When you buy a brand new car or a certified pre-owned (CPO) car, you usually get a manufacturers’ warranty that covers repairs for at least three years or 36,000 miles, whichever comes first. Once it expires, you must pay any and all auto repairs out-of-pocket, and just when your car is reaching the age in which it may start needing trips to the repair shop more frequently.
Dealerships and third-party companies are ready to sell you an extended car warranty that will cover potential repair costs once the manufacturers’ coverage expires.
Only around a third (37%) of Americans have such a warranty, according to a 2018 survey by Pegasystems. But more than six in ten (62%) of those who have an active extended vehicle warranty reported that they benefited from it.
If this is the case, why isn’t everyone rushing out to buy coverage for their aging vehicle, or buying it from the dealer when they get a car?
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Money’s Best Extended Car Warranties of 2021
Do I Need an Extended Car Warranty?
The leading reason most people don’t have a car warranty is its cost, according to Pegasystems’ survey. One third of respondents said they couldn’t afford it. Another third reported they didn’t need one, and the remainder reported the option wasn’t available to them when they bought the vehicle. (Third-party aftermarket warranties aside, dealerships often sell extended warranties for new vehicles they sell.)
A factor influencing consumers to resist paying for extended warranty services are the longer terms of the original warranties included for free with new cars. These days, it’s pretty common for manufacturers to include a factory warranty more generous than the three-year/36,000 mile offerings of old. Hyundai and Kia, for example, offer a five-year/60,000 miles bumper-to-bumper warranty with their new vehicles, which is two years and almost double the mileage of a traditional manufacturer warranties.
High Pressure Sales
A car warranty can potentially mean big bucks in commissions to the dealership, so many drivers get their first taste of the sales pitch for one when they are buying a car.
“Warranty pitches have become…part of the car buying process,” says Ronald Montoya, Senior Consumer Advice Editor for Edmund’s, who adds that they’re among the automotive extras that “can sometimes provide more of a profit for the dealership than the vehicle itself.”
The process can be just as pressure-laden when it comes to purchasing a policy for a car you already own from a third-party provider — the transactions that are the focus of this report.
Most such car warranty providers won’t give you the option to get a free quote online, instead forcing you to call them. When you do, expect a high-pressure approach, at least based on our experiences when we called warranty companies to inquire about their terms and pricing.
When we said we were interested only in a quote, and would not commit to buy at this time, the sales reps consistently responded by peppering us with limited-time or on-the-spot offers, insisting these deals would not be available later.
Many continued to pester us for weeks afterward, calling or emailing us every few days to ask if we had made up our minds.
A hard sell for a product doesn’t necessarily signify it’s a poor buy, however.
To help you decide the merits of acquiring an extended car warranty, we’ve looked at the financial pros and cons of the product.
Is an Extended Auto Warranty Worth It?
First let’s take a look at how much a car warranty costs. Extended warranties from manufacturers and third-party companies start at about $1,000 for a protection plan that runs for two years and run to about $3,000 for a five-year plan.
Premiums vary depending on the make, model, and age of your car (the latter being a reason that the cost per year of coverage can be more with longer warranties than shorter ones.) Other factors are also considered, like your driving habits and the deductible per repair you select. Deductibles typically range between $50 and $250 and, as with most forms of insurance, the lower the deductible, the higher the premium.
Let’s look in rough terms at how a warranty that costs $500 or $600 a year might stack up against your likely repair bills without a warranty as your car ages.
Although mechanical breakdown frequency varies greatly from make and model, the causes and repair costs related to these are easier to estimate. According to Haynes, the most common car breakdown causes include dead batteries, flat tires, alternator faults, broken clutch cables, and damaged spark plugs, among others. Most of these repairs won’t dig deep into your savings: a damaged alternator costs around $130-$250 to replace, while a new battery can cost around $60-$120.
For such small-potato repairs, an extended warranty makes little sense financially. For one, the chances of any part failing in any one year are low; as examples, a car battery typically lasts 3 to 5 years, an alternator 6 to 10 years. And even if failure occurs, a policy with a $100 deductible would provide little benefit on a repair of only a few hundred dollars.
A car warranty is most useful if you are anticipating — or want the peace of mind that you are protected against — major car repairs. These include transmission replacements—which can range from $3,500 to $5,000—and cylinder repair or replacement, which can cost from $3,000 to $10,000.
