Find out about the many different car warranty options available.
Consumers may face numerous car warranty choices when purchasing a new or used car. Consumer advocates recommend that consumers research the reliability of their automobile's make and model before choosing a car warranty. Consumers should also familiarize themselves with the different kinds of car warranties: All car warranties are not created equally.
New cars typically come with a manufacturer's car warranty and, occasionally, a dealer's car warranty. The manufacturer's car warranty that comes with a new car is a detailed document that requires the manufacturer to pay for certain repairs for a specified period of time or until a certain mileage number is reached on the car. According to the Federal Trade Commission (FTC), most manufacturers' warranties cover at least 12,000 miles and 1 year. However, the Better Business Bureau notes that manufacturers' car warranties can also differ. For example, a manufacturer's car warranty may be limited or full. A full car warranty -- a warranty in which there is no end time or mileage limit -- is rare. Sometimes, a manufacturer's car warranty will be limited by having a deductible, and the expiration point may also vary. Dealers' warranties require dealers to pay the cost of car repairs or repairs to special add-ons to the car. An additional manufacturer's car warranty may also be available at the time of a new vehicle purchase for specific items connected to the vehicle, according to the Wisconsin Department of Transportation.
Understanding car warranties becomes more complicated when the consumer is purchasing a used car. Some used cars come with the remaining manufacturer's warranty because the expiration year or mileage limit has not yet been reached. Some used car purchasers must pay a cost upfront to activate the manufacturer's warranty. If the used car dealer picks up the cost of the remaining manufacturer's warranty in the car price, it's considered a car warranty. If the consumer is asked to pay an extra cost upfront to obtain the remaining manufacturer's car warranty on a used car, it's generally considered a service contract, not a car warranty, according to the FTC.
Some used cars are sold "as is" without any car warranty at all, although many states have lemon laws to protect the consumer from outright fraud. All dealers must provide purchasers with a buyer's guide for used cars. This information is often presented to the consumer through a sticker on the car. According to the FTC, the buyer's guide should tell the consumer whether the used car comes with a warranty and which repair costs are covered by the warranty. The consumer must receive the car warranty promised in the buyer's guide.
Implied car warranties are usually unspoken promises made to a consumer about what most people would consider to be reasonable standards. According to the Better Business Bureau , consumers should determine which implied warranties are covered by their individual state's laws, as they can differ. Implied car warranties also can vary. For example, merchantability warranties simply mean there is an implied promise to the consumer that the car will run. These implied warranties are not necessarily written down. By advertising a used car as being sold "as is," however, the car dealer can sometimes eliminate an implied car warranty, depending on the state's law.
Consumers can also purchase what is commonly called an extended car warranty. According to the FTC, an extended car warranty is really considered a "service contract," not a car warranty, under federal law. The extended car warranty is a contract that details what repairs will be covered by a dealer, a manufacturer or an independent company at the expiration point of the manufacturer's warranty. An extended car warranty, or service contract, doesn't usually cover everything in the vehicle. These service contracts usually specify which repairs will be covered, and they can become very complicated. They differ from manufacturers' warranties because a manufacturer's car warranty is generally included in the car's purchase price, whereas an extended car warranty requires the consumer to pay extra, often upfront.
According to Consumer Reports, extended car warranties are associated with some concern. Some surveys of car users have found that consumers paid more for the extended car warranty than they earned back from it in covered repair costs. On the other hand, an extended car warranty can make more sense for consumers who are purchasing cars with higher rates of mechanical problems or whose vehicles include expensive extra equipment. The Better Business Bureau says that extended warranties also make more sense if they offer free maintenance on the vehicles at scheduled times. Consumer advocates agree that those considering an extended car warranty should carefully study what a service contract does -- and does not -- cover.
Some state attorney generals have raised concern about mailings that offer consumers an extended car warranty. For example, the Missouri Attorney General's office recommends that all consumers research the typical repairs expected for their model and make of automobile and compare those costs to the price of the extended warranty. Consumers are also encouraged to make sure their manufacturer's car warranty is really about to expire before they sign up for an extended car warranty. The FTC recommends that consumers ask the following questions about an extended car warranty:
According to the FTC, many extended warranties are actually administered by independent companies, not the dealer or manufacturer.
The best protection for consumers is to research the vehicle and to understand the specifics of all the warranty options available to them.