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Understanding Warranties

Car warranties guarantee that certain parts of a car will work for a specific period of time. Like an insurance policy, warranties vary in their level of overall protection.

When you buy a warranty, it offers you peace of mind that if something breaks (that is covered by the warranty) breaks, the repair will be covered. You may never need your warranty or it may save you thousands of dollars.

While most new cars come with some sort of manufacturer’s or dealer’s warranty, you will often have the option to extend the original warranty on a new car by several years.

For a used car, you may have the option to buy an extended warranty. If you elect to purchase a warranty, remember you don’t have to buy it from the dealer when you buy your car. You can shop around for the best price.

If you’re looking to buy a warranty, make sure you understand exactly what it covers, who is guaranteeing the coverage, where you can get the car serviced and what might void your coverage.

Types of Warranties

Here’s a look at some of the most common types of warranties:

Bumper-to-Bumper

A bumper-to-bumper warranty is the most comprehensive warranty available on the market and is generally only available on new cars.

It doesn’t cover everything though - oddly enough, sometimes bumpers are not covered - so read the warranty agreement carefully. Generally it will list parts not covered, since so many are included. Some manufacturers throw in freebies like free gasoline, free car washes, roadside assistance, periodic maintenance, towing service, car rental reimbursement, some wear and tear or electronic equipment coverage.

Most new cars include at least a three-year/36,000-mile bumper-to-bumper warranty.

Powertrain

Powertrain coverage covers the vehicle’s powertrain - the engine, transmission, drive axles and driveshaft. These are often big, expensive repairs, and generally it’s less expensive to buy a powertrain warranty than other warranties. A powertrain warranty might be included in bumper-to-bumper warranty coverage or you can buy it separately.

A powertrain warranty might have the best value on used cars with high miles, because other warranties may be too pricey, but you still want some coverage in case your engine fails.

Extended warranty

These warranties are most effective for used cars, where limited or no other warranties are offered. Remember, you don’t have to buy this warranty from the dealer and you don’t have to buy it when you buy the car. You can find good deals by shopping around for third-party warranty suppliers online, (be sure to check them out thoroughly online at places like the Better Business Bureau) or asking your auto insurance company for a referral.

Extended warranties will never cover what a bumper-to-bumper warranty covers, but they address similar parts. This warranty will spell out what is included, instead of what is not.

While you want to check over any warranty’s conditions, you want to be particularly careful when you’re paying extra for it. The length of the coverage in both mileage and years should be spelled out. Make sure parts and labor are covered. You should also find out if wear-and-tear is included in the warranty.

If you go with a third-party warranty supplier, verify that the company is reputable and in good financial health. If the company is dishonest or goes out of business, you’re out of luck. Be sure to check the comments at the Better Business Bureau.