Learn when and how to buy a warranty

When car shopping, check the warranty that comes with the vehicle. Not every car warranty is created equally. Some cover all the non-wear items on the car up to only three years or 36,000 miles, while others cover repairs up to 10 years or 100,000 miles. The strength of the coverage should help you decide whether to buy an extended auto warranty.

A typical new car warranty has two parts: the "bumper to bumper" warranty, which covers everything except the "wear" items such as brakes and tires; and the powertrain warranty that covers all the parts that make the car move, such as the engine and transmission.

An extended auto warranty can be purchased to prolong the coverage of the bumper-to-bumper warranty. This is sometimes called a "factory warranty" because factory-trained technicians perform the required work on the car. There are also "third-party" warranties and can save consumers money but are generally less convenient to use. Many third-party warranties require out-of-pocket payment for repairs before reimbursement. Weigh all these factors carefully before you make your choice.

• To what extent is your vehicle already under warranty? Is coverage in sync with how long you’ll own the car? If you just bought a new car, look closely at its factory warranty. If you plan to keep the car after the factory warranty expires, an extended auto warranty is worth considering. If you've purchased a used car, research any existing warranty coverage. Some manufacturers offer "certified used" programs, extending factory warranty terms on pre-owned vehicles. If the car isn't under warranty, or if you plan on keeping it past its warranty expiration, an extended warranty makes sense.
• What's the reliability record of the model you're purchasing? Research the reliability of the model you're buying. This isn’t fail-safe, but it gives you an idea of what you may be in for service-wise; bear this information in mind when making a warranty decision.
• Who supports the warranty you're considering? An extended warranty may be backed by an independent warranty company or by the covered vehicle's manufacturer. Knowing who’ll be underwriting your policy can give you insight into the strengths and weaknesses of the contract you're considering. Manufacturer-backed warranties score very highly when it comes to ease of use. However, aftermarket warranties are often cheaper.
• What's the nature of the warranty deductible? Investigate deductible before signing. Consider not only amount, but also whether the deductible is per visit or per repair. What sounds like a minor difference may, under certain circumstances, have a major impact. You will have to pay extra for certain deductibles, but if your circumstances become such that you have to take your car in frequently, you'll find that this policy more than pays for itself.
• Is the warranty transferable? Some extended warranties end when the person who bought the warranty sells the car. A warranty that allows you to transfer it to a new buyer is preferable; it's an excellent selling point for prospective buyers.
• Can repairs be performed at any repair shop? Some extended auto warranties stipulate that repairs be performed at the dealership where the warranty was purchased. It's best to opt for a warranty giving you multiple service facilities to choose from.
• What exactly is covered? Know what's covered (and what's not) by the extended warranty. Does it cover breakdown as well as wear and tear? Under a "breakdown" warranty, coverage is extended only to parts that break. A "wear-and-tear" warranty extends coverage to worn-down parts in need of replacement. Before committing to a warranty, take the time to fully explore the ins and outs of its coverage implications.
• Is a cash layout required for repairs? Some extended warranties require you pay the bill, then send the receipt in and wait for reimbursement; in many cases, months elapse before you get your money back. Ideally, you'll want a warranty that pays the dealership directly with a credit card.

Remember to compare all your options before making a warranty decision. Utilize the Internet; many companies sell directly online, and getting quotes can give you an idea of what an extended warranty with your desired features should cost.

Source: Edmunds.com