A car warranty, also known as a vehicle service contract, is a contract between a car owner and a company, often the car dealer or manufacturer, that covers repairs within a specific period or mileage. It is not insurance and does not cover accidents, theft, or damage caused by natural disasters. It is a strategic financial choice that may give peace of mind but might not pay for itself. Auto insurance, on the other hand, covers damage to your vehicle and protects you from the cost of sudden accidents caused by someone else.
Characteristics | Values |
---|---|
Definition | A promise to fix certain defects or malfunctions during a specific timeframe after you buy a vehicle |
Who provides it | Vehicle manufacturers, dealers, or independent companies |
Who it's for | For new or used car buyers |
What it covers | Repairs within a specific period or mileage |
What it doesn't cover | Theft, damage caused by natural disasters, or vandalism |
Cost | $1,500 to $4,000 |
Types | Powertrain, inclusionary, and exclusionary |
What You'll Learn
What is covered by a car warranty?
A car warranty, also known as mechanical breakdown insurance (MBI), protects you from repair bills if your car breaks down due to a mechanical or electrical fault. It covers the costs of parts and labour following the mechanical or electrical failure of components. This includes the engine, fuel pump, or radiator, which can be very expensive to repair.
Warranties can be supplied or sold by manufacturers, retailers, third-party car warranty providers, and insurance companies. They usually last between three and seven years, depending on the manufacturer, and some may also cover up to a certain mileage limit (e.g. 60,000 miles). Most new cars will come with a three-year warranty as standard.
Different warranties will cover different problems, so it is important to understand the terms and conditions of the policy. A basic warranty will cover issues with the car's engine and transmission, while more comprehensive policies will also protect parts like the steering, suspension, brakes, and ignition system. Some warranties will also include cover for damage to the car's paintwork and even general wear and tear. For example, if your warranty covers wear and tear, it could include damage to the wheels, tyres, exhaust, or air conditioning.
It is important to note that not all components within a car are included in a warranty, and there are several exclusions. Warranty policies tend not to include consumable or "wear and tear" items such as tyres, batteries, windscreen wipers, brakes, and clutches. Additionally, most warranties will be invalidated if you make any modifications to the car, including major changes such as a supercharged engine or a new exhaust system, or even minor changes such as spoilers or tinted windows.
Furthermore, to keep your warranty valid, you must adhere to the manufacturer's maintenance and servicing requirements, as outlined in the handbook. This includes regular servicing and maintaining the car according to the manufacturer's recommendations. Failure to do so may result in your warranty being voided if something goes wrong with the vehicle.
In summary, a car warranty provides valuable protection against unexpected repair costs for mechanical or electrical faults. The level of coverage will depend on the specific warranty plan chosen, and it is essential to understand the terms, conditions, and exclusions of the policy before purchasing.
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What is not covered by a car warranty?
A car warranty is a repair contract that limits a car owner's financial risk for a set period. It is not insurance and does not cover accidents, abuse, or normal wear and tear.
- Consumable items, routine service, and maintenance.
- Gradual deterioration through use.
- Accident or impact damage.
- Burnt-out components caused by negligent driving.
- Servicing (e.g. oil changes) or consumable items or fluids (e.g. anti-freeze).
- Cosmetic or interior damage, such as chipped plastic and tears in seats.
- Exterior damage, such as paint marks or scratches.
- Vehicle parts that wear out regularly, such as brake pads, batteries, windows, and tires.
- Routine maintenance, such as tune-ups, belt and hose replacements, and tire rotations.
- Abnormal use, such as aftermarket parts, towing beyond the vehicle's limits, off-road driving, or racing.
- Acts of nature, such as damage caused by weather or natural disasters.
- Pre-existing faults or damage.
- Manufacturer recalls.
- Modifications to the vehicle, including custom aftermarket parts or other custom modifications.
- Corrosion or rust that occurs on internal parts or parts hidden within the vehicle, unless due to an accident or negligent driving.
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How does a car warranty differ from car insurance?
A car warranty and car insurance are both protection plans for your vehicle, but they differ in several ways.
