Auto warranties are insurance for when something goes wrong with your vehicle – not if something goes wrong. Cars are labeled depreciating assets for a reason, and those reasons range from bad accidents to broken axles.
When you're signing the final paperwork on a new or used car, sold through a car dealership or a private party, what do you need to know about auto warranties?
Getting to know your warranty options
If you're buying a newer vehicle, you'll notice the original limited or factory warranty is your first line of defense or guarantee. Not all factory warranties are created equal; but if you take a new 2009 Subaru Outback, for example, included in the car price is a 3-year or 36,000 mile Basic warranty, along with a 5-years or 60,000 miles Powertrain warranty and a 5-year or unlimited mileage Rust Perforation warranty.
What this means is you are granted a timeframe or distance – whichever comes first – in which you are able to depend on the manufacturer's "factory-trained" technicians to repair or replace specific or limited issues. These warranties can be useful in cases of recalls or major malfunctions.
But how likely are you to experience serious vehicle issues in the first 36,000 miles of ownership? Not likely, which is why you'll also be offered by the dealership – at an additional cost – an extended or vehicle service agreement aimed to cover what your limited doesn't or stops doing. You aren't obligated go with the offered line of coverage and can purchase a third-party or aftermarket extended plan instead; whichever the case you want to make sure the contract benefits your peace of mind and not just the dealer's commission. Many extended vehicle agreement companies allow you to customize your level of coverage based on such factors as your mileage or deductible amount, for example. Like anything else, it is best to shop around.
Used vehicles offer a mixed bag of warranty options, depending on what you are being sold. Your best bet is a manufacturer-certified used car inspected with numerous standards and covered by an extended plan, all in one fixed or negotiated price. But if buying from a private seller, your warranty option might be transferring or purchasing a third-party extended agreement.