Unlike any other industry related to cars, the businesses that offer “extended warranties” – we’ll get into what those are in a minute – range from solid, well-rated companies to boiler room call centers that exist solely to separate you from your hard-earned money. We’re here to try and separate the best of these companies and point you in the direction of the ones that actually provide the service you think you’re paying for.
According to the Federal Communications Commission, if you “own a car and a phone,” it’s only a matter of time before some fly-by-night extended warranty scammer tries to take advantage of you through some kind of predatory marketing. It’s unfortunate because there are several extended warranty providers around that deliver on services the way you’d expect them to. But before you even begin to do your research on extended warranties, you’ve got to know what an “extended warranty” is in the first place.
The only warranty that’s an actual “warranty” is the written guarantee from the manufacturer that agrees to repair your car if one of its parts fails during a specific period of time and/or mileage. If you’re the original owner of a brand new car, you got one of those when you purchased it. You may have also had that original warranty transferred to you if you were the second owner of a car and bought it when the time and/or mileage of the original warranty hadn’t run out.
Those original warranties break down into a few different categories:
Compare quotes from multiple providers to get a good deal.
The only real “extended warranty” that comes from the manufacturer is the extension of coverage that comes if you purchase one of the cars it offers through a Certified Pre-Owned program.
Manufacturers like Lexus will extend the original Basic Coverage out to six years with unlimited mileage, which is pretty sweet if you drive a lot. It also throws in things like up to four factory recommended services in the span of two years or 20,000 miles.
If you’re looking at used cars and you have the choice between a car with or without the Certified Pre-Owned stamp of approval with the extension of the original warranty coverage, the one with it is almost always the better deal.
There was a time when most consumer watchdogs would never advocate purchasing a service contract. Back in the late 1980s and early 1990s, for example, cars were infinitely more reliable than they had been in the 1970s. Yet, they were still relatively simple machines; the only really expensive things that went wrong were the engine and the transmission, and they’d become reliable enough to make service contracts redundant.
It’s a different story in the modern era, though. Whether you purchase a car that was built in Japan, South Korea, England, Italy, Germany, or the United States, they are uniformly expensive to repair, and while the engine and transmission are still both expensive, some of the systems that monitor and regulate their performance are staggeringly costly to repair. If you own a car from the 2010s, it is the single most powerful computer you own. They can be unreliable, and they’re expensive to fix.
The computer network that makes your car operate is more complex than you can imagine. Your average Chrysler, for example, has 44 different computer modules that manage everything from the fuel/air ratio to the speed of the windshield wipers.
The cost to replace some of these modules can be as expensive as replacing a rear differential. Take a look at the cost of replacing the Engine Control Module for a vehicle as pedestrian as the Chrysler 300 with a 3.6-liter V-6. The part alone costs almost $700. Considering diagnostic time and labor to actually perform the replacement and you could easily be past $1,200.
Another good example is an auto stop/start technology. This feature was introduced as a means of scavenging a bit of extra fuel economy when the car was stuck in traffic and not actually moving. The idea is sound: Why spend money idling your fuel away when the car can automatically turn off and on in traffic?
You start running into problems, though, with how that system works. It seems simple enough. You turn your car off and on every day, right? The difference is that you turn your car off and on when the gear shift is in “PARK.” Auto stop-start does it when the vehicle is in “DRIVE,” something that was expressly forbidden in the owner’s manual in cars since the advent of the automatic transmission. To make auto stop/start work, pressure has to be maintained in the transmission’s hydraulic system. That requires an additional electric pump. In the case of a lot of vehicles, that pump is housed within the transmission. If it fails, it means the transmission needs to be removed and serviced, something that nobody ever wants to have to pay for.
The list of Very Expensive Technology You Do Not Want to Pay For if it Fails is getting longer by the day. Radar-guided cruise control, lane-keeping assist, automatic emergency braking, cross-traffic alert: all of these technologies are great and are hard at work saving lives, but the expense of keeping them working long after the original basic warranty has expired is something you don’t want to have to take on.