A car warranty is a contract between you and the car manufacturer or dealer that covers repairs to your vehicle within a specific period or mileage. It is designed to protect you from costly repairs due to mechanical breakdowns or component failures. A warranty will cover the cost of replacing or repairing defective parts and, in some cases, may also include maintenance. However, it's important to note that a warranty does not cover accidents, theft, or damage caused by natural disasters.
On the other hand, car insurance is a legal requirement in most states and protects you financially in the event of an accident. It covers damage to your vehicle, medical bills, and property damage if you are at fault in an accident. Car insurance also provides coverage for theft, natural disasters, and vandalism. While car insurance is mandatory, a car warranty is optional but highly recommended, especially for older vehicles no longer covered by the manufacturer's warranty.
Another difference lies in the scope of protection. A car warranty covers mechanical failures and breakdowns, while car insurance covers expenses arising from accidents, such as repairs, medical bills, and liability. Additionally, car warranties often have term or mileage limits, whereas car insurance provides continuous coverage as long as you pay the premiums.
In terms of cost, the average extended car warranty can range from $2,000 to $4,000, while full-coverage car insurance averages around $1,190 per year. It's worth noting that the cost of both can vary depending on factors such as the vehicle, age, driving record, and location.
In summary, while both a car warranty and car insurance offer financial protection for your vehicle, they serve different purposes. A car warranty focuses on mechanical issues and repairs, while car insurance provides coverage for accidents, liability, and related expenses.
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What is the average cost of a car warranty?
A car warranty, also known as a vehicle service contract, is a contract between you and a company, often your car's dealer or manufacturer, covering repairs within a specific period or mileage.
The average cost of an extended car warranty is around $4,000, with prices ranging from $2,000 to $5,000. The cost of an extended car warranty depends on several factors, including the level of coverage, the provider, the vehicle's make and model, and its age and mileage.
The average monthly cost for extended car warranty coverage is $135, while the average rate per year of coverage is $1,330.
Some providers, such as Endurance, offer flexible payment plans to suit different needs and budgets. It is recommended to shop around and compare quotes from multiple providers to find the best option.
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How to choose a car warranty provider?
When choosing a car warranty provider, there are a few key factors to consider. Firstly, it is important to assess your own needs and preferences. Consider the level of coverage you require, your budget, and the age and condition of your vehicle.
Once you have a clear understanding of your requirements, you can begin researching warranty providers. Look for companies that offer plans with the coverage options you need and compare their prices. It is also worth checking online reviews from customers to gauge their experiences with the provider and their claims handling process.
Additionally, pay attention to the waiting period and mileage restrictions associated with the warranty. Some providers may require your vehicle to be below a certain age or mileage threshold to be eligible for coverage. It is also common for warranties to have a waiting period of around 30 days or 1,000 miles before you can request service, so be sure to factor this into your decision.
When evaluating warranty providers, also inquire about their network of approved repair facilities. Ensure that there are authorized mechanics or dealerships located conveniently near you. This will make it more convenient when you need to have repairs or services performed.
Finally, read the fine print of the warranty contract carefully before making a decision. Understand what is covered, what is excluded, and any conditions that may void your coverage. Also, look for additional perks or benefits offered, such as roadside assistance or rental car reimbursement, which can provide added value to your warranty.
By following these steps and considering your own unique circumstances, you can make an informed decision when choosing a car warranty provider that best suits your needs.
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Frequently asked questions
A car warranty is a contract between you and a company, often your car's dealer or manufacturer, covering repairs within a specific period or mileage.
Car insurance covers damage to your vehicle and protects you from the cost of sudden accidents caused by someone else. A car warranty, on the other hand, covers repairs and replacements required beyond the initial manufacturer's warranty.
A car warranty covers defects or damage that occurs during regular use and can’t be considered normal wear and tear. It pays to replace defective parts and covers labour.
A car warranty does not cover normal wear and tear, damage caused by accidents, theft, weather, or similar factors that have nothing to do with the quality of the car.
The cost of a new car warranty is built into the price of a new car. An extended warranty, however, can cost anywhere from $1,500 to $4,000, depending on the provider and level of coverage.