An auto extended warranty is a good idea if you want the piece of mind that comes with knowing you can drive your car into the ground for an extra couple of years or few thousand miles, but it is important to remember that an auto extended warranty is not an insurance policy and does not work as such. With an insurance policy, you pay the provider a premium so they will provide you with financial coverage in the event of an accident, provided you pay the deductible. With an extended warranty, you pay a dealer or a contracted warranty company to make an agreement with the manufacturer that they will cover certain parts of your car for certain malfunctions over an certain extended period of time. Essentially, extended warranties allow for your car to be covered by the original manufacturer’s warranty for a longer period of time.
When you buy an auto extended warranty, you must remember that it is merely an extension of the manufacturer’s warranty. Most manufacturers’ warranties only cover drive train (engine and transmission) performance and a couple of other related parts, from malfunction due to general wear and tear. Some extended warranties such as the Emerald, Ruby, or Diamond plans do cover more than a traditional warranty. The Emerald and Ruby plans usually only cover parts that fail because of mechanical malfunction while the Diamond plan covers problems associated with general wear and tear. The Diamond plan coverage is best to buy when your car is newer, because many of the problems you are likely to have with your car when it is new will be associated with general wear and tear.
Although the dealership will most likely try to sell you your auto extended warranty, you do not have to buy from them. There are many credible extended warranty companies that will sell you an extended warranty for a better price than the dealership. When you are shopping for an extended warranty, remember that you may be dealing with two separate companies — the ones that sell you your extended warranty and the ones that administer your claims in the event of a repair. You should always fully investigate both the company that administers your claims and the one that sells you your contract. Some companies like Warranty Direct and 1Source Auto Warranty are able to sell their own warranty contracts and administer the claims. Most of the companies that both sell and administer their warranties are large enough to ensure financial security, but that does not mean that they have the best prices or that they will cover all your needs.
You can also buy auto extended warranties for used cars. Although they may be more costly than warranties for new cars, a used car extended warranty is valuable because it may cover some of the problems you are likely to experience from problems an older car may have. Some companies like 1Source Auto Warranty provide coverage of cars up to 102,000 miles.
By Alex Turman
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