Obviously, you want to spend a lot of time looking at the fine print in any of these service contracts, and yes, cost should be a significant consideration. But there are three things that make several stands out above the others:
There are service contracts that we like that don’t fall into these categories, though, and we’re not saying they’re bad. In fact, there are very good reasons to purchase one:
Ah, that’s the eternal question and we’re providing a slippery answer: It depends.
There are simply too many factors to nail down exactly what a service contract or extended warranty is going to cost.
The greatest cost advantage you’ll realize is if you’re buying a service contract at the time you purchased a new car. In general, the company providing the service contract is going to be more likely to cut you a deal on a service contract if your original warranty is still in effect. They’re also more likely to be less expensive if you’re attempting to buy a service contract for a one-owner, low mileage vehicle than something that’s had more owners than your local newspaper.
If we looked at an average cost for a warranty, you’re looking at around $1,200. The thing to consider, though, is based on surveys from consumer groups, the average savings for repairs paid for with a service contract only amounts to about $900. In other words, if you end up getting more repairs paid for than you paid in service contract fees, you’re kind of a rarity.
As with everything, it depends. If you’re driving something with an exceptional reputation for reliability, you probably shouldn’t spend the money. However, if you’re driving something British, you should’ve bought that service contract already. What are you waiting for? Your transmission already fell out.
The best thing to do is spend some time researching your car’s (or your intended car’s) repair history. Our friends at CarComplaints can give you a good idea of the potential trouble issues. You also want to research the cost of specific repairs. Your car might be generally reliable but prone to failures of the Engine Control Unit, which might be particularly expensive for your model. You’d want to know that before you make a decision on whether to purchase a warranty or not.
We found a Dear Car Talk letter with Tom and Ray that we think does a great job summarizing how you should decide whether an extended warranty is worth the extra cash. Here it is:
*Dear Tom and Ray:
We just picked up a new Fiat 500C, and we were pondering the lifetime warranty. Before the car hits 10,000 miles, we have to decide whether to buy it. The cost is around $3,000. Is something like this worth it? We would like to keep the car for 10-15 years. Cheers!
RAY: Generally speaking, extended warranties are not worth it. Why? Because if insurance companies didn't take in more money from premiums -- overall -- than they spent on repairs, they would stop selling the things.
TOM: But that doesn't mean it's not worth it to you. Maybe you're buying a car with unknown long-term reliability? Hint: You are.
RAY: Or maybe you're someone who sleeps better knowing for certain that you'll never get a call from the service manager telling you that the estimate for your new engine is $6,400.
TOM: But there are two variables to consider. The most important is the fine print.
RAY: What does this "lifetime warranty" actually cover? Is it a complete extension of the factory warranty? Is it just the powertrain? Does it cover body hardware and electrical issues? What, specifically, is excluded? "Wear items," like brakes and shocks?
TOM: What's the deductible? Are there conditions you have to meet to keep the warranty in force? For instance, do you have to get your car serviced regularly at the dealership? Do you have to keep written records of all of your services and oil changes?
RAY: If you don't feel capable of doing a "close read" of the warranty's fine print by yourself, then it's worth paying an independent mechanic you trust to read it and go over it with you. You want to know what is and isn't covered. Your mechanic also can talk to you about how often he sees the kinds of repairs that are covered, and how often he sees those that aren't.
TOM: Once you know what kind of warranty you're actually buying, then you can try to guess the likelihood that you'll spend $3,000 on those kinds of repairs in the years that you own your car.
RAY: Also keep in mind that the price of the warranty is negotiable. Like most "parts," an extended warranty is bought by the dealer at one price, and sold to you at a higher price -- sometimes double. So you often can negotiate a lower price.
TOM: But don't do anything until you understand what the warranty actually covers. It may be a great warranty, with a low deductible and very few exclusions or requirements. And it may help you sleep well for the next 15 years.
RAY: Or it may have more holes in it than my brother's favorite underwear. And you may decide you're better off buying a second Fiat 500C and just driving whichever one is working on a given day. Good luck, Karl.*
Compare quotes from multiple providers to get a good deal.
