2 Types of Car Warranties Explained
When it comes to car warranties, there are two main types – manufacturer’s warranties and extended warranties.
A car warranty is a vehicle service contract between you and the warranty provider. In this contract, the provider agrees to cover the cost of repairs to your vehicle when there is a mechanical failure.
A manufacturer warranty comes with every new vehicle you purchase and provides cover for a limited amount of time, while an extended warranty can be brokered by a third party and can be purchased at any time.
Let’s delve deeper into manufacturer’s warranties and extended warranties, how they work, and the main differences between them.
1. Manufacturer’s Warranty
A manufacturer’s warranty serves as a buffer against financial loss due to defects or malfunctions, and they come with every new car.
Essentially, they are a guarantee that a vehicle leaving the factory meets a certain standard of quality, but manufacturer’s warranties are only in force for a specified amount of time.
Usually, a manufacturer’s auto warranty will only cover repairs that occur due to mechanical breakdowns – they will not cover damage or failure due to wear and tear, such as tires, brake pads, or windscreen wipers, so it will be up to you to replace and maintain them.
A manufacturer’s warranty is usually available in three package options: inclusionary, exclusionary, and powertrain.
The powertrain package offers the most basic coverage and will only cover vital components like the car’s engine, while exclusionary plans are the most comprehensive.
2. Extended Warranty
An extended car warranty works in much the same way as a manufacturer’s warranty, however, it can be purchased at any time. Extended warranties are designed to extend the length of the manufacturer’s warranty or they can be purchased to cover a used car.
Although you can purchase an extended warranty before your manufacturer’s warranty expires, it will not come into force until the original warranty ends.
Like manufacturer’s warranties, extended warranties usually provide coverage for mechanical breakdowns and will not typically cover preventative maintenance or wear and tear on your vehicle.
You can purchase an extended warranty from dealerships, car manufacturers, and third-party companies.
There are two main options when it comes to extended warranties: original equipment manufacturers warranties and aftermarket extended warranties.
Original equipment manufacturer warranties are issued by the car’s manufacturer, while aftermarket warranties are sold by third party companies or car warranty providers.
The Bottom Line
Auto warranties provide coverage and protection because they cover the cost of repairs when your car breaks down due to mechanical failure.
Although manufacturer’s warranties guarantee that you won’t have to pay for repairs on new cars due to defects, extended auto warranties are a strategic choice.
To decide if an extended warranty is a necessary purchase after your manufacturer’s warranty expires, estimating how likely it is for your car to have problems is key.
If the cost of out-of-pocket repairs is going to be higher than the cost of the extended warranty, purchasing one will save you money in the long run.