Extended warranties ... and what they entail

By: Drivers.com staff
Date: 2000-09-14

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Buying a car is a complicated business. If you're shopping around you've probably already made such basic decisions about the model you want, what options to order with it, and how to finance the purchase. However, buyers are often in the final stages of negotiating the deal before the subject of extended warranties is raised.

This apparent contradiction requires some explanation.

All new cars are covered by a manufacturer's warranty that typically lasts for three years or 36,000 miles, whichever comes first. Such warranties often guarantee that the car's engine and drive train are free from defects and cover the costs of repairing or replacing them. Some manufacturers are even extending the length of their limited warranties up to 70,000 miles.

However, given the reliability of the modern automobile, it's extremely unlikely that the engine and drive train won't last for three years. Hence the reason for extended warranties, many of which extend the life of the manufacturer's warranty and cover some additional repairs. Exactly what additional repairs are covered will be specified in the warranty's fine print.

Extended warranties, in fact, are akin to insurance policies . Their coverage begins after the expiration of the factory warranty on a new car, and either adds to or becomes the primary warranty coverage on a used car.

That's right, an extended warranty is usually an excellent idea when buying a used car as a supplement to that offered by the dealer. Extended warranties are frequently offered by the dealers themselves, but many can be purchased from independent companies that specialize in the extended warranty business.

Buying an extended warranty is a personal decision based upon the individual car owner's comfort level. However, the three fundamental questions to ask when debating whether or not to buy an extended warranty are:

• How long do you intend to keep the car?
• What is the price of the extended warranty?
• What is covered under the extended warranty?

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