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Extended Warranty-Aftermarket Warranty

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Knowledge Center, Articles
November 4, 2016 
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The question that is often asked about aftermarket warranties is whether they cover the transmission, and if so, is the coverage sufficient to pay the cost of having the transmission replaced or rebuilt, if needed.  The answer is; "some do and some don't" - it all depends on the type of coverage you purchase. 

Types of Aftermarket (or Extended) Auto Warranties

There are three main categories of aftermarket auto warranties, Bumper to Bumper, Powertrain and Stated Component.

Bumper-to-Bumper Auto Warranty
A bumper-to-bumper warranty does not actually cover everything from the front bumper to the rear bumper - nor does it cover the bumpers.  However, a bumper to bumper auto warranty is the highest level of auto warranty coverage you can purchase after the manufacturer's warranty expires.  Typically, bumper to bumper coverage is only available for newer vehicles with 50,000 or fewer miles.

You might also hear a bumper to bumper warranty being referred to as an  exclusionary warranty.  This is because the warranty covers more of the vehicle than could be realistically listed in the agreement, thus it is easier and less confusing to list the parts that are excluded (not covered) under the warranty than to list everything that is covered.  Bumper to bumper extended auto warranties are typically the most costly simply because they provide the widest coverage.

Powertrain Auto Warranty
A Powertrain aftermarket auto warranty covers exactly what it says; the vehicle's powertrain.  In a rear wheel drive vehicle, the powertrain includes the engine, transmission, drive shaft, rear differential and wheel axles.  In a front wheel drive vehicle, the powertrain includes the engine, transaxle and drive axles, or half-shafts. 

Basically, a powertrain warranty covers the parts of the vehicle that are the most costly to repair when something goes wrong.  Depending on the vehicle year and make, the cost to replace a blown engine or a failed transmission can easily reach in the thousands of dollars.

Owners of mid to high mileage vehicles typically opt for a powertrain warranty over the other options.  These warranties are more reasonable in terms of cost because of their limited coverage.  But, for the vehicle owner, the coverage is for the most crucial and costly parts of the vehicle - so it can be a good fit under the right circumstances.

Stated Component Auto Warranty
A stated component auto warranty covers only the parts of the vehicle that is listed (or included) in the coverage agreement.  Also called an �inclusionary� warranty, these policies typically cover most of the major parts of the vehicle as well as many of the smaller components.  The nice thing about a stated component warranty is that there is no gray area of coverage; if a part of the vehicle is not specifically stated as being covered in the contract - it�s not covered.

Owners of vehicles with between 50,000 and 100,000 miles typically choose a stated component warranty because it is more similar to a bumper-to-bumper warranty in terms of coverage. 

Tips on buying an aftermarket warranty for your vehicle(s)

1. Determine the value of your vehicle.  When considering an extended warranty for your vehicle, do some research to determine the resale value of the vehicle.  In most instances, it does not make sense to buy an extended warranty  if the cost for coverage is near to, or greater than, the value of the vehicle.

2. Determine Your Desired Level of coverage.  Take a few minutes to think about what you want to accomplish with an aftermarket warranty.  In other words, try to determine the level of coverage that would be the most beneficial to you and your situation.   A review of your vehicle's repair history might give you some indication as to what to expect down the road.  Also, consider your financial situation - maybe you feel comfortable paying for the small repairs out of your pocket and getting coverage only on the big ticket repairs such as the engine and driveline components.

3. Comparison Shop.  Once you know the value of your car, pick-up, van or SUV and you have a good idea of the level of coverage you feel most comfortable with then it's time to do some comparison shopping.  You'll want to visit several provider's Websites to compare the different offerings, pricing, etc.

4. Read the contract.  The only way to know whether the plan you have chosen will provide the coverage you want is by reading the contract.  We recognize that most contracts are lengthy and not written in easy to understand language but it is crucial that you read it.  So, be sure to read the agreement from beginning to end.

Extended Warranty FAQs

Q: How much do extended warranties cost?
A: The main components that determine the cost of an extended warranty is the year, make, model and mileage of the vehicle being covered and the level of coverage (or warranty plan) you choose.  You should obtain quotes from several providers before making your final decision.

When obtaining quotes from different extended warranty providers, be sure you are comparing apples and apples.  In other words, for the price comparison to be of any value, the warranty plans must have the same coverage and deductible.

Q: What's covered?
A: Coverage depends of the warranty plan you choose, which can range from a bumper to bumper plan or a more specific plan like the engine and drivetrain only.  You will need to decide what is important to you and then consider the pricing for the different levels of coverage before making a decision.

Q: Is there a deductible?
A: Yes, a typical deductible amount is $50 but higher deductibles are normally available.  Choosing a higher deductible, a $100 deductible for example, will be considerably less costly than the same warranty coverage with a $50 deductible.

Q: How does cancellation of an extended warranty work?
A: Normally an extended warranty plan can be cancelled within 30 days for a full refund.  Plans can be cancelled after 30-days for a pro-rated refund for the unused portion of the plan.

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