Auto Warranties 101
Imagine deciding to take your next final exam without reading any of the course books or completing any of the assignments. Now imagine being told that every answer you get wrong could cost you hundreds, maybe thousands, of dollars.
Got a horrible feeling in the pit of your stomach? That's what a lot of new car buyers feel when it comes time to work through the various financing and insurance options the car dealer pitches.
Sure, most people like the idea of getting a new car, and searching for the right one can be a lot of fun. But it can turn unpleasant if you aren't prepared to consider the choices offered and you are afraid the dealer might try to take advantage of you.
Clearly, the key to enjoying the entire car buying experience is to go in prepared. While this entire magazine could be devoted to the do's and don'ts of buying a car, let's focus today on one particular decision you'll have to make -- choosing the right extended warranty for you.
An extended warranty is a way to protect your investment, saving yourself from costly repairs that may be required as the vehicle ages and the manufacturer's warranty expires. Think of it like health insurance for your car. And just like finding health insurance that fits you and your needs, you'll want to consider extended warranties that best fit your type of car, driving style and budget.
Start by answering the following questions:
- How many years do you plan to keep your car?
- Will you purchase a new or used vehicle?
- Will you finance the car or pay cash?
- How will an unexpected $1,000 or $2,000 repair bill impact your finances?
The great thing about cars today is that their quality and reliability continue to improve. However, the number and complexity of the systems that make up these cars seem to increase with each new model year. With a GPS system, MP3 docking, DVD players and keyless entry and remote start, some cars rolling off the assembly line are starting to look like they require clearance for take off. So, while some extended warranty plans may seem pricey, check out the rising costs of auto repairs and you'll see extended warranties generally pay for themselves over the life of the agreements. If nothing else, an extended warranty will certainly provide you some peace of mind.
Manufacturer's Warranty
All new vehicles come with a manufacturer's warranty that typically covers most of the vehicle's components for three years or 36,000 miles, whichever comes first. And don't confuse a "powertrain" warranty with an extended warranty. While a powertrain warranty provides extended coverage beyond the manufacturer's warranty, it does not cover everything under the hood. Basic coverage includes the engine, transmission and axle-assembly components. Once the manufacturer's warranty expires, you in turn become responsible for all repairs.
A nice benefit of purchasing an extended warranty at the dealer when you buy your car is that you may wrap the cost of the warranty into your vehicle financing. This could be a good option if you can't afford to shell out an initial large sum of cash for an extended warranty, but still want a comprehensive plan that fits into your monthly budget. And if you don't buy the extended warranty when you purchase the car, you can still buy one later. But be warned: The closer you get to the expiration date on the manufacturer's warranty, the more your extended warranty will likely cost.
If you are looking to pick up a used vehicle, you should seriously consider an extended warranty that provides the greatest coverage. Do some research on the reliability of the vehicle you intend to purchase, such as industry reviews and websites that include user-submitted comments from car owners. This will help as you look for an extended warranty that provides coverage for the more common problems your vehicle may encounter in the years to come.
Additionally, consider some of the extra benefits an extended warranty might offer that go beyond simply paying for repairs. For example, Toyota's plans offer towing to the nearest Toyota dealership, rental car reimbursement and travel protection that covers hotel stays and meals should you be stranded far from home.
It is important to remember that "manufacturer warranties" and "extended warranties" do not mean everything on your car is covered. It is critical you read the entire warranty and understand which components are covered. Generally, such warranties do not cover normal wear-and-tear items such as brake pads, batteries, many valves, or interior items like vents, fabric and lights.
Aftermarket Warranties
Some car dealers may offer you a manufacturer-backed warranty or an aftermarket brand. An aftermarket brand may offer less expensive plans, but read the fine print. You will undoubtedly want to have a policy that is easy to use and ensures your car is worked on by factory-trained mechanics that use the latest diagnostic tools and genuine factory brand products. Many aftermarket policies can require someone must first inspect the vehicle before a repair is made, then you pay the bill and later file for reimbursement.
If the dealer does not initially offer you a manufacturer-backed warranty, ask for it. The manufacturer's brand will allow you to take your vehicle to any authorized dealer. Some aftermarket brand warranties only allow you to take your car back to the dealer where you made your purchase -- not very convenient if you are far from home when you need a repair or move out of town.
A vehicle is one of the biggest investments you'll make. So, in the end, it comes down to this: If you want to protect your car and protect your wallet, do your homework. You'll leave the dealership happy, protected and at peace.
Justin Leach is a communications specialist for Toyota Financial Services. Prepare yourself for your next car buying experience by visiting www.toyotafinancial.com where you can view finance programs and offers tailored to meet your needs and learn more about understanding and protecting your credit, differences between buying and leasing, and various vehicle protection plans.
