What to Know About Extended Warranties

You might think that once your auto loan is paid off, the costs of vehicle ownership will notch a dramatic decline. But, it’s likely that you also may be coming to the end of your manufacturer warranty as well. That means that any unexpected repairs — whether it’s an aging alternator or an air conditioner that expired in the middle of Texas summer — are going to be paid on your dime.

Those repairs can be costly. For example, UFCU settled 1,716 claims in 2018 for more than $1 million. The two most frequent claims were alternators at an average of $568.88 and A/C compressors, averaging $1,088.89. The good news is, with a little advance planning, you can avoid many of these kinds of out-of-pocket expenses. The answer is an extended auto warranty.

What Is an Extended Warranty?
When you buy a car, it can come with an auto warranty (or a warranty for used cars) that will cover certain repairs for a set time period and mileage — usually three years and 36,000 miles for new cars. Beyond that, repairs are out of pocket, unless you’ve purchased an extended warranty that picks up coverage once your original warranty expires. Extended warranties are also known as vehicle service contracts or major mechanical protection (MMP).

What Cars Qualify for an Extended Warranty?
Both new and used cars can be protected with an extended warranty. You can purchase an extended warranty at any time before the original warranty expires; it’s not required that you buy one at the time you purchase the car.

What Does an Extended Warranty Cover?
An extended warranty typically provides similar coverage to the original warranty, according to the Automobile Protection Association. Some also feature extra perks not usually found in the manufacturer’s warranty, like 24-hour roadside assistance, rental vehicle assistance, $0 deductibles, and the choice of using any licensed repair facility nationwide.

• Financing is not contingent on buying an extended warranty. Some unscrupulous car dealers may pressure buyers to purchase an extended warranty as a condition of financing. Don’t be fooled by high-pressure tactics. Most credit union car loans do not require extended warranties; they are offered as an optional protection for Members. A reputable financing expert will guide you in getting the best financing options possible, and also provide you with details on extended warranty coverage if you are interested.
• Not all policies are alike. Read any extended warranty policy closely to be sure you understand what it does and does not cover. Many claim to be “bumper to bumper,” but it’s up to you to read the policy closely before purchasing. Look for a warranty that covers the items likely to break down during the coverage period. You should be able to find extended warranties for both new and used cars that cover everything from rental car allowance while your car is being repaired, to replacing a lost key fob or battery.
• Know and trust the source. Do your research before committing to a policy. Know who backs the warranty when you need to use it. What is their service record for handling claims? Go with a source that has a good track record for customer service, and who will stand behind their warranty throughout the claims process.