As much or more than with smaller repairs, the odds of needing such a repair varies a lot by the car’s brand. To get an idea about how likely such major work at a repair facility will cost, your best bet is to research your car’s make and model for reliability and average repair costs over time. If you’re about to buy a new or used vehicle, you can also use this research to find one of the more reliable brands.
As Montoya, the Edmunds editor, puts it, the hard sell for extended warranties “doesn’t mean that these products don’t have value to some people.” He recommends always “tak[ing] the time to research the products… This will give you a perspective on whether you need it, and what to expect when it comes to pricing.”
Be aware that warranty prices may not be set in stone, and you might want to haggle over an extended car warranty just as you would the cost of a new or used car. You could, for example, negotiate both on the premiums and the deductibles.
Keep in mind that a warranty may not necessarily be renewed when it expires. Extended car warranty companies have authority not to renew a contract and even to suspend it. They may elect one of these options if your vehicle no longer meets the requirements set by the company — as is usually the case with older or higher-mileage vehicles.
Extended warranty providers have a maximum age and mileage coverage limit for vehicles, which typically caps at 10 years or 100,000 miles, over which your car is ineligible for a contract renewal. Some warranty companies don’t offer extended warranties for older cars at all, since these are seen as too risky to protect.
Another variable: not all car brands are covered by all warranty companies — because some makes may be considered too repair-prone or too expensive to repair, or both.
Finally, pay attention to what is and isn’t covered under competing warranties, across and even within the companies. Usually, extended car warranties don’t cover parts affected by wear and tear, such as brake pads and tires; or liquids like coolants and brake fluids. But plans may or may include repairs to such component areas as the car’s air conditioning, suspension, or on-board GPS navigation system.
Key Takeaways about Extended Car Warranties
- Car warranties do not cover any pre-existing problems.
- Read warranty contracts thoroughly.
- Older and high-mileage cars usually are more expensive to insure.
- Companies usually set a 30-day waiting period before activation.
Best Extended Car Warranties Company Reviews
Endurance Review: Best for Older and High Mileage Vehicles
With coverage options for classic cars as old as 1958 and up to 200,000 miles, Endurance stands out as one of the best extended warranty options for vehicles that are older and have higher mileage.
The company has four service plans for new and used cars: Secure, Superior, Supreme, and Select Premiere. Their Secure policy offers industry-standard benefits and is equivalent to powertrain coverage, while the Supreme has the same benefits as an exclusionary plan. The Superior plan, for its part, is one of the most comprehensive inclusionary plans in the industry, offering protection for air conditioners, suspensions, and turbo/superchargers.
Finally, Endurance also offers the Select Premiere, an intermediate option between their Secure and Superior plans. Though it doesn’t feature all the bells and whistles of their Supreme plan, you will get more protection than is offered by their most basic plan.
Endurance has some of the best trip-interruption coverage on the market, too. The company allows a daily $150 reimbursement for a maximum of three days, or $450, whichever comes first.
Endurance’s one drawback is that their contracts have a consequential loss clause, meaning that in the event your vehicle breaks down, the damage can’t be due to the failure of a component that’s uninsured.
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Liberty Bell Auto Protect Review: Best Range of Vehicle Makes Covered
From Acura to Volkswagen, Liberty Bell offers one of the most comprehensive make lists in the industry. It’s common for extended warranty companies to cover around 40 manufacturers, but Liberty Bell covers 46. Their warranty plans — Platinum, Platinum Plus, and Platinum Prime — offer industry-standard coverage, although it offers more added benefits than most.
Specifically, the company’s most comprehensive coverage, Platinum Prime, includes protection of the GPS Navigation system as standard, rather than as an add-on.
And where the industry norm for rental car reimbursement maxes out at $150, Liberty Bell offers $35 for each 8-hour workday, up to a maximum of $210. At $40, the company’s battery boost/jumpstart allowance is also ten dollars higher than the industry standard.
Finally, Liberty Bell allows you to transfer your extended car warranty up to twice per purchaser/household without paying any of the change fees that are typical in the industry. The only conditions for this transferability are that the person you’re transferring it to can’t cancel the contract until the end of its term, and you can’t transfer the warranty to a vehicle that’s used for commercial purposes.
