Car Warranty, Extended Warranty, & Vehicle Service Contract Defined

                              

Definitions

Car Warranty: Technically speaking, the only true car warranty is the one provided by the manufacturer or factory. These warranties are only available on new cars, and some cannot be transferred to a new owner if the vehicle is sold. These car warranties are commonly referred to as a manufacturer warranty or factory warranty.

Vehicle Service Contract:

This is a contract between a car owner and a company that specifies specific repairs that the company will help pay for and under what circumstances the company will pay for the repairs. Sometimes these contracts have restrictions on where the car can be repaired. These contracts are sometimes referred to as extended warranties.

Extended Car Warranty:

While vehicle service contracts are often referred to as an extended car warranty, legally vehicle service contracts are not considered warranties. Consumers looking for an extended warranty are actually looking for a vehicle service contract.

Because many consumers are familiar with warranty terminology, warranty terms are sometimes used to describe vehicle service contracts. For example, some common types of vehicle service contracts are exclusionary warranties (also called “bumper-to-bumper”), stated component warranties, and powertrain warranties.

Vehicle Protection Plan:

Some companies offer vehicle protection plans. These plans are similar to vehicle service contracts and cover specific car parts and repairs resulting from malfunction.

Mechanical Breakdown Insurance (MBI):

Like an extended warranty, MBI helps cover certain car repairs resulting from malfunction or mechanical breakdown. MBI is typically available for newer cars.

MBI can also be added to a typical auto insurance policy to provide additional protection than just repairs resulting from an accident. MBI policies can also have more flexibility to include certain car parts and can include coverage for more parts than an extended warranty.

Types of Extended Warranties:

Exclusionary warranty:

Also known as bumper-to-bumper coverage, exclusionary warranties cover all car parts except for the items listed in the contract. These warranties offer similar coverage to a factory warranty and are typically only available for newer cars with less mileage.

Stated Component warranty:

This warranty offers medium coverage. Stated component warranties only cover the car parts listed in the contract. Some extended warranty companies offer several different levels of stated component coverage, which allows customers to find a great vehicle service contract that is also affordable.

Powertrain warranty:

These warranties offer the most essential and basic protection for a car. Powertrain warranties typically cover the engine, transmission, and a few other major car parts.

Extended warranty and insurance cost

Pricing for all car warranties, vehicle service contracts, and MBI is based on the following:

  • a car’s mileage
  • a car’s age
  • a car’s make and model
  • the extent of the coverage purchased

Because the pricing varies so much, it’s difficult to pin down even general costs.

Generally speaking, the most expensive place to buy an extended warranty is a car dealership. Purchasing a vehicle service contract independently or adding MBI to an auto insurance policy tend to be more cost-effective for consumers.

Consumers should contact extended car warranty companies and insurance companies directly to learn more about product costs for their car.

Payment plans

Some car warranties and vehicle service contracts require consumers to pay for the entire warranty or contract upfront, which is why some consumers prefer to purchase MBI instead.

However, extended warranty companies, like Coverage Insurance!, permit their customers to set up an interest-free payment schedule that fits their budgets.

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