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What is a Car Warranty?

What is a car warranty - featured. Close up of person's hands shielding a small red toy car

Our straightforward guide explains what a car warranty is and what coverage it will offer your vehicle

For most people reading this, your car will be among the most valuable and important things you own. However, between paying for fuel, repairs, and maintenance, it can be often difficult and costly to keep your vehicle on the road. This is why people seek out coverages like car insurance and car warranties, which help mitigate the cost of damage to your car and get you back driving sooner.

Most people will be familiar with car insurance, since it is a legal requirement in almost every state, but what is a car warranty? In brief, while insurance covers damages resulting from accidents, a car warranty covers fixes for parts that break down due to manufacturing faults. Read on below for a more in-depth explanation of what a car warranty is, the different types of car warranty and what kind of coverage is offered when you purchase a policy.

What is a car warranty?

A car warranty is a contract that states that the provider will cover repair costs for your vehicle resulting from manufacturing defects or incorrect installation. There are two main types of car warranty: manufacturer’s warranty and extended car warranty.

  • Manufacturer’s warranty: Also known as new car warranty, this type of coverage comes with most new vehicles sold in the US and is built in to the purchase cost. The manufacturer’s warranty guarantees that the car you purchase is in good working condition and offers coverage for any parts that fail due to defects in their design. Different manufacturers and sellers offer different levels and lengths of coverage with new purchases, with a three-year/60,000 mile warranty (whichever comes first) being the standard.
  • Extended car warranty: An extended car warranty can be purchased to cover pre-owned vehicles or to act as an extension of the original manufacturer’s warranty once it has lapsed. This type of coverage is sold by manufacturers, retailers and third-party warranty companies.

What does an extended car warranty cover and how does it work?

As noted above, an extended car warranty is purchased to cover second-hand cars or vehicles whose manufacturer’s warranty has lapsed and covers repair costs, up to a specified amount, for parts that fail due to manufacturing flaws. Warranty providers generally offer multiple tiers of coverage, with lower-priced plans covering only essential parts and more expensive plans offering more comprehensive coverage. For example, higher-tier plans will offer coverage on costly electrical components and throw in extras like breakdown coverage. Like manufacturer’s warranties, these policies last for a set time period measured in years/miles before renewal.

Once a plan is purchased, customers will pay a premium each month and a deductible each time they claim, which is usually set at around $100 to $500. When making a claim, customers must take their vehicle to a provider-approved auto repair shop, and allow a mechanic to assess the car and liaise with the provider before approving the repair. Once the repair is approved and the deductible is paid, your provider will cover the remaining repair costs and the mechanic will get to work on fixing your car.

Car warranty vs car insurance

As noted briefly above, car insurance and car warranty both broadly offer financial protection against damage to your vehicle, but are ultimately two very different things.

While car warranties are an add-on offered by dealerships, manufacturers and warranty companies, car insurance is a legal prerequisite for any car to be considered roadworthy in most states in the US. The coverage offered by car warranties protects drivers against breakdowns and problems with parts which arise from manufacturing defects or incorrect installation, whereas car insurance covers the cost of financial liabilities and vehicle repairs resulting from accidents and collisions with other road users. More extensive car insurance plans can offer coverage against things like theft, accidental damages, fire, personal belongings and more.

Car warranty vs roadside assistance

Roadside assistance is a service offered by car manufacturers, insurance companies, and specific providers which offers drivers a point of contact and immediate help should they run into trouble in transit. If you have a problem while driving, you’ll simply need to call your roadside assistance provider and they’ll either send someone to your location with the necessary tools to get you back on the road or have your vehicle towed to a mechanic if the problem is more involved. Typical fixes covered by roadside assistance include tyre replacements, fuel refills, jump starts, locksmith services and towing.

For anyone browsing car warranty plans and providers, it is important to note that roadside assistance is typically not included as part of the package, as breakdown cover is a separate form of coverage to an extended car warranty. That said, some premium or more comprehensive car warranty plans do include roadside assistance, which may make them worth considering if you want to be sure you’re covered in the case of an emergency.

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