?

Many consumers do not realize that even after the manufacturer’s warranty has expired, their vehicle is still eligible for extended coverage. You can generally receive coverage on vehicles that have less than 100,000 miles on the odometer. A vehicle out of its original warranty is more apt to have mechanical failure compared to a newer vehicle. For this reason, vehicle inspections are required. A good example would be life insurance. As you age, can you get a comprehensive life insurance policy without a physical and increased cost?

9. How does the claims process work?

The top warranty companies work like this: If your vehicle breaks down or is in need of a repair, take it or have it towed to any licensed repair facility and present your service agreement to the Service Department. After they diagnose the problem with the vehicle, they will call the claims administrator toll-free and receive repair authorization for all your covered repairs less a deductible where applicable. All claims are paid directly to the repair facility of your choice with a corporate credit card; therefore, you do not have to pay for your repair and wait to get reimbursed.

10. Where can I get an instant quote for an extended auto warranty for my vehicle?

We have partnered with Warranty Direct, the consumer division of one of the nation’s oldest and largest warranty companies, to provide you with the most comprehensive extended auto warranty.

This 25 year old company has the experience of nearly 2 million contracts sold, assets in excess of $165 million, has paid over $500 million in claims and they are reinsured by an “A’ rated A.M. Best insurance company with over $2 billion in assets. Their excellent track record is why car dealers, bank and credit unions offer their coverage. When looking at extended warranty companies, financial stability and claims paying experience should be of utmost importance.

If you are thinking of purchasing an extended car warranty, you should, of course, do your research on them.

Certainly, for some car owners, it makes sense to know that they have a certain amount of protection beyond the manufacturer’s warranty period.

Before you make the decision to buy an extended warranty keep a few points in mind:

First of all, if you aren’t really interested in purchasing an extended warranty, there is nothing that says you must.

Most new car factory warranties cover at least 3 years and/or 36,000 miles. If you are considering a warranty extension, first know exactly what the manufacturer’s warranty does (and probably more important what it does not) cover.

One possible advantage to extending the manufacturer’s warranty is that you know that it will be good anywhere in the country that the car sold. After market warranties may require you go to a specific dealer or have limited geographic coverage.

So, if you’re looking at an aftermarket extended warranty be sure to know this.

Make sure that the company that you may be considering for the aftermarket warranty is a solid viable company that has been around for a while and has a solid track record of payment and customer service.

Be sure read the terms of any warranty very carefully. Some warranties have up front deductibles that you must pay first before any of the coverage kicks in.

Know what it covers and look to see if the terms include a free loaner car or a per diem in the event your car may be down for a while.

Finance managers will also push for you to purchase other such add on’s as gap insurance or credit life insurance.

Gap insurance essentially pays for your car if it is lost or stolen and you owe more than the car is worth.

Credit life pays the loan off in the event of your death.

Again, if these are coverages that you want, I would say check with your personal insurance agent first and crunch the numbers. You may already have the coverage or at the very least you’ll get a better price.

Remember the F&I person is there to sell and sell they will (including extended car warranties).

As with the rest of the entire process do your homework and know the numbers as they pertain to you. This will allow you to stay focused and unemotional and make good decisions.

Get more detail on extended auto warranties

Everywhere you go shopping these days, as you finish up the transaction, you are asked if you would like to purchase an extended warranty.

And as you well know when it comes to warranty peddling, car dealerships and their extended car warranty programs are at the top of the list.

The reason that extended warranties and car warranties are so prevalent in the marketplace is simply because we buy them. Buying an extended warranty in and of itself isn’t necessarily a bad thing, but buying one without understanding what it is you’re buying is.

Many people sign their name to a car extended warranty contract that is pages long based upon a couple minute sales spiel given to them in the finance manager’s office.

Not advised.

For some reason when people hear extended warranty they then think they will have this protective suit of armor wrapped around them protecting them from any manufacturing defect.

Failing to read and understand any vehicle extended warranty contract is a recipe for frustration and anger. Yet some people even have the misconception that an extended car warranty will cover just about anything that they perceive is wrong with the car either now or later.

Many people aren’t of the understanding that they cextended car warrantiesan purchase an extended warranty and extended coverages for their car outside the dealership. And quite frankly, can save some good money in doing so.

