There are some things in life beyond your control. To name a few: death, taxes and head gaskets.
One minute you’re at a drive-through awaiting your Timbits, the next you’re fanning smoke from an overheated engine. If your car doesn’t have warranty coverage, either from the manufacturer or an insurance provider, the $1,200 repair bill might cause you to blow a gasket of your own.
Although warranties are a birthright of all new cars, they’re not all created equal – and they don’t last forever. Enter the extended auto warranty, which covers repair costs once the manufacturer’s warranty has expired (usually after five years) or if the part in question – a head gasket, for example – isn’t covered by the existing warranty.
Most car dealers offer extended auto warranties for new vehicles on the day of purchase, but you can also return later to buy one. Some insurance companies offer the plans as well, for both new and used vehicles. With used vehicles, there are usually a few limitations. For example, the warranty might only cover a car up to seven years old, or with 200,000 km on the odometer – whichever comes first.
The premium you’ll pay is based on age, mileage and model; also whether you’re willing to pay a deductible per claim, how long you want the coverage to last and the level of protection the car qualifies for. These variables can put the price of the extended warranty anywhere from $750 to $2,500.
So who should be considering an extended warranty?
“It’s perfect for someone whose manufacturer’s warranty is about to expire, or has already expired, and who still wants that continued protection,” says Marlene Dickson, southern regional manager of AMA Insurance. It’s also a smart decision for anyone who plans to own the same vehicle for a long time.
On the other hand, an extended warranty might not be a wise decision for serial owners who replace their vehicles every few years, before the manufacturers’ warranties expire. (Though some extended warranties are transferable, so they improve resale value in some cases.)
Another question to consider: how well do you care for your car? Dickson recommends extended warranties for “someone who maintains his or her vehicle quite well, but still wants to protect against potential failure of components.” She adds, “With most warranty plans there are requirements that the customer maintain the vehicle to the manufacturer’s recommendations.” Owners have to take their vehicles in at the first sign of failure, and keep receipts as evidence of proper maintenance.
And what does an extended warranty cover? A better question to ask might be, “What doesn’t it cover?” If you do purchase an extended auto warranty, be sure you’re aware of any exclusions, so you aren’t surprised when you take your vehicle in for a repair and learn the part isn’t covered. In general, extended auto warranties don’t cover cosmetic parts, such as upholstery, or consumable “wear and tear” products, such as brake pads. Warrantors may also have different levels of protection, some extensive enough to include GPS navigation systems, others limited to only the engine, transmission and drive axles.
Dickson advises looking for fine print that answers the following questions: “Where can I take the vehicle to have it repaired? Just in Canada? Just in the United States? How is payment made? Is it a reimbursement or is it pay-direct?” Look into any restrictions on repair facilities, too, because warrantors might limit you to using their dealer shops only.
Above all, says Dickson, consider your past experiences: “Some people will go through years of car ownership and never have a problem; they may not see an extended warranty as an option that will work for them. Others have had one instance that cost them $3,000 or $4,000 – and a warranty would have protected them.”