How to Choose an Extended Auto Warranty

An extended auto warranty can be valuable in helping to cover car repair costs, but not all warranties offer the same coverage. But consumers need to be aware because many of these warranties are aggressively marketed and grossly overpriced.[1][2] It's important to evaluate your auto warranty needs and know how to choose an extended auto warranty that meets your requirements without spending money on services or coverage you don't really need.


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    Decide if you need an extended warranty at all. According to, you're probably better off without one. They claim that a $1000 warranty typically only pays out $250 in repairs, with the rest going to marketing and overhead. [3]
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    Know if you're leasing or buying.
    • You may not need extensive warranty coverage on a vehicle you're leasing for a year or two. Let warranty representatives know this information up front and ask if they have warranty options specific to leased vehicles.
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    Base your coverage on the life of the car.
    • If you're going to be driving your car for several years, you will probably have to perform major repairs, like engine or transmission service. If you replace your car before the warranty expires, you may get a partial refund, but this is not ideal as most of the value of the warranty comes from repairs made at the end of its term as the vehicle ages.
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    Do your homework before purchasing.
    • Gather all the information you need to select an extended auto warranty package before you purchase the car. Planning ahead will help you avoid being pressured into coverage you don't need. It can also help you avoid penalties or extra charges assessed for adding warranties after the date of purchase.
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    Ask about manufacturer-specific warranties.
    • Most major auto manufacturers offer brand-specific warranties that cover more extensive repairs than private or after-market warranty vendors. Ask your auto dealer about brand-specific or manufacturer warranties available for your vehicle and compare all your warranty options.
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    Ask how it works.
    • Depending on the type of warranty you purchase, you may be able to have your car serviced at any authorized dealer or you may be required to take it back to the dealer or lot where you purchased it. Ask about this requirement so you know what restrictions you will have to get service and maintenance covered under the extended warranty. Read the contract carefully. Many contracts don't cover certain types of common repairs.
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    Find out about up-front costs.
    • Ask your warranty representative to explain the process of obtaining service coverage under your chosen extended warranty package. Some warranties will pay the mechanic directly, while others will require you to pay up front and submit a bill for reimbursement. Consider which process will work better for your financial situation before choosing an extended auto warranty.
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    Inquire about upgrades.
    • You might choose one level of coverage and determine later that you need more coverage. Find out if the warranty you choose offers coverage upgrades or if you'll be locked into one level for the life of the warranty.
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    Review the financial stability of the company backing the warranty. Your service plan is worthless if the company goes out of business before you need to file a claim. Look for an A- or better rating from A.M. Best.

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Categories: Car Maintenance and Repair