When purchasing their new vehicle, consumers often don’t realize that they are purchasing a machine and that all machines will require repairs. Any problems that occur after the warranty has expired are the responsibility of the consumer, which could be very expensive, depending on the type of problem.
You may choose to lease for longer terms to keep monthly payments as small as possible. In this case, an extended warranty is highly recommended to eliminate the risk of financial surprises.
Types of warranties
New-car warranties generally come in two parts: a "the Basic" ("bumper to bumper") warranty, and a "powertrain" warranty, which often covers a longer period of time than the general warranty. There may also be separate warranties for rust corrosion, emissions system, restraint system, tires, and battery. The Owner's Manual for the vehicle will spell out these coverage’s.
Basic warranties are typically for 3 years or 60000 kilometers from the original in service date whichever comes first. These warranties cover just about everything on the vehicle that is not covered by another warranty. They don't cover normal wear-and-tear items and other items that are specifically listed in their "exclusion" clause. Since all manufacturers' warranties are different, you should consult the Owners Manual that comes with your car, or contact the manufacturer directly to understand your coverage.
Powertrain warranties are usually for a longer period, say, 100,000 kilometers or 60 months from the original in service date, and cover the engine, transmission, transaxle, and drive system — parts related to getting power from the engine to the drive wheels. Again, coverage varies by manufacturer. Just remember that after your general bumper-to-bumper warranty expires, only the powertrain warranty is in effect, which only covers a relatively small portion of your vehicle.
Extended warranties
We are all aware that vehicle repairs are expensive, inconvenient, and that most problems will typically occur after the manufacturer's warranty has expired.
An extended warranty is especially important if you are leasing your car for a term that exceeds the number of months in your car's "bumper-to-bumper" general warranty coverage. You don't want to have major expenses repairing a car that doesn't belong to you.
This is where extended warranty companies come in. They typically offer equal coverage to a factory basic warranty in most cases, including wear-and-tear coverage, and include rental car reimbursement, and roadside assistance. Buying the extended coverage when you acquire your new car can save you money (prices generally increase with time and age of your car).
Choosing an extended warranty company
Since warranties are their business, the success of any extended warranty company depends on having satisfied customers and having a good business reputation.
The worse possible scenario is to have to deal with a warranty company that doesn't fulfill their promises and fails you when you need them the most.
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Therefore, it is recommended that you choose a warranty company that:
- Has been in business for years and written thousands of policies (stay away from new companies that may not be around when you need to file a claim)
- Has a proven customer track record (the company is trustworthy and can be counted on)
- Has substantial assets (so that they can pay off when needed)
- Is accepted by car dealers, banks, and credit unions (so that you know they are not just a fly-by-night Internet reseller or broker)
- Offers a variety of coverage plans (to meet your specific needs and budget)
- Fully explains their plans with details, not just vague promises (so that you know what you're buying)
- Offers a detailed written copy of their terms and conditions (so that you know exactly what is covered and what is not)
- Covers your vehicle all over Canada and the US (provides you coverage no matter where you happen to have a problem)