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EXPLAINED: Vehicle Warranties

EXPLAINED: Vehicle Warranties

“I am looking for an unreliable clunker that will have to be in the shop on a regular basis,” said no one ever. Reliability is often assumed when searching for and procuring a new ride. But lemon or not, repairs are inevitable. Dealerships will always offer warranty plans, and in the right circumstance, car warranties can be an effective hedge against future breakdowns. But how do you know what warranty to buy? What is a car warranty anyway?

Don’t worry! The Boomag team is here to explain.

What is a car warranty?

A car warranty is a service contract in which the provider agrees to fix broken parts due to manufacturing design or installation. There are two main types of vehicle warranties: manufacturer’s warranties and extended warranties.

A manufacturer’s warranty ensures that your new vehicle is in proper condition. Manufacturer’s warranties cover the costs of repairs or replacements if the car incurs damages due to a manufacturing-related error. This type of warranty only covers damages deemed to be caused by the manufacturer. Most new cars come with a manufacturer’s warranty.

There are two primary types of manufacturer’s warranties: powertrain warranties and bumper-to-bumper warranties. Powertrain warranties cover basically anything used to power the car’s wheels. This includes the car’s engine, transmission, transfer case, drive shafts, axles, differentials, and drive box. A powertrain warranty’s coverage depends on the provider, so it’s important to understand your specific warranty’s terms.  Powertrain warranties typically last for five years or 60,000 miles.

Bumper-to-bumper warranties are the most comprehensive type of manufacturer’s warranty. They cover almost every part of your car between the front and rear bumpers. Most cars come with bumper-to-bumper coverage between three to five years. Just like powertrain warranties, their coverage is limited to damages resulting from manufacturing errors.

An extended warranty, on the other hand, is offered by manufacturers, dealerships, or independent providers at an extra cost beyond the vehicle purchase price. An extended warranty covers, in theory, repair or replacement of specified parts for a specified period—it can also simply add miles to the miles covered by the manufacturer’s warranty.

What don’t warranties cover?

Most warranties do not cover accidents or normal wear and tear. Warranties generally do not cover damages caused by accidents, improper maintenance, misuse, aftermarket products, and any alterations made that the manufacturer warned against. Exclusions can vary based on the specific warranty’s coverage, so it is critical to ask questions and do your research on what exactly your vehicle’s warranty does and does not cover.

Are warranties worth it?

Vehicle warranties can be helpful in a sticky situation, but the truth is most people do not end up using them. Luckily, most new cars automatically come with a manufacturer’s warranty; the tough decision is deciding if you want to purchase an extended warranty.

Extended warranties can bring more peace of mind and reduce financial stress if you cash in on it. Extended warranties save you money on out-of-pocket repair costs and provide robust protection on costs not covered by factory warranties. Alternatively, they are an added expense and only pay for covered expenses. Extended warranties are a “use it or lose it” expense. Again, do your homework and be honest with yourself: is your used car going to demand lots of maintenance? If so, it is probably worth looking into an extended warranty.

Extended warranties aren’t the only option for protection. If you’re purchasing a reliable vehicle, have money set aside for potential repairs, and have auto insurance to cover basic repairs and damage, you have essentially the same coverage you would have with an extended warranty. If you’re worried about the expense of potential problems, it may make sense for you to explore extended warranties. They can also be good for used cars; extended warranties may help you reduce your out-of-pocket costs for service.

Ultimately, vehicle warranties have pros and cons. Luckily, most new cars come with a manufacturer’s warranty, so that decision is made for you. Extended warranties may be a good option for drivers looking for extra protection but having auto insurance and funds set aside for repairs can provide similar coverage.

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