Tips on Purchasing an Auto Warranty Plan

If you are about to invest your hard-earned money in a new or used car, you may want to consider protecting your investment by purchasing an extended warranty.

An extended warranty is a service contract that covers the cost of repairs after the manufacturer's warranty expires. Unlike the manufacturer's warranty, which is included in the price of the car, an extended warranty is an additional cost and can be purchased from either the manufacturer or from a third-party company that specializes in auto service repair contracts.

You don't have to wait until your manufacturer's warranty is about to expire before considering purchasing an extended warranty. In fact, you can negotiate the addition of an extended warranty into the price you pay for your car.

Purchasing an extended warranty from the manufacturer offers several advantages over third party companies. Under a manufacturer's warranty, you get automotive factory technicians to work on your vehicle. Repairs are done while authorization for them is being obtained with no wait time for you. You won't need to file claims for reimbursement or lay out money up front. Finally, if you decide to sell the care, a manufacturer's extended warranty is transferable to the new owner.

Many dealerships sell both the manufacturer's extended warranties and third-party warranties and will try to sell you whichever makes them the most profit. Try to do your research online first so that when you negotiate with the dealership you know what you want and what is available to you. Most extended warranties, regardless of who is selling them, offer different levels of coverage. Typically, there are three levels of coverage. The first level covers the power train. The second covers the power train plus several other components. The last offers the highest level and is referred to as comprehensive or bumper-to-bumper coverage, which includes expensive electrical systems repairs.

The benefit of purchasing an extended warranty when you purchase the vehicle is that you can roll the costs of the extended warranty into your financing and can pay for it as part of your monthly payments rather than pay for the warranty coverage in one lump sum later.

Regardless of when you decide to purchase an extended warranty, be sure to first go online and research different coverage options and price points. Don't forget to compare options like level of coverage, price and duration of the policy.

Purchasing an extended warranty can be a good investment if you plan to keep the car past the life of the original manufacturer's warranty. If you do your research and plan ahead, you can get a plan that's an investment and not a waste.

Canadian Car Warranty FAQ

Who offers auto warranty plans?

There are lots of companies offering warranty coverage for your car. They work very similarly to health insurance: you'll pay more for higher coverage, some things are covered and some aren't, and your policy will have a time limit. You can shop around for auto warranty plans just like insurance, too: you don't have to go with the plans offered at the dealership.

How much do auto warranties cost?

That depends on your car and your coverage. On a new vehicle, you might pay $25/month for bumper-to-bumper coverage, but an older vehicle's premium could be three times that. You can usually pay in full or monthly, with no difference in total cost.

My car is brand new. Why would I buy a warranty?

The cost of your auto warranty will never be cheaper than when your car is new. But, you'll want to read the terms of your plan very carefully. While warranty plans at the dealership usually start from the time the manufacturer's warranty runs out, third-party plans often start from the date you purchase them. That could mean you're paying twice for the same coverage.

My car is old or has a lot of miles. Can I get a plan?

Probably. Each provider sets the limit for coverage, but there are options for cars with up to 150,000 miles! Most auto warranty plans are available for cars that are 20 years old or newer.

Are there any exclusions in what's covered?

YES! The most important part of choosing an auto warranty plan is knowing what's covered and what isn't! Even comprehensive plans don't cover items with normal wear-and-tear, like brake pads and tires. The most user-friendly plans usually give you a list of what isn't covered - and if it's not on that list, it's covered!

Is there a satisfaction guarantee?

Sometimes, but it's usually limited to the first 30 days after the purchase date. Again, be sure to read the terms of your auto warranty plan very carefully, to avoid any unpleasant surprises when you go to use your policy for the first time.

Can I use my warranty at any mechanic?

Almost all plans let you use the mechanic of your choice. Some providers will reduce your deductible if you go to one of their network partners.

Are auto warranty plans legitimate?

Despite all of the annoying spam phone calls you've gotten, desperately trying to contact you about the expiring warranty on your car, auto warranty plans are a real thing. And, when you choose a plan from a reputable provider, you can save thousands of dollars on car repairs.

Tips on Purchasing an Auto Warranty Plan in 2025

Tips on Purchasing an Auto Warranty Plan

Canadian Car Warranty FAQ