On the downside, Liberty Bell’s contracts have a consequential loss clause (see the Endurance review above) along with one for betterment, which stipulates if the repair or replacement of the damaged parts results in better than “like kind or quality,” the warranty will not pay for this net improvement.
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Infinite Auto Protection Review: Best Basic Warranty Plan
Infinite Auto Protection offers three plans: Foundation, Modern, and Prime. Their Modern policy works similarly to an inclusive plan, but is more limited when compared to others in the industry.
This isn’t the case with their Foundation and Prime plans: the latter offers protection for high-tech equipment that some other warranties don’t cover, including for temperature control programmers, power window motors, and fuel injectors at no added cost.
The Foundation plan stands out the most, since it also includes cooling and differential assembly as standard. This means that their most basic plan covers your radiator, radiator fan blade and motor, fan clutch, water pump, seals, gasket, drive axle, ring and pinion, bearings, seals, and internal parts contained in the differential assembly.
Additionally, all of Infinite Auto Protection’s contracts include an option to protect commercial vehicles, albeit for an additional fee. The only drawback to this commercial vehicle protection is that it’s limited to vehicles used for router sales or services, delivery, inspections and examinations, maintenance/repair, carrying hand tools to a job site, and gardening. The coverage is also limited to vehicles with a payload capacity of no more than one ton, so you will have to look for another company to cover a vehicle that can carry more.
Infinite Auto Protection’s biggest downside is that its contracts have both betterment and consequential loss clauses (see the reviews above), giving them a bit more room to deny claims.
Carchex Review: Best Plan Options
Carchex doesn’t settle for the industry standard of three to four coverage plans. Instead, the company offers five different tiers — Bronze, Silver, Gold, Platinum, and Titanium — each of which has its own levels of coverage.
For example, their Gold policy offers three levels — preferred, gold, and deluxe — while their Titanium tier offers four levels — diamond, titanium, titanium plus, and ultimate. This means that, when we counted all the tiers and levels available, Carchex has a total of 16 coverage options.
Since Carchex is a warranty broker, and not a direct provider, their plan levels are distributed among two warranty provider companies — American Auto Shield (AAS) and Royal Administration Services, Inc., each of which offers its own benefit limits, limitations, and exclusions.
For example, AAS allows a per-breakdown limit of $160 and a workday reimbursement of $40, whereas Royal limits reimbursements per workday to $35 and has a breakdown maximum of $175.
In terms of limitations and exclusions, all AAS contracts have consequential and betterment clauses, while Royal’s contracts only have a consequential loss clause. We recommend reading each contract carefully to learn which one works best for you.
CARCHEX Helps You Purchase a Quality Car Warranty Policy at a Great Price
How We Found the Best Extended Car Warranties
To reach our selection of the best extended car warranty companies out there, we decided to put ourselves in the consumer’s shoes. To do this, we created three different personas with two different car makes and years and requested three quotes for each company we vetted.
For the first two quotes, we chose for quote purposes two Honda Civics (one a 2000 model, the other a 2018 one) — one of the most popular cars nationwide — because we wanted to compare an older model with a newer vehicle of the same make. For the third quote, we used a 2018 Fiat 500L, since this make has a reputation of being less reliable.
We set our place of residence in Texas, the second most populous state after California. We didn’t set California as the place of residence for our personas, as some extended car warranty companies don’t offer their services in that state. Once we had our personas and quotes set, we evaluated each company on the following three factors.
Plans and Service Contracts
We checked that the companies on our list had a sample contract readily available on their website, and that each of their plans broke down precisely what was and wasn’t covered. Transparency was an important consideration since it gives you, the customer, the chance to see what plan benefits you most, and to read thoroughly through any exclusions and limitations, such as an inclusionary plan adding extra parts as standard. As the most common extended car warranty complaint we found online was the denial of claims due to customers assuming something was covered when it wasn’t, we focused on transparency to help you avoid that mistake.
We also honed in on the following six elements:
- Plan Diversity: We checked that companies had various plans to comply with multiple customer needs, such as an extended warranty for an older vehicle.
- Perks: We checked whether companies offered any extra features with their plans, such as roadside assistance, towing, rental car coverage, oil changes and trip interruption benefits. We also checked the limits of these perks; those that had better-than-average benefits scored higher with us.
- Warranty Transferability: Since it’s relatively common for car owners to sell or gift their cars to friends or family, we made sure that companies on our shortlist allowed transfers of the extended warranty. Since such transfers typically have a fee requirement, those companies that offered the service free of charge scored higher with us.
