Extended Warranties Explained

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - May 17, 2018

You may be wondering if an extended warranty is worth your time and money. While it’s not required, extended warranties can come in handy and save borrowers money.

Extended Warranty Basics

Sometimes referred to as a service contract, which it really is, an extended warranty is a form of optional protection that covers certain repair costs after a used or new car is purchased. Extended warranties don’t begin until after the manufacturer’s bumper-to-bumper warranty expires. In order to get an extended warranty, a borrower can purchase it at the dealership when buying the car, after the purchase (as long as it’s before the manufacturer’s warranty is up), and even from a third party. There are many different types of policies available from different providers, and the level chosen determines how much it costs and what is covered. Many extended warranties also include deductibles – an amount owners have to pay before warranty coverage kicks in.

Third-party vs. Manufacturer-backed Extended Warranties

If a borrower is purchasing a vehicle through a private party and wants extra coverage, they’ll need to get a third-party extended warranty, which is also called an aftermarket warranty. These warranties are from independent providers that aren’t directly related to an auto manufacturer. Depending on the provider, the aftermarket warranty can either be paid for in cash, or be paid off in separate monthly installments.

Third-party extended warranties vary, just like manufacturer-backed warranties, but are commonly grouped by names such as:

  • Bronze
  • Silver
  • Gold
  • Platinum
  • Titanium

Bronze is typically the most basic protection option, while titanium is usually the highest. Factors such as the vehicle’s age, reliability, and service history should be taken into consideration when picking out an extended warranty. If a car has a consistently high reliability rating, an extended warranty coverage may not be needed. If the vehicle has a spotty reliability rating and history, drivers may want to consider spending the extra cash to get an extended warranty.

Franchise dealerships are able to sell manufacturer-backed warranties and aftermarket warranties. Each varies, and what one provider is willing to cover may not be the same as the next. A borrower will need to be prepared to ask questions on how long the extended warranty lasts, when it begins, what it specifically covers, if any deductible has to be paid, and how much it costs, and more.

The Choice is Yours

Ultimately, it’s your decision if you want to purchase an extended warranty. Extended warranties may not pay off, but having one if an unexpected repair cost pops up can save you money. It pays to be prepared.

If you’re ready to finance your next vehicle, CarsDirect wants to help. We work with a network of special finance dealers that have lending resources available to help people facing difficult credit situations. Just fill out our online auto loan request form to get started today.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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