Extended Warranty and Vehicle Service Contracts

Extended Warranties are some of the most misunderstood aspects of the automotive industry, and while many have taken quite a beating in the media recently, there are many very good and legitimate extended warranty programs out there.


What are Extended Warranties, Really?

What the policy actually is, just happens to be where many consumers become confused about the entire situation, which highlights one of the most important aspects of automotive warranties, what kind of policy it is. There are three basic types of additional automotive coverage for mechanical issues; the new car protection, the used car, sometimes known as silver or comprehensive, and the power train coverage that is typically reserved for older and higher-mileage vehicles.

New car packages are likely to cover the vehicle in what is commonly called “bumper-to-bumper” protection, the same as what is offered through dealerships when the vehicle is brand new, and these are often through the exact same underwriters as those from the dealer. The comprehensive packages are similar, covering many electronics, sensors and computers, but not quite as many as the new car protection would. Although, these two can be indiscernible, depending on the particular vehicle and coverage plan. The power train packages commonly include the engine, transmission and other larger components that are prone to failure on older vehicles.


What is Actually Covered?

Here again, this is where the customer and the provider need proper communication to impart exactly what is covered, as many customers will assume things like “bumper-to-bumper” includes the bumpers. Any credible provider will immediately provide a detailed list that itemizes exactly what is covered along with the policy documentation, as well as for much, and it is often the failure to read and understand this that leads to surprises at the service department.

Regardless of what is actually covered, even the simplest of these policies can be real life-savers when the major repair that we all know is coming finally makes its appearance. With the average automotive service shop charging around $100 for each hour of labor, not including parts, the bill for something as simple as a power window motor can cost over a thousand dollars in no time at all.


Avoiding the Scams

The extended warranties industry has been marred by a few unscrupulous providers, the majority of which have since been closed down by the various attorneys general around the country, and these are well-documented around the web and in the various media outlets.

There are many legitimate extended warranty providers that offer the exact same service contracts as the dealers use, with the added benefit of features like low or no-interest payments over one or two years, as opposed to the life of the car loan. Many of these policies also have transfer and refund options that enable customers to pay for the part of the policy used and get a refund on what was not. The key to extended auto warranties is an educated consumer, and with some simple research online, the best one for any given situation is easy to find.