- Waiting Period and Refund Policies: We checked each company’s waiting period, and made sure the company offered refunds. Most companies offer a 30-day waiting period and refund policy, which they term a “review period, ”during which you can review your plan and make any changes and/or cancellations. However, you should know that canceling your contract after a review period will result in either a partial refund or no refund at all.
- Coverage, Exclusions, and Limitations: Since each extended car warranty plan is different, we looked at all the coverage offered and favored companies with the most comprehensive policies. As exclusions also differ from company to company, we checked that they offered coverage that’s in line with industry norms, including any specific exclusions.
- Notes on Two Terms: There are two specific clauses that contracts usually don’t explain, and they can spell danger if you don’t know what they exclude. These are the “betterment” and “consequential loss” clauses. The former refers to car parts that, if installed, would improve the condition and value of your car — if you add these and they break down, they won’t be covered by your warranty. The latter refers to any damages to a covered car part caused by another part that’s not covered under your plan. If this happens and your contract has a consequential loss clause, then the damaged part (that should be included) won’t be covered.
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Claims and Repairs
Companies that offer extended car warranties either outsource claims or handle them themselves. We found that companies with in-house claims handling have more control over the quality of claim resolutions. While it’s common for extended car warranty companies to allow you to choose your own licensed service provider, some limit these to providers that are within their own network. We preferred companies that allowed you to select your own repair person, and so enable you to search and find the provider you’re truly comfortable with. Finally, we looked at each company’s claim fees, deductibles, and monthly payment plans. Those we chose had offerings of industry standard, and so allow you to choose a deductible that best meets your needs.
Financial backing ultimately determines whether or not a company will be able to guarantee that claims will be paid during the lifespan of your contract. Some extended car warranty companies are well-insured and back their contract themselves, while others depend on third-party insurers to pay for claims. Whichever the case, we made sure that all of the companies we chose were either financially sound or backed by companies that were. To do this, we checked that each company or its third-party financial backer had solid financial scores with financial rating agencies such as A.M. Best and Standard & Poor’s.
Extended Car Warranties FAQs
What is an extended car warranty, exactly?
Despite the name, an extended warranty isn’t a warranty per se, but rather a service contract that goes into effect once the manufacturer’s warranty expires. Third-party companies and car dealers sell these vehicle service contracts, and they offer different plans at varying prices, so you can choose to spend as little as possible for a minimal amount of coverage or go full out for a comprehensive plan.
What are the types of extended car warranty plans?
Typically, extended warranty coverage comes in three main types:
- Powertrain Warranty: This is the most basic plan, covering only those car components that generate power, such as the transmission, engine, and the drivetrain. It’s the cheapest option available, but the least comprehensive.
- Inclusionary Warranty: Serving as a middle-tier plan, inclusionary warranties only cover those parts listed in the contract. Inclusionary warranties work best for those who know exactly which parts they specifically want covered. For example, if you worry that your engine or transmission could break down in the future, but don’t want to go all out with an exclusionary plan, then an inclusionary plan would be your best coverage option.
- Exclusionary Warranty: The most comprehensive option available, these warranties cover so many parts and major systems that providers instead choose to list what is excluded from the warranty. This is also known as “bumper-to-bumper coverage.”
How do warranties differ from car insurance policies?
You may confuse extended car warranties and car insurance. A car warranty covers expenses incurred when your car breaks down and stops working, whereas car insurance is issued by an insurance company and covers your vehicle from other perils, such as accidents, theft, or vandalism. This insurance coverage includes any damages that you may cause to another car owner or vice versa. Also, under laws in almost all states, cars need to have car insurance, while an extended car warranty is optional.
What’s required to make a claim under an extended warranty?
If you read the fine print, among the requirements to be covered under a warranty is to be able to show that a repair was not required due a neglect of regular maintenance. As a rule extended warranty companies require that you follow the maintenance guidelines specified in your car’s owner’s manual. Indeed, if you can’t show proof that you’ve done so, you will be significantly hindered in your ability to access the benefits offered by your extended warranty. Be sure to keep an orderly log of all of your maintenance receipts, as companies will probably ask you for proof that you’ve followed maintenance regiments when filing a claim.
Summary of the Best Extended Car Warranty Companies
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