An excellent resource for doing this is Warranty Direct. With a Warranty Direct extended auto warranty you’ll receive the same coverage sold by over 2,200 car dealers, banks and credit unions at a major discount. Warranty Direct is the consumer division of the 5th largest independent automobile warranty provider in the US. They are a 25 year old company with the experience of nearly 2 million contracts sold. Get a free instant quote from Warranty Direct and find out for yourself why they are the industry leader.

If you would like more extended car warranty information and explanations here is a handy FAQ page for you to answer many of your questions on extended warranties.

Car dealers or car sales people that imply or indicate to you that (for whatever reason they come up with) you must purchase an extended car warranty in order to qualify for financing are just flat lying.

If run across this ‘sales’ tactic your best bet is to go somewhere else. Obviously, you are not being dealt with in an honest manner. Also extended car warranties are 100% refundable within 30 days of purchasing if no claims have been filed against the warranty. Do not allow yourself to be told otherwise.

The reality of buying extended car warranties today is that you should not buy them from a dealership. You’ll overpay for your coverage. Like everything else at the dealership, they are not providing a product or service for you; they are selling you a product at a very nice profit. Extended vehicle warranties sold at the dealership are a source of tidy profit for them. And just like the car buying and negotiating process, you can negotiate some of the profit out of their extended warranty product they are offering you.

Extended warranties on cars are just like anything else we have discussed when it comes to getting the best deal on buying your next car, do your homework, shop around, and get several quotes. There are reputable online companies that offer excellent extended vehicle warranty coverage.

Used car extended warranties are also available online. But remember, before you even get that far into a used car deal, a vehicle history report is an absolute requirement for you as well.

In summary, when it comes to extended car warranties, do your homework, shop around and get some quotes. Take the time to read and understand the precise coverage of the extended warranty. And, if it is a used car, get a vehicle history report and have a trusted mechanic get the car on the rack and give it a thorough inspection.

Some tips on extended car warranties next…

Buying a car is not investing.

It is not an investment.

Oh, to be sure, you’ll be ‘investing’ much of your hard earned money into your car over the years to come, but buying a car is not an investment.

By buying a car too soon, I don’t mean in the calendar year. I mean falling victim to all the new styles and marketing ploys car manufacturers and car dealers throw at you and buying a new car well before what you owe catches up with what the actual value of the car is.

In car buying vernacular, when you owe more than your car is worth you are ‘upside down’ in your car.

You’re ‘flipped’.

These days, believe or not, the average person ends up rolling about $2,000 of negative equity into their new car when they trade. In other words, if you’re looking at a $20,000 car and your car is worth $8,000 and your pay-off on your loan is $10,000 then you are going to be buying a $22,000 dollar car.

When the car dealer says they are going to ‘pay off’ your loan, they are really only rolling your negative equity from your old car into your new car and burying you even deeper in your new car.

Now here is the extremely important point to keep in mind about our example above and why it is beyond important that you put forth a concerted effort to get the best car deal you can.

If you are bound and determined to roll negative equity into your next car purchase (which is a mistake in and of itself), then you better darn well drive a hard bargain and work every penny you can.

Here’s why.

First, if you pay the sticker price of $20,000 on your new car, you just over paid for the car itself because I will guarantee you that the market value of that car is nowhere near $20,000!

And we haven’t even added in the $2,000 you still owe on your trade.

Remember, in our example you owe $10,000 and you traded it for $8,000… because the dealer is kind enough to ‘pay off your old loan’. Before the ink even dries on your new car contract you are in a deep financial hole with your new car.

I hope you really like it because your will have to drive it for a long while before you get anywhere back to even money.

In summary, know your numbers. Don’t rush into buying a car when you are really not in a good financial position in your current car to do so.

Cars depreciate at a very rapid pace. Some at as much as 30% in the first year. If you head into your next new car way upside down, it will take you the entire term of the loan payments before you can get out from underneath it financially.

I am sometimes amazed when I talk with people and I bring this topic up and they look at me and go “oh yeah, that’s right. I hadn’t thought about that.”

Well, you should think about it.

As you are in your initial stages of researching some cars, it’s easy to find out how cars are rated by insurance companies.

