An extended warranty — also known as an auto service contract or mechanical breakdown insurance — pays for certain repairs beyond your car’s manufacturer or original warranty. These plans typically cover the engine, transmission and powertrain. Some offer additional coverage such as prepaid maintenance or tire protection, though these may come at an extra cost. They can be offered by a dealer, third-party company or even the manufacturer. Typically, buyers must front the full fee for an extended warranty at the time of sale, though some dealers allow new-car buyers to roll the initial cost into their overall loan or financing terms.

An extended car warranty can be a good idea for some drivers, especially when they have limited savings and want to avoid the financial stress of paying for major automotive repairs out of pocket. However, it’s important to understand the fine print and comparison shop before purchasing a plan. These warranties vary in price, coverage options and length of term. Some include a deductible, while others don’t. Whether or not you can transfer the plan to a new owner is another crucial factor to consider.

Buyers should also note that some extended warranties can be misleading, as they do not always cover the same things as the original factory warranty. Some companies sell these warranties without a license to do so, meaning their policies are not fully backed by the manufacturer. Moreover, they often restrict where the car can be repaired and have a wait period before coverage kicks in. Additionally, they may only cover certain parts or systems of the vehicle and exclude wear items such as tires or oil changes.

If you decide to purchase an extended warranty, make sure it comes from a reputable provider with a high rating and a customer satisfaction guarantee. Consumers should also compare prices for similar coverage between providers and check if the policy includes any cancellation or termination fees. Lastly, make sure the policy has an effective date, a deductible and a maximum repair cost per year or mile.

In addition to being an excellent way to increase resale value, extended warranties can help car owners save money by eliminating some of the risks associated with car ownership. Those risks can include the potential for unforeseen repairs and the need to replace or rebuild vehicles after accidents or flood damage. Buying an extended warranty can provide peace of mind and reduce the anxiety that comes with car ownership for many drivers, which may be worth it if it helps alleviate the risk of large expenses down the road. However, it’s important for consumers to weigh these costs and benefits before deciding on this option. For example, some extended warranties can have a deductible, which means you would need to pay up to $200 for covered repairs before the plan kicks in. This can add up, and it’s best to keep this in mind when comparing pricing. car extended warranty