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How Does an Extended Warranty Work?

Extended warranties are service contracts that you can purchase for your vehicle to provide extra financial security when your vehicle needs servicing or repairing. They are not included in the price of your vehicle, and they do not take effect until after the manufacturer’s warranty expires. Take a look at these important things to consider if you’re thinking about adding on an extended warranty to your vehicle.How Does an Extended Warranty Work?

Who’s Backing Your Extended Warranty?

You can purchase an extended warranty for your car at the time of purchase through the dealership or through an independent company after you buy your vehicle. When you purchase your vehicle at a dealer, you may be able to add on an extended warranty for an additional cost. Extended warranties backed by dealerships can be more expensive yet more reliable than many extended warranties backed by independent companies.

A warranty through an independent company is called a third-party warranty. You can purchase a third-party warranty for some, but not all, vehicles any time in between the time of purchase the expiration of the manufacturer’s warranty.


Whether you’re purchasing your extended warranty through a dealer or independent company, make sure that you’re fully aware of everything that your warranty does and does not cover. For example, some extended warranties only cover a portion of your vehicle, such as the engine and drivetrain. Others may cover your vehicle all the way from bumper to bumper.

Another relevant example is whether your warranty only covers a certain type of damage, such as breakdown damage or wear and tear damage. If your warranty only covers breakdown damage, then it only covers the costs associated with repairs from parts that break. Many car repairs are due to wear and tear, however, so you may want to opt for a warranty that includes both types of repair coverage.

Important Considerations

In addition to the considerations already discussed, there are a few more important things to consider before purchasing your extended warranty.

  • Does your vehicle already come with a warranty?

If you purchase your vehicle from a dealership, there’s a good chance that it already comes with some type of warranty. Check into the details of the warranty that comes with your vehicle. If you find that it doesn’t cover everything that you want in a warranty, or if it doesn’t last for as long as you’d like, consider adding on an extended warranty.

  • How long are you planning on keeping your car?

How long you plan to keep your vehicle is also a major factor when deciding whether an extended warranty is right for you. If your vehicle already comes with a three year or 36,000-mile warranty, and you are only planning to keep your vehicle for a few years, purchasing an extended warranty won’t be of much use to you. In this instance, you’re essentially paying more money for a warranty that won’t even kick in until you’re planning to sell your vehicle.How Does an Extended Warranty Work?

  • Is your warranty transferable?

This is especially relevant for those of you planning to sell your vehicle in the future. Purchasing a warranty that is transferable means that you can transfer it into the name of the vehicle’s next owner. This makes your vehicle much more appealing to many buyers.

  • Where can you get your car serviced?

Many extended warranties come with a stipulation that you can only have your vehicle repaired at certain shops. It’s always best to opt for a warranty that includes multiple options in a variety of places, especially in the event that your vehicle needs repairs when you are far from home.

  • Is there a deductible?

Consider the details of the deductible associated with your vehicle’s repairs. Some warranties entail a per-visit deductible, while others require per-repair deductibles. Per-repair deductibles are less desirable and more costly since you may need three repairs in one visit, thereby tripling the cost if you had a per visit deductible.

Fred Beans has proudly been providing the greater Philadelphia, PA, area for decades with vast selections in used vehicles. Give us a call to schedule your test drive!