If you’ve got a vehicle produced by FCA (Chrysler, Dodge, RAM, Jeep, Alfa Romeo, Fiat), you should be taking a serious look at Chrysler Warranty Direct before you even consider any other service contract provider.
CWD is an example of a provider that includes all three of our key attributes. They’re a direct provider, meaning that while they’re selling you a contract, they’re also administering the contract when things have gone wrong with your vehicle. Chrysler Warranty Direct also utilizes nothing but OEM parts to service your vehicle, meaning that when it leaves the garage, it will have the same quality parts it left the factory with. Finally, all of the work performed is at authorized, franchised FCA dealerships, by technicians trained by the factory.
CWD has two tiers of contracts. Added Care Plus covers over 850 different vehicle components, and you can adjust the term from two to two to eight years, and mileage from 60,000 to unlimited. Maximum Care offers the same flexibility in time and mileage, but covers significantly more, with 5,000 components covered, replicating the factory’s original bumper-to-bumper coverage.
In addition to vehicle protection, the plan also provides several other benefits:
You can also adjust the length of time and the deductible to reduce the monthly cost. The second tier of the service contract is as robust as the original warranty and provides bumper-to-bumper coverage for years after the original warranty runs out.
Similar to the Chrysler warranty, GM Extended Protection Plans cover GM vehicles (Chevrolet, Buick, GMC, and Cadillac) and extend the coverage of the bumper-to-bumper warranty up to 10 years. GM administers this plan, but the plans are sold through authorized resellers and franchised GM dealerships.
With a GM Extended Protection Plan in place, you don’t need to carry paperwork or special membership cards. Using your vehicle identification number, any authorized GM dealership in the country can access your plan level and provide services using their factory-trained technicians, and service your vehicle with GM-specific parts.
The plan comes in two levels, Silver and Platinum. Silver is an affordable plan that covers major components like the engine, transmission, transfer case, drive axles, factory-installed turbo- or superchargers, steering components, brake components, electrical system components, factory air conditioning components, and seals and gaskets.
Platinum offers everything in the Silver plan, but adds essentially an extension of the factory’s bumper-to-bumper coverage, protecting you from expenses related to failures in items like the entertainment system, rear vision camera, blind spot monitoring system, adaptive cruise control, and anything else that isn’t a normal wear item.
In addition to vehicle protection, the plan includes several built-in benefits:
Before the Federal Government’s bailout of General Motors, Ally used to be called GMAC and was GM’s captive finance company. After the bailout, GMAC was spun off into a new company called Ally, and when it was, it launched its own service contract offering (GMAC used to administer a similar plan to the GM Extended Protection Plan).
It’s a bit of a hybrid because Ally Flex Coverage isn’t manufacturer-dependent. You can cover just about any car with Ally Flex Coverage. It’s also important to note that it’s a reimbursement plan. If something fails that’s covered by the plan, you submit the receipts and Ally reimburses you for the expense.
If other plans are like collision insurance, think of Ally Flex Coverage like an HMO. If your car breaks down, you have to contact Ally to receive authorization before the work can begin. You then submit your invoice to Ally and they reimburse you for the expense.
While not as convenient as some of the other plans, there are a handful of benefits to consider. The price of a plan like this should be lower than that of a factory-backed plan. Also, you aren’t restricted to using a dealership’s service department. As long as the repair has been authorized, you can use any mechanic you like. If you have someone you trust in town and the dealership is three towns away, that can be a great benefit. It also provides the use of new, used and remanufactured parts.
Ally Flex Coverage comes in three flavors: Tech Coverage provides covers only for a number of advanced technology features such as collision avoidance systems, factory-installed GPS, backup sensors and adaptive cruise control. Core Coverage is more like your original “powertrain” warranty, covering things like the engine, transmission, drive axles, transfer case and brakes (with the exception of pads, rotors, drums, shoes, and other wear items). Ultra Coverage is an extension of your manufacturer’s bumper-to-bumper coverage.
