If the phrase “extended car warranty” sends a chill down your spine and brings back bad memories of robocalls warning that your coverage is about to expire, you’re not alone.
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you → send → robocalls
Years of unsolicited calls, texts and official-looking mailers have made the product category almost synonymous with scams.
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category → look → scams
But that doesn’t mean every extended warranty is a rip-off.
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warranty → mean → ?
Automakers, dealerships and independent companies like CarShield sell legitimate vehicle service contracts that can cover certain repair bills after a manufacturer’s warranty expires.
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warranty → sell → bills
The challenge is figuring out whether the contract you are being offered provides useful protection or simply adds another expense to owning a car.
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you → figure → car
The first thing to understand is that what people commonly call an “extended warranty” often is not technically a warranty at all.
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call → understand → what
A manufacturer’s warranty generally comes with a new car and promises to repair certain defects or malfunctions for a specified period or number of miles.
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warranty → come → miles
And when you buy a car from a dealership, you can also often buy an extended warranty for the same coverage.
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you → buy → coverage
A vehicle service contract, on the other hand, is an optional product you buy separately.
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you → buy → hand
The company providing the service contract agrees to pay for certain repairs or services described in the contract.
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company → provide → contract
For some drivers who are planning to keep a vehicle for years after its original warranty expires and who may face a greater chance of repairs as the car ages, an extended service contract could ultimately save on repair costs.
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contract → plan → costs
The key to getting a fair deal with a vehicle service contract is to consider the contract’s price, what repairs it covers, how long you expect to keep the car and how you expect to use it.
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you → get → it
A service contract can pay some repair costs beyond what a manufacturer’s warranty covers or after that warranty ends, but it does not mean every breakdown will be covered.
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breakdown → pay → what
In some ways, a service contract is like an insurance policy: For folks who have the money to pay for the contract but who don’t have the money to cover a large repair bill, paying monthly installments may hedge against greater financial uncertainty.
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paying → have → uncertainty
That protection still has to be worth its cost.
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protection → have → ?
The Federal Trade Commission (FTC) recommends comparing the price of a service contract with likely repair costs and considering whether setting money aside for repairs could be a better alternative.
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setting → recommend → repairs
Contract prices can range from several hundred dollars to several thousand dollars, according to the agency.
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prices → range → agency
Coverage also makes less sense when it duplicates protection you already have.
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you → make → protection
New cars usually come with manufacturer warranties, and used cars may sometimes have factory warranty coverage remaining.
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cars → come → coverage
The most important thing to keep in mind is that few vehicle service contracts cover every repair.
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contracts → keep → repair
Some exclude wear-and-tear items or problems related to maintenance, while others cover only components specifically listed in the agreement.
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others → exclude → agreement
Routine expenses such as oil changes and tires are also commonly excluded.
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expenses → exclude → changes
Some common caveats in a vehicle service contract include:
- Exclusionary Lists: Many contracts only cover a highly specific list of parts.
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contracts → include → parts
If a broken part is not explicitly named in the contract, it is not covered.
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it → name → contract
Look for “bumper-to-bumper” plans, which cover everything except a small list of exclusions.
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which → look → exclusions
Providers will deny claims if they determine the problem started before you bought the contract.
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you → deny → contract
They may require a waiting period (in time or miles) before coverage officially starts.
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coverage → require → time
- Strict Maintenance Requirements: You must follow the manufacturer’s exact maintenance schedule (like oil changes and fluid flushes) and keep meticulous, dated receipts.
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You → follow → receipts
Reddit is full of customers who were denied service because they couldn’t prove regular maintenance.
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they → deny → maintenance
Contracts rarely cover parts that naturally wear out over time.
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that → cover → time
This includes brake pads, belts, hoses, tires, wipers and clutches.
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This → include → pads
Some contracts even deny coverage if a covered part fails because of a non-covered wear-and-tear item.
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part → deny → item
If you use your vehicle for Uber, Lyft, door-to-door delivery, or commercial business, the contract is usually void unless you pay extra for a specific commercial rider.
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you → use → rider
Your deductible might apply per visit or per component.
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deductible → apply → component
If it is per component and your mechanic fixes three different things during one visit, you may have to pay your deductible three times.
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you → fix → visit
- Prior Authorization Rules: You cannot just have a mechanic fix your car and send the bill to the contract company.
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mechanic → fix → company
The repair shop must call the provider and get an official authorization code before doing any work, or the claim will be denied.
Those provisions can determine whether a contract that looks comprehensive on the sales sheet pays what you expect when your car is in the shop.
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car → call → shop
It’s important to remember that the dealership selling the contract may not be the business making coverage decisions.
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dealership → ’ → decisions
Many service contracts are administered by independent companies that determine whether a repair qualifies for payment.
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repair → administer → payment
Before you sign anything, do your homework and find out what you can about the company offering the coverage.
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you → sign → coverage
…and 17 more, not listed.
The Aporia
