Buying A New Car? Do You Need A Warranty?

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Buying a new car can be awesome but there are many different factors and expenses to consider beforehand, like features and add-ons. Do you want tinted windows? What about the latest safety and anti-theft technology? Some cars come fully loaded, others require you to pay for upgrades.

You may also want an extended warranty, which many dealers offer. The problem is, salespeople can be tricky and good at misleading customers into warranties that aren’t the right fit for them.

Learn how to negotiate the price of a new car.

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.

Buying a car? Don’t forget to check your credit score first.

Common types of car warranties include:

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

Also called service or maintenance agreements, extended warranties typically cost extra but cover different parts of your car, such as its 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.

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What To Look Out For When Buying A Warranty For Your Car

Not all warranties are bad. Many can protect you 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’s what you should know about car warranties in Canada:

Beware 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 who offer warranty packages that don’t fully cover mechanical or electrical issues.
Extended Warranty” Is Actually 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’s sold separately for an extra cost and only protects you for a longer period.
Warranties Don’t Cover Misuse – Most warranties won’t cover your vehicle if you’re responsible for the problems it’s having. So, if you’ve driven the car too hard, left it sitting too long or don’t bring it for regular inspections and servicing, many warranty providers will deny your claim.
Warranties Don’t Cover The 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’ll probably be out of luck for the $3,000 replacement that you need afterward.

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What Can Cause Your Car Warranty To Be Void?

While a warranty may cover a number of potential issues with the car, there are a number of things that can void your car warranty. As the car owner, there are certain things you must do and must not do in order to keep the warranty agreement intact. Here are some things that can cause your car warranty to be void:

Car Maintenance – Cars generally require regular maintenace to prevent any premature car issues. Skip[ing 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.
Car Accidents – If your car gets totalled in a car accident, most warranties will not replace the car, it simply will be voided.
Car Misuse -If you were driving drunk, racing or breaking the law in some way, you 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 likely be voided. Many warranties are tied to the number of kilometres you’ve driven. If they’re unable to determine the exact mileage due to the tampering, then your warranty will 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?

Find more questions you should ask your dealer before buying a car.

How To Spot Warranty Fraud

Thankfully, there are ways to spot and protect yourself against fraud and also agreeing to purchase an unnecessary warranty.

Find out if the dealer is certified and has a good reputation
Research your vehicle brand and see if it comes with a factory warranty
Ask for a price quote with and without the warranty (if it costs extra)
Avoid phone, email, software and online offers from suspicious senders
Contact the Canadian Anti-Fraud Centre if you’re a victim of fraud.

Car Warranty FAQs

What’s the difference between a car warranty and car insurance?

While car insurance is mandatory in Canada, a car warranty is not. Car warranties typically cover mechanical issues or defects with the car. They’ll pay for the parts and labour. On the other hand, car insurance will cover the cost of any repairs or damages caused by accidents. It also covers theft and damages due to natural disasters.

Can I buy a warranty on a used car?

Depending on how old and used the car is, it may still be covered under the manufacturer’s warranty. You can also check with your dealership to see if they offer any extended warranty programs.

Can I transfer my car warranty?

Car warranties typically follow the car, as such, if you sell the car it may still be covered with the new owner. For example, if your car warranty is valid till 50,000km and you’ve driven 30,000km, the new owner would still be covered under the warranty for the next 20,000 km.

Watch Out For Unnecessary Warranties

Buying a car can be expensive and annoying, especially if you purchase a warranty that’s not worthwhile. Don’t worry, you can easily avoid warranty fraud if you’re careful and know where to look. For more information about warranty fraud and how to protect yourself against them, contact the Canadian Anti-Fraud Centre.

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Bryan Daly

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and traveling the world in search of the coolest sights our planet has to offer. Bryan uses the BMO Cash Back Mastercard to earn cash back on everything from boring bill payments to exciting excursions. He is also a strong saver, holding both a TFSA and an RRSP account in order to prepare for his future while taking full advantage of tax benefits.