Insurance companies just play the odds and the statistics.

By that I mean, if a car is near the top of the list in vehicles stolen, your car insurance is going to cost you more. If the vehicle type you’re are looking at is that little sporty model that is fun to go fast in and has a higher rate of accidents, your car insurance cost is going to be higher. If the car you are looking at has expensive replacement parts, your car insurance is going to cost you more.

So, once you’ve narrowed your car choices down to a chosen few call your insurance agent and get a quote and some feedback.

In fact, you should shop your insurance around and get more than just one quote with Hometown Quotes.com rather than just the quote from your agent.

Again, you are the consumer, and it is your money. It doesn’t take but just a few minutes to get this done and it could save you money, or save you from making a very expensive mistake.

It’s so easy to get an online car insurance or a quote these days at websites such as GEICO.com and AIG Auto Insurance, that this should be a given task for you to do during your car buying steps.

Don’t blow your budget, and take the shine off of your new car by not researching, knowing, and budgeting for the monthly cost of car insurance.

Next Mistake Car Dealer Financing

Comprehensive: Pays for the damages to your car that are not a result of a collision (floods, hail, fire, theft, or vandalism).

Personal Liability: Pays claims against you. Covering the legal fees in the event your car damages property, injures or kills someone in an accident.

Property Damage: Pays for legal defense if your car damages someone’s property.

Medical Payments: Pays medical expenses of the driver and the passengers of your car in an accident.

Uninsured Motorist: Pays for injuries caused by uninsured or under insured or hit and run driver.

Gap Insurance: With today’s creative financing such as extending the length of time of the term, it’s possible for a person to fall into a situation where if the car is wrecked and totaled. But the owner’s insurance will only pay the market value of the car. Not what you owe on it. This could leave you holding the bag for the difference. Gap Insurance is sold for protection from this scenario.

Now let’s move on to some tips on what to do when you need to file a claim.

It’s during the claim process, that having a good agent will become an asset for you.

A good automobile insurance agent will help and guide through the process and help you with dealing with the insurance adjuster especially if you feel the adjuster has come up short and you want to dispute the figure.

Be mindful that although this may not seem a significant nuance, if you have purchased your car insurance coverage via the internet, you may be limited to an 800-number and as such sacrifice personal service at a very stressful time.

It is certainly to your advantage (and stress level) to understand your car insurance company’s claim process before you may have to use it.

The entire process is much less frustrating if you know ahead of time details such as:

Does your company pay for manufacturer brand parts or only generic?

Are you limited by only having specific pre approved body shops do repair work?

If so, are the approved body shops conveniently in your city and throughout the country? If you aren’t sure, make sure your agent fully explains any stipulations that your car insurance policy may have.

If a claim becomes necessary, call your agent as soon as you can after an accident. During the claim process document or journal with names, dates, notes from conversations, emails, receipts, and anything else you discuss or fill out as a result of the claim process.

Stay calm and as proactive and detailed as you can during the process including getting estimates completed.

If you don’t feel as though you got a fair number from an adjuster have them put their findings in documentation form, again, stay calm and work you way up the chain of command with your car insurance company. Have your agent make calls and run interference on your behalf when it comes to dealing with the claims department.

Hopefully you will never have to file a claim against your car insurance policy. But, if you do it is during this time that you’ll find out for sure just how customer oriented your agent and your insurance company is.

Of course, ultimately if you are not impressed with the service you receive; it may be time to do some more shopping around.

If you’re just beginning your insurance consideration or looking at making some changes to policy and coverages, take the extra step to get the advice of an auto insurance professional.

If you are shopping for an agent, look for one that has extended experience and certifications in the field of car insurance.

Taking care of your credit and maintaining a solid credit score is good practice and will save you money in other areas in addition to your insurance premiums. And as it the mantra throughout this website when it comes to buying cars – do your research and shop around – this advice is no different when it comes to your car insurance.

Premiums can vary greatly from one car insurance company to another. The caveat is that you make sure you are comparing apples to apples when shopping your insurance coverages; to ensure this, be sure you are specific when getting quotes.

I would also make sure that you have a car rental provision in your policy. At today’s prices, a trip to the body or repair shop for your car can easily run you up hundreds of dollars if you don’t have an extra car handy that you can drive in the interim.

