Phone calls and emails about your car’s extended warranty are some of the most popular scams these days. Unsuspecting people are coaxed into purchasing coverage they don’t need or, even worse, doesn’t actually exist. But not all car warranties are scams. In fact, there are quite a few good reasons why you might want to purchase an additional warranty for your car. But how can you tell what’s what among all the warranty scams?
There are plenty of things to watch out for whenever you’re looking to purchase a new or new-to-you vehicle, including the different warranty terms. To help guide you through all of the options and terms that might get thrown around as you’re buying a new car, take a look at some of these car warranty facts and how to sleuth out whether you’re being taken for a ride or protecting all the right things.
Car Warranty 101
At the most basic level, a car warranty is a contractual agreement offered by either your car’s manufacturer or a warranty company. This contract specifies which repairs or defects are considered their responsibility and under what circumstances they will pay for these repairs.
In most cases, a warranty covers only defective parts or those that do not perform as expected. If a part or process covered by the warranty fails to operate properly before that lifespan is over, then the repair or replacement is covered by the manufacturer or company offering the warranty.
However, measuring the lifespan of something like a car is difficult. One driver may rack up 40,000 miles on their car in a year, while another driver may be lucky to hit 400 miles. Therefore, warranties are typically offered in both miles and years. The warranty is honored either until a certain date or until the vehicle has a certain number of miles on the odometer.
For example, many new cars today are sold with a three-year/36,000-mile warranty. If you buy a brand new car today, this warranty expires either three years from today or once you’ve crossed the 36,000-mile threshold, so use your test drive miles wisely.
Types of Warranties and What They Cover
When you purchase a brand-new vehicle, you’ll receive any and all warranties directly from the manufacturer. When you purchase a used car, the seller may be able to transfer any existing warranties to the new owner. The terms and conditions of what will carry over to the next owner depend on the manufacturer and warranties offered.
An extended warranty is one that is offered beyond the standard new vehicle warranty period. Some used car dealers offer a limited warranty on certain parts or mechanisms as a show of good faith. They want buyers to know their vehicles have been fully inspected and are worth your investment. Outside companies that are not affiliated with the dealer or manufacturer may also offer warranties. These are the types of warranties that you need to be most cautious about.
Most of us are most familiar with the “bumper-to-bumper” warranty. Formally known as a Comprehensive Warranty, this typically covers all of the parts your new car received from the manufacturer as it was assembled.
In many cases, manufacturers will also offer a separate warranty for the powertrain. This specifically covers the mechanical parts related to the engine and keeping your vehicle safely in motion. Hybrid and electric vehicles (EVs) also include warranties on the battery and motor components, along with the electrical systems that keep these parts functioning properly.
Other types of warranties are somewhat self-explanatory. Restraint systems warranties include features like seat belts and airbags, while corrosion warranties are offered on body panels that are consumed by rust. Emissions warranties can vary between states and cover various parts of the car that regulate dangerous emissions.
When Bad Things Happen to Good Warranties
We’ve probably all heard horror stories from folks who claim to have been scammed by a bad warranty. While that does happen all too frequently, it’s also possible to void your own warranty, sometimes without even knowing you’re doing so.
If your vehicle has a salvage title, meaning it was considered a total loss after an accident, it is no longer eligible for coverage under a warranty. The same is true if your vehicle was declared a total loss after a disaster like a flood or fire. Usually, these types of losses are handled by insurance instead of a warranty.
But there are a few ways you can void your warranty without meaning to. First, there’s the way you use it. While there are a few manufacturers who include provisions for track driving when the vehicle is equipped with a factory-installed track package, taking most vehicles racing will void the warranty. The same is true if you try to haul or tow more than your vehicle’s maximum payload and towing ratings. Off-roading is another tricky area. While some vehicles are clearly designed for tackling tricky terrain, even these warranties may have a few specifics about things like body damage and the types of obstacles that are appropriate for that vehicle.
Then there’s the matter of parts. A manufacturer is obviously only going to cover their own parts, so it makes sense that any aftermarket modifications wouldn’t be covered. But those modifications might actually void your warranty if they cause problems with how the other parts and mechanisms in your vehicle work. This is also true in extended warranties if a problem is determined to be a downstream effect from a modification. Systems completely unrelated to the modification would still need to be covered.
There’s also the matter of neglect and regular wear and tear. When gunk and grime cause your engine to fail or driving 100,000 miles without changing your brake pads makes braking difficult, your warranty will not come to the rescue. Following the maintenance guidelines for your car will prevent potentially voiding your warranty and keep you safely on the road.
When Is a Scam a Scam?
One of the biggest complaints folks have about extended warranties is that they are rarely worth the money. Not only do you have to pay for the warranty itself, usually in a large lump sum or in monthly payments, but many extended warranties include a deductible. Similar to your car insurance, this means you would have to pay for a certain amount of any warranty-covered repairs out of pocket before your warranty coverage will pay for the rest.
Also, bear in mind that extended warranties usually limit what they cover. Less scrupulous companies will fight as hard as they can to avoid paying out, which can lead to a long fight and having to provide a lot of impossible proof. Do you have solid evidence that you haven’t taken your car off the pavement during the entire period of ownership?
The best way to determine if an extended warranty is worth the investment is to do the math. What would it cost to repair your car out of pocket versus paying for an extended warranty and any related deductible? There are situations where luxury cars, sports cars, and those manufactured overseas can be particularly expensive to repair, and parts can be incredibly difficult to source. Purchasing a reputable extended warranty can be very beneficial in these cases.
Stay Alert and Stay Safe
Reading the terms and conditions of any warranty is important, but it is absolutely critical when you purchase an extended warranty through a party other than the manufacturer. Aftermarket parties are less interested in your enjoyment of the vehicle and more interested in making money, so some offer tight restrictions on what you can and cannot do with your vehicle.
Ultimately, most drivers would be better off putting the money they would spend on an extended warranty in an emergency fund. All cars will eventually need repairs. As your car ages, those repairs may be less expensive than the cost of continuously paying for an extended warranty in hopes that what goes wrong will be covered.
