6 Tips for Comparing Extended Car Warranty Providers

New cars come with a manufacturer’s warranty that should cover your repair expenses for up to seven years. However, if you intend to keep your vehicle for longer than that, you might have to get an extended warranty. This is to keep you from draining your savings account and banking on your credit card if your car breaks down. An extended car warranty will also give you peace of mind when buying a vehicle that is a few years old.

Buying an extended car warranty is not always easy. There is a wide range of warranty packages available in the market, and you will want to examine each one of them to make sure you’re getting the right coverage. You’ll also want to make sure that you are working with a reputable service provider.

We’ve rounded up six tips to help you choose among numerous extended car warranty providers and settle for the right coverage.

Cost Comes First

Cost is the first thing you should consider when picking out an extended car warranty provider. If you’re looking to protect your vehicle long-term, you may need to look for a good bargain. That said, you don’t always have to get an extended car warranty from the same dealer you bought your car from. Dealerships may hike their prices knowing that you’re more likely to buy from them. Ask for a quote on their extended auto warranty offerings and then compare their prices to the dealer’s competitors until you find a perfect deal.

On average, extended car warranties cost about $2,800. Instead of setting constant rates, third-party providers and manufacturers use different factors to determine your rates. These include your vehicle make, mileage, model, and your age.

It’s easy to compare the total cost of an extended warranty from one company to another. But how much can you afford to pay every month? For instance, you could pay off a $2,800 plan in 16 monthly installments of $150 or $100 over 28 months. It’s all up to you to decide if you want to pay off your auto warranty earlier or if you want to pay low monthly installments.

Flexible Deductibles

The deductible is the amount you pay out of pocket to cover an insured loss. It can either be a percentage of the total policy cost or a specific dollar amount. It’s a way in which you and your insurer share the risk.

Policies with high deductibles have lower monthly premiums and vice versa. You have to be careful with some warranty providers, though. They’ll bill you a deductible per repair item and not per repair visit. A per-repair visit means that you’ll pay the deductible amount once per visit, no matter how many items you’re going to repair. A repair per item means that if you have a $200 deductible and want to fix two covered items, you will have to pay a total of $400.

You might also want to choose a company that gives you the liberty to decide on the amount of deductible that you’d like to pay.

Make Sure You’re Paying for the Right Coverage

There are two types of extended car warranties: powertrain and bumper to bumper. Powertrain warranty covers the engine transmission, driveshaft, and drive axle. A bumper-to-bumper warranty doesn’t usually cover all components in between the bumpers.

You should read the fine print rather than the quote to ensure that you have excellent bumper-to-bumper coverage. Check to see which components are covered and which ones are excluded. Most extended auto warranty providers will use different price scales for different policies. So you’ll want to make sure that you’re getting what you want for the amount you are willing to pay.

Transparency

Is your company of choice open about the plans they offer? Check their website to see whether you can find a sample contract along with their pricing. If not, then you should perhaps think twice before you buy your warranty from them. Also, providers that require you to make an in-person visit or a phone call to get a quote are always less transparent than those who give you quotes upfront online.

Positive Reviews From Third-parties

Look online for endorsements and ratings from automotive experts. Partnerships with well-known brands and positive reviews from real people are signs of trustworthiness and a good reputation. If you cannot find any reviews online, you should be concerned about the company’s credibility. Legit businesses usually provide a platform for their clients to review their products or services. Look at CarShield reviews, for example.

Platforms like Trustpilot, BBB and Yelp are also excellent places to look for reviews. Strong ratings from the Better Business Bureau indicate timely problem solving and effective communication.

Sound Financials

Your ideal company might have ticked all the above boxes except for financial stability. In this case, you might just have to drop it. How will it pay for your claims when it can hardly sustain its daily operations? Make sure it’s publicly listed and that it’s been recently audited by a trusted firm. Some companies hire underwriters to keep their operations in check. It’s best to check if those underwriters are rated by reputable companies.

Bottom Line

One of the most common mistakes that car owners make when buying an extended auto warranty is engaging the wrong company. You should review the fine print before signing any contracts (not the pamphlet or brochure). Know your plan and ask for clarifications to determine if it’s worth the purchase. And most importantly, look online for signs of shady business. You don’t want to work with a company with a poor reputation and a feeble financial base.