Buying a new car is a big financial decision and commitment. On top of the purchase price of the car, you may have additional costs to cover, including an optional extended warranty. While new cars come with a manufacturer’s warranty, an extended warranty provides additional coverage after the original warranty expires. The question is, is an extended warranty worth the extra cost?
Key Points
- A car warranty covers the cost of repairing your vehicle for covered issues over a specific period.
- New cars typically come with a manufacturer’s warranty for a limited time.
- You can buy an extended warranty to provide coverage once the original manufacturer’s warranty expires.
- Be sure to understand exactly what is and isn’t covered under a car warranty to avoid unpleasant surprises.
What Is A Car Warranty?
A car warranty is a binding agreement between you and the manufacturer or dealership that covers the cost of specific issues with the car during a specified period of time. Generally, all new cars come with a 1 to 5-year manufacturer’s warranty, however, there are additional types of warranty for more coverage.
Types Of Car Warranties
Dealerships offer different warranties for different vehicles. Cheaper warranties usually cover basic issues for several months. However, if you don’t mind paying more, you can buy a warranty that lasts for years and covers a whole range of issues.
Common types of car warranties include the following:
Manufacturer’s Warranty
Many cars have a manufacturer’s warranty included with the price, which covers factory defects and simple mechanical problems for a limited period (some brands offer longer warranties than others).
Extended Warranty
Extended warranties typically cost extra but cover different parts of your car, such as the engine or transmission, for longer than a manufacturer’s warranty.
Implied Warranty
Some dealers sell vehicles “as is”, meaning you’re buying the car at your own risk and any necessary repairs or services aren’t covered. Luckily, there are provincial and territorial laws that can protect you against defective products. If you buy a lemon car, you might be able to sue the dealer for costs you’ve incurred due to the poor condition of the vehicle.
What Is Included In A Manufacturer’s Warranty?
Most new vehicles come with a factory warranty that covers repairs and defects for a certain period or mileage limit. Such warranties typically cover the following:
- Bumper-To-Bumper Warranty. Covers most components, except for wear-and-tear items such as tires and brakes.
- Powertrain Warranty. Covers the engine, transmission, and drivetrain components.
- Rust And Corrosion Protection. Protects against rust and corrosion damage for a certain amount of time.
- Roadside Assistance. Some manufacturers offer roadside assistance as part of the warranty during a specific period.
What May Not Be Included In A Manufacturer’s Warranty?
It’s important to understand what may be excluded from coverage under your warranty. The following things are typically not covered under a regular warranty:
- Misuse. Most warranties won’t cover your vehicle if you’re responsible for the problems it’s having. For example, if you’ve driven the car too roughly, left it sitting too long, or haven’t brought it in for regular inspections and servicing, the warranty provider may have grounds to deny your claim.
- Damage From Non-Factory Replacements. If you modify your vehicle and try to claim the resulting damage, you won’t be covered under warranty. The same goes for any repairs that you do yourself. For instance, if you add the wrong type of fluid and ruin your transmission, you may be out of luck with the costly replacement that you need afterward.
- Wear-And-Tear. Regular wear of a vehicle from regular use is not covered under a car manufacturer’s warranty. This can include wear and tear on components such as tires, brake pads, wipe blades, filters, and lightbulbs, among others.
- Accidental Or Environmental Damage. If your car was damaged by a collision, vandalism, fire, flood, or road debris, your warranty likely will not cover repairs from these factors.
How Much Does A Car Warranty Cost?
The cost of a factory warranty is typically included in the price of the vehicle. An extended warranty, however, can range quite a bit in price from $500 to $2,500. The cost of an extended warranty depends on things like the type of warranty, how long it lasts, and the level of coverage.
How Long Does A Manufacturer’s Warranty Last?
The length of coverage for car warranties depends on the type of warranty:
Manufacturer’s Warranties: Factory warranties typically cover 3 years or 36,000 miles, whichever comes first. Extended warranties take effect once the original factory coverage ends.
Extended Warranties: The length of an extended warranty can vary from an additional 2 years/24,000 miles, up to 10 years/150,000 miles.
