An extended service contract (also called an extended warranty covers the cost of certain repairs after the vehicle’s original manufacturer warranty expires.  It is essentially an insurance policy against repair bills.  Extended warranties can be purchased for both new and used cars (depending on the age and mileage). 

The cost of the warranty depends on the type of car, its age and mileage, and the level of coverage.  Warranties for Asian cars (Honda, Toyota, etc.) are the cheapest, and warranties for high-line, European cars (BMW, Mercedes, etc.) are usually the most expensive due to both repair costs and reliability.  Three “tiers” of extended warranties are typically offered, depending on the level of coverage you desire.  The lowest tier covers the basic, power train components, such as the engine, transmission and drive axle.  The middle tier typically covers your brakes (including ABS), A/C, steering and basic electrical components (not including navigation or DVD systems).  The top tier is usually a bumper-to-bumper warranty that covers almost everything except normal wear-and-tear components (tires, wiper blades, etc.) and after-market parts.  Coverage for navigation and DVD systems may be extra.  Contracts known as “wraps” are common for vehicles like Hyundai and Kia, which have longer factory warranties for their powertrain components.  These wraps extend the “bumper-to-bumper” warranty to equal the term and mileage of the longer powertrain warranty.

Every warranty is different, so be sure to get a comprehensive list of what is covered, what is excluded, and any deductibles and proof-of-maintenance requirements before you sign.  Some contracts cover the cost of towing, rental car and even hotel stays, but others do not.  Some contracts have a per-part or per-incident deductible of $50, $100 or $200, others have no deductible.  Also check where you can get the repairs done, and how the shop will be paid.  A good warranty will have many authorized repair shops across the country, including both independent shops and franchised car dealers.  The repair shop should contact the warranty company for authorization prior to making any repairs, and the shop should bill the warranty company directly for the repair costs.  Finally, the company that backs the service contract (and the re-insurer who backs them) should be financially sound and have a strong track record in the industry.

But, are extended warranties worth the money?  That depends on several factors.  People who buy and trade cars frequently or lease should pass on an extended warranty. There’s no need to purchase one if you only plan to keep the car for three or four years since repairs are covered under the car’s original warranty.  If you plan to keep the car longer and you don’t like surprise expenses, then an extended contract might be a good option - but only if you don’t pay too much for it!  Women’s Automotive Solutions offers service contracts through third party vendors that are comparable to the top quality warranties offered at dealerships, but at a significant discount. 

While you should not select a warranty solely on price, if the coverage and quality are the same, why not save some money!  And you don’t have to rush your decision.  Most warranty companies allow you to sign up after you have purchased your new or used car or even after the original manufacturer warranty has expired.  However, it is significantly cheaper to buy an extended warranty before the manufacturer warranty expires.  If you prefer to buy the warranty from the dealer, then negotiate the price as a part of the deal. 

Don’t get forced into buying an extended warranty!  If a warranty company calls you and tries to pressure you into buying a warranty on the spot - beware!  Some of these companies are not legitimate!  Always check out warranty companies with the Better Business Bureau and research them online before you buy.  Buying an extended warranty is your decision and yours alone.