Vehicle Service Contract Myths

You’ve probably heard mixed things about Vehicle Service Contracts. We’re here to separate the fact from the fiction, and give you the clear information you deserve.

The dealership where I bought my car is the best place to purchase an extended auto warranty.

In the extended auto warranty business, dealerships are the middleman. They can purchase warranty products from other vendors and offer them to you at a higher price. After all, a dealership is essentially a profit center. They may be an excellent source for the automobile itself, but they are not equipped to offer the same selection of warranty products. And you may need to conduct additional research to be sure that the underwriters who back them have a high rating and history of paying claims.

An extended auto warranty is just what it sounds like: an extension above and beyond the coverage offered by your manufacturer or dealer. By putting a good warranty plan in place, you can protect yourself from the burden of high repair bills.

I can get double coverage for my car by purchasing an extended warranty right away, before the manufacturer's warranty expires.

Yes, it is less expensive to purchase an extended auto warranty early in the life of your car. However, extended warranties begin after the manufacturer’s warranty expires, protecting your vehicle for as long as you own it. Hence, an extended auto warranty is not double coverage for your car; rather, it is assurance that your protection will not lapse when it outgrows its initial warranty coverage. To avoid interruption in coverage, and to get the lowest price, you should purchase an extended warranty early. The longer you wait, the greater the cost.

Once I purchase an extended auto warranty, I can stop caring for my car.

You should always do your part to protect your investment. An protects your car against accident or damage, but not from breakdowns resulting from negligent care. Just as your manufacturer’s warranty requires that you maintain the condition of your vehicle as recommended in the owner’s manual, any extended auto warranty relies on you to keep accurate records and receipts and observe the maintenance schedule. Doing so will ensure your claims are paid easily and that your investment maintains its maximum value.

When I purchase an extended auto warranty, coverage begins immediately.

You should purchase an auto warranty that begins when your manufacturer’s warranty expires, ensuring that you receive uninterrupted coverage and don’t pay extra for coverage you don’t yet need. When you have selected and purchased the plan that’s right for you, call the underwriter directly within 30 days of purchase. The insurance company is solely responsible for paying claims consistent with the terms and conditions. They can guarantee when your coverage begins, and that your application was received and processed accurately.

After my bumper-to-bumper coverage expires, I don't need an extended auto warranty because I still have powertrain coverage.

A powertrain warranty covers a significantly smaller percentage—only about one-fourth —of your car’s components. When your bumper-to-bumper coverage expires, you will be vulnerable to the costs of repair when any of the remaining three-fourths fail. And those parts not covered, such as the suspension, brakes, air conditioning, electrical, seals and gaskets, have a much higher rate of failure. Some powertrain warranties lose effect under transfer of ownership.

To qualify for financing I have to purchase an extended warranty.

Purchasing an extended warranty with your car only increases the amount of your loan, hence the interest you will have to pay. Financing depends on your credit, not your purchase. Instead, consider buying an extended auto warranty from a company that specializes only in warranties. Ask about interest-free financing.

I am covered under my manufacturer's warranty, so I don't need to purchase an extended auto warranty.

Manufacturer coverage lapses over time, but you can protect your car throughout its life by buying an extended auto warranty. An extended auto warranty is not double coverage; it is an extension of coverage. The earlier you purchase, the less expensive it will be. Many such warranties can pay for themselves after a single costly repair, and continue to cover you far beyond that. When you buy an extended auto warranty that is transferable, you also increase the resale value of your car and make it more attractive to potential buyers. If given the option, wouldn’t you choose a car that came guaranteed against repair costs?