Considerations To Make When Buying A Warranty For Your Car
A warranty can protect you financially when your car experiences various problems. That said, some dealers pull sneaky tricks to manipulate you into paying more than you should for a useless warranty. Because of this, warranties have gotten a bad rap.
Here are some things to consider before buying an extended car warranty in Canada:
- Read The Fine Print. Always do research before buying a vehicle. That includes reading every part of your contract and finding out where the warranty comes from. Many dealers hire third-party companies that offer warranty packages that don’t fully cover mechanical or electrical issues.
- “Extended Warranty” May Be Misleading. A warranty is a manufacturer’s guarantee that they will repair or replace a defective product within a specific time (included with the car’s price). An extended warranty is a “service contract” that is sold separately for an extra cost and only protects you for a longer period.
- Compare Costs. Review several providers and their plans to see where you can get the best deal.
What Can Cause Your Car Warranty To Be Void?
While a warranty may cover a number of potential issues with the car, there are several factors that can void your car warranty. As the car owner, there are certain things you must do and must not do to keep the warranty agreement intact. Here are some things that can cause your car warranty to be void:
Lack Of Maintenance
Cars generally require regular maintenance to prevent any premature car issues. Skipping the oil changes and other common car maintenance appointments can cause issues with your warranty. For example, if you have car issues because you never got an oil change, your warranty may be void as it may be seen as negligence or misuse.
Total Loss
If your car gets totalled in a car accident, most warranties will not replace the car. The warranty may simply be voided.
Certain modifications to a car that are not authorized may void the warranty. This may include things like adding after-market parts that alter the car’s performance or tuning the engine software.
Car Misuse
If you were driving drunk, racing or breaking the law in some way, your car warranty may be voided as that would be classified as misuse.
A Tampered Odometer
If you’ve tampered with the car’s odometer, your warranty will be voided. Many warranties are tied to the number of kilometres you’ve driven. If the exact mileage cannot be determined due to the tampering, then your warranty may be void.
Things To Ask When Purchasing A Car
Before you buy any vehicle, here are some important questions to ask the dealer:
- Is the warranty included in the price or does it cost extra?
- How long is the coverage period?
- What mechanical, electrical, and bodywork issues does it cover?
- Does the warranty cover replacement parts and servicing fees?
- Where can I go to get warranty-covered repairs?
- What conditions does the warranty feature?
- Can I cancel the warranty? If so, how much will that cost?
- Will the dealer make the repairs or do I have to bring the car elsewhere?
- Who has to finance towing fees if my car breaks down?
The answers to these questions can help you determine if buying a warranty is right for you.
Alternatives To Buying Extended Warranty
While buying an extended warranty may offer some peace of mind, you may want to look into some alternatives to this additional purchase:
- Maintain The Vehicle – Be sure to keep up with regular maintenance so the car stays in good condition. This can help prevent costly repairs.
- Set Up An Emergency Fund – Put some money aside every month to build an emergency fund that you can tap into to cover unexpected repairs rather than pay for an extended warranty.
Should You Buy An Extended Warranty?
Considering the added expense of an extended warranty, it’s important to consider if it’s worth the purchase in your situation. The following chart can help you determine whether you should buy an extended warranty for your car:
| When To Consider Buying An Extended Warranty | When An Extended Warranty May Not Be Worth It |
| You plan to keep your car for a long time. | Your car is very reliable. |
| You put many kilometers on the car. | You plan to sell or trade in your car before the warranty expires. |
| You don’t have an emergency fund to cover costly repairs. | The cost of repairs outweighs the benefit of the warranty. |
| Your vehicle model has a reputation of needing expensive repairs. | You prefer to save up a separate fund to pay for any potential repair costs. |
Final Thoughts
A manufacturer’s warranty might provide you with ample coverage for a new car, but it may not be enough for your needs. In this case, an extended warranty may provide you with additional peace of mind. That said, the decision to purchase an extended warranty depends on your vehicle, financial situation, and long-term plans. If you do decide that an extended warranty is right for you, consider where you buy it from, as other sources offer it besides the dealership.