Also make sure you are aware of any and all possible discounts that are offered by each car insurance provider that you contact.

For instance, if you have gone a number of years without an accident or ticket you will probably qualify for a ‘safe driver’ discount.

If your car is equipped with all of the modern safety features, a discount could be available.

Even if your car is stored in garage or drive under a specified number of miles you may be eligible for a discount. And you can often save money if the same company that insures your car also has the coverage on your house and other insurable assets.

Teens with good grades can also save you money if you new drivers you need to cover as well.

In all, make sure you discuss all the coverages, the deductibles, what you may be liable for, and any discounts that may be on the table for you with a qualified insurance representative and make sure you get details so you are able to shop and compare your car insurance quotes among various companies.

If you drive a car you are going to need automobile insurance.

Although you need not me an expert in the field of car insurance there are some things you should know, and preferable not learn them as a result of having an accident and/or having to file an insurance claim.

When it comes to your budget, car insurance isn’t the most exciting thing to try to figure out, but you do want to spend your money wisely.

First of all, a great many people probably don’t carry enough liability insurance; especially today with the costs of litigation as high as it is. Be careful about squeezing your auto insurance budget so tight that you carry a minimum deductible and too little liability.

If you’re worried about coughing up the $500.00 deductible, what will it be like if you have to cough up $500,000 because of a liability suit against you?

Consider carrying a higher deductible. Put your deductible amount into a basic savings account then leave it alone. Then use the savings you gain from carrying a higher deductible to raise your liability coverage.

Determining these numbers is best done by you and your insurance agent since everyone’s ability to assume risk and net worth are different.

When it comes to your liability, don’t just evaluate your total liability per accident.

You need to take a look at this as it pertains to your per person amounts as well. This can be a bit confusing, but for example, if you had a basic policy that pays up to $300,000 in total liability, but $100,000 per person; and you are at fault with one of the individuals for $200,000, then you would be on the hook for half of the $100,000.

You may want to make sure your agent writes the policy so that the per accident and per person are the same. In other words, you’ll have $300,000 in coverage not matter how it is divided up.

Another area to take a look at in order to get the most and best from your car insurance dollar is your personal injury protection. If you already have health insurance that you carry, check to see what or if the coverage would be for you and your family in the case of an accident. There’s no need to pay twice for the same coverage if there is overlap.

True…

it does sound simple enough. You pay for your car insurance premium and when something goes wrong; your insurance company pays you after the deductible is met by you.

However, as you can imagine, each state is going to have some differences and nuances on how they define and legally interpret their no fault auto insurance statutes. So, you’re best off to bring yourself a bit up to speed on your local no fault laws as they pertain to your own insurance coverage.

With car insurance most states fall into three basic categories. They are no fault, tort, or some sort of no fault option or inclusion. Your comprehensive and collision coverage (physical damage to the car) the systems essentially work the same.

If you are in a no fault auto insurance state, and someone runs into you, your insurance company will pay to fix your car; then they have the option to try to recover from the other person’s insurance company if they determine that necessity.

In a tort state, you can have your insurance company pay to fix your car, or you can leave your company out of the loop and have the other driver’s insurance company handle the details.

This way you would not report the accident to your insurance company and thus save you out of pocket expenses of the deductible.

Obviously, in a tort system, you have to channel everything through the individual that was at fault. This, of course, puts you at the mercy of the other insurance company when it comes to receiving payment. This can be frustrating enough if there is only damage to your vehicle, but if there are physical injuries involved, this can become a whole other personal matter.

The best approach is to make sure that you have the proper car insurance coverages that meet your personal and financial needs and risks.

Be sure to discuss any limits and thresholds that your state has depending upon its insurance environment. It’s especially important to discuss and evaluate your insurance coverages as they pertain to you and/or your family’s financial situation. Particularly as your coverage pertains to personal injury protection because medical bills and subsequent law suits could wipe you out financially almost instantly.

And as always, remember to shop around for your coverages. You might be under the assumption that with all of the states insurance statutes whether they are a no fault auto insurance state or not, the costs of the coverages would be fairly standardized. This isn’t necessarily the case; in fact, there can be stark differences in price of coverages from company to company.

A little research and homework can save you good money.