Like the other plans, there are also some significant side benefits to Ally Flex Coverage:
If your car doesn’t fall into one of the brand-specific service contract companies, check out Carchex. They offer service plans for all brands, both new and used. They also have an A+ rating from the Better Business Bureau, meaning that they respond to whatever complaints they get, and they’re probably not hounding you on the phone late at night.
Carchex is a service contract broker, so within every tier of their coverage, they have several offerings from third party vendors that can meet your needs. For example, at the highest level, (Titanium Coverage) Carchex offers plans from six agencies that run from seven to 10 years worth of coverage.
The not-so-hot part of the coverage is that it’s really a reimbursement. Remember the health plan you had years ago that paid for nothing until you paid for it first, then you had to go through a labyrinthine procedure of filing claims with receipts and that whole deal? That’s kind of what’s happening here. It’s not the most convenient thing in the world, and you’re still going to have pay for the repairs upfront, but the good news is that you can get the work done anywhere that’s a licensed repair facility.
You’ve also got a paradox of choice going on with Carchex. They have 21 different plans ranging from Titanium, Platinum, Gold, Silver, and Bronze, and then down at the bottom somewhere Brass, Tin, Aluminum Foil and Doublemint Gum Wrapper (we’re kidding about the last ones.
In addition to the service contract coverage, the plans also provide some added benefits, such as:
Endurance is the provider you’re likely to hear the most about because they spend a gazillion dollars marketing everywhere. If you’ve ever searched “extended warranty” in Google, these people have been following you around like they used to threaten you about your “permanent record” in junior high.
That said, Endurance has some benefits. They’re not rated or accredited by the BBB, but they have a four-star rating with TrustPilot.
Unlike Carchex, Endurance is a direct provider, meaning that they not only sell the plan, but they also administer it, too.
They offer four levels of coverage: Select Premiere, Secure, Superior, and Supreme. The difference in those plans is how much the plan is going to cover. Secure, for example, appears to only cover what a Powertrain warranty would. As you step up the ladder, you get coverage on other ancillary services. Supreme appears to be a fairly comprehensive, bumper-to-bumper-style service contract.
If you're not exactly sure which level of coverage is right for you and how it may impact pricing, Endurance does a great job of making themselves available to answer questions. They can be reached at (855) 534-1173.
Again, with a program like this, you’re going to pay for the repair upfront and get reimbursed for the repair when you’ve submitted receipts. Not exactly the most convenient thing in the world, and frankly, if you’re going to have to spend money first to maybe getting money back later provided you submitted your receipts properly, you’d probably be better off just putting money in savings account for the day your air conditioning system fails.
Other benefits to the program include:
Compare quotes from multiple providers to get a good deal.
A: Yes you can, and it’s sometimes an advantage to do so. You can roll the cost into your monthly payment if you’d rather not pay for it separately.
A: Yes, depending on the mileage and how old the car is. Usually, those mileage caps tend to kick in around 100,000 miles, and the vehicle typically needs to be less than eight years old.
A: Although not a direct provider, CarShield does a great job of building awareness about its brokerage services. The Better Business Bureau, however, advises caution when considering doing business with CarShield and even gives them an F rating, so we'd recommend reviewing our checklist of how to find a reputable car warranty company.
A: On average, probably not. Most people end up saving less than a plan would cost. But that’s the average. There are a lot of people running around with ultra-reliable cars like Honda Accords and Toyota Camrys that buy extended warranty coverage and never use it. Then there are people who buy extended warranties on their Range Rover and end up saving more than the vehicle was worth in the first place.
A: It totally depends on the contract. Some service contracts require that you have your car repaired at franchised dealerships. Others say you can get the car repaired anywhere, but require a lot of phone calls ahead of time on the part of the garage so that the cost of repair can be pre-approved. Every extended warranty is different, so read the fine print.
A: That’s fantastic. It will cover your vehicle at no cost because that warranty was provided by the original manufacturer. But that warranty typically runs out in three or four years. Extended warranties and service contracts provide coverage after the original warranty has expired.
The best way to get a good price is to compare offers. We recommend reaching out to...