New Car Warranty 101

Auto warranty

The ins-and-outs of an auto warranty, what it covers and why it's important for you

In this section, we discuss what an auto warranty is, what it covers and why it's an important consideration when buying a new car.

What is an auto warranty?

New cars come with a manufacturer warranty, or a guarantee from the automaker that it will cover the costs of mechanical failures or breakdowns over a specified period of time, and for certain parts of a car. 

What does a new car warranty consist of?

There are two common parts of an auto warranty.  The first part consists of bumper to bumper coverage, under which most every major component of a car is covered.  Items that are excluded from bumper to bumper coverage include parts that are subject to wear over time, such as tires, brake pads, spark plugs, filters, batteries and wiper blades. 

The second part of an auto warranty is powertrain coverage, under which the car's engine, transmission and driveshaft are covered.  Similar to bumper to bumper coverage, any parts that are subject to wear over time, such as belts and hoses, are not covered. 

Does warranty coverage vary?

Warranty coverage can vary considerably from manufacturer to manufacturer and from model to model.  Some warranties cover major components for three years or 36,000 miles, while others offer coverage for up to 10 years or 100,000 miles.  Since car repairs can be extremely costly, especially on major components such as the powertrain, it pays to factor warranty coverage into the new car consideration process.

What other types of warranties are available?

Beyond bumper to bumper coverage and powertrain warranties, there are a variety of additional warranties offered on new cars.  They include rust warranties that cover a car's sheet metal against corrosion, roadside assistance coverage that includes battery jumps, tire repairs, and towing, and travel interruption benefits that provide a daily reimbursement for hotels and restaurants should your car break down while you're on the road and a certain number of miles from home.

What is an extended warranty?

Simply put, an extended warranty is similar to an insurance policy that protects you against vehicle repair costs once your car's original warranty expires.  There are two types of extended warranties — those offered by manufacturers and those offered by independent companies.

Manufacturer extended warranties are usually an extension of your car's original warranty, covering the cost of dealership repairs and service after the time the original manufacturer's warranty expires.  

Independent extended warranties are typically offered by third party organizations or insurance carriers.  In addition to allowing for dealership repairs, independent warranties usually allow for repairs at other facilities.   

Do I need an extended warranty?

If you're buying a new car, chances are it's already covered under a manufacturer's warranty which is included in the price of the vehicle.  If you're leasing and get a new car every two to three years, the manufacturer's warranty should be all the coverage you need.  When it comes to determining whether or not you need an extended warranty, keep in mind many of today's manufacturers offer comprehensive plans, with some programs lasting 10 years/100,000 miles.  As a general rule, it makes sense to purchase an extended warranty after your car hits 100,000 miles. This is usually the time when older cars begin to experience mechanical problems and are no longer covered by most warranty plans.

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