Warranties, Extended Warranties, and Maintenance Contracts – Do you know the difference?
By Camron Wilson
Warranties, extended warranties and maintenance contracts might sound as exciting as a trip to the dentist but it is good to know the difference are before heading to a dealership. Had I not spent 10 years working for an American automotive company and consulting with dealerships on a daily basis, I doubt I would know the difference. Hopefully this article will give you a basic understanding so when you sit down in the Dealership’s Financing Department, their hard-sell tactics will feel less like a root canal and more like more like a simple teeth cleaning.
(New Vehicle Limited Warranty) A warranty is included in the purchase price of the car and the coverage timeframe can vary from vehicle to vehicle and brand to brand. A typical warranty timeframe is 3 years or 36,000 miles for bumper to bumper coverage. Basically, this means that if anything on your car breaks before you pass three years from the purchase date of your car or drive more than 36,000 miles; you return to the dealership and they will fix what is broken. This does not, however, include parts that are considered “wear” or “maintenance” items. Examples of wear or maintenance items include tires, brake pads, windshield wiper blades, air filters and oil. Trust me, you don’t want to be the girl that walks into a dealership’s service department and asks if an oil change is covered under warranty.
Warranty repairs have to be completed at a dealership. It doesn’t have the be the dealership where the car was purchased but it will have to be done at a brand specific store so if you own a Toyota you will have to take it to a Toyota Service Department.
In addition to the bumper to bumper warranty there are several other warranties that are regularly included with vehicles such as Powertrain, Corrosion and Emissions Warranties. The bumper to bumper warranty time/mileage limit is set by the manufacturer whereas some of these other warranty’s time/mileage limits are set by State and/or Federal government. For example, Federal Law mandates that certain emissions parts have to be covered for 8yrs/80,000 miles.
Most manufacturers have a copy of their vehicle warranties available online so you can download a copy and know exactly what you will get before you buy the vehicle.
An Extended Warranty (also called; Extended Service Plan, Aftermarket Warranty or Extended Service Contract) is not technically a warranty at all. Getting down to the nitty-gritty, a warranty is included in the purchase price of the vehicle and can not be extended whereas, anything you purchase in addition may look like a warranty and act like a warranty but it is technically a service contract.
Here are some questions to ask yourself to determine if you need a service contract in addition to the warranty:
How long do you plan to keep the vehicle?
Many new car warranties are 3 years/ 36,000 miles. If you are only planning on keeping the vehicle for two years before trading it for the latest and greatest, then you probably don’t need an additional service contract. But if you plan to keep you car until the back seat disintegrates into foam sand which makes a perfect place for an ant farm to take refuge, then you might want to consider buying a service contract. Yes, that anthill lived in my first car…but that is the subject of a whole different article.
How many miles do you drive in a year?
If you drive more than 12,000 in a year then you will hit the mileage end of your warranty quicker than the three years. If you have a long commute or travel a lot by car you can rack up enough miles to out of warranty in less than a year. If you are a true road warrior, you may want to consider an extended service contract and a really good audio book to help pass the time while watching the odometer spin.
How much additional coverage do I need?
Service contracts come in lots of different shapes and sizes and thankfully you don’t have to try them on in a stuffy dressing room with bad lights to figure out which one you need. Just figure out how many years/miles you want the additional coverage, how much deductible you want and determine how much you are willing to pay for the service contract*. Depending on the manufacturer you can get an extend service plan that will cover you for up to 7yrs/125,000 miles. And, if you are financing your new car you can often include the service contract into your monthly payment instead of paying for in one lump sum.
*Just like the purchase price of a car there is usually an opportunity to negotiate price on the service contract.
Should I take the risk and just pay for something if it breaks after the warranty ends?
Of course you can! Adding a service contract to you car is kind of like adding repair insurance to your vehicle, it is there for when you need it but you might not ever need it. You could buy a vehicle that never breaks and if that is the case then I say, “Lucky Lady, lets go to Vegas!”
A maintenance contract or maintenance plan is also a product that you purchase at a dealership and covers the “wear” or “maintenance” items that we discussed earlier like tires and filters. I think the most important question to ask yourself when considering buying a maintenance contract is:
Will I return to the dealership for regular oil changes or tire rotations or will I take it somewhere else to have it serviced?
If you have a place around the corner from your house and you know you will be taking it there for all of your vehicle servicing then you don’t need a maintenance plan. However, if the dealership is close enough to you to make it a convenient servicing option then a maintenance plan might be a good investment for you. I personally like the idea of leaving my wallet at home when I go to a dealership for service work so I am not tempted to buy a new set of rims and a maintenance plan gives me that option. Just like service contracts, there are several of options when it comes to maintenance plans so make sure you know what you want covered and for how long.