What does an extended car warranty usually cover?

What does an extended car warranty usually cover?
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Even if you're willing to spend big to guard against the financial repercussions of your car letting you down, not even the best extended car warranties are guaranteed to cover you for all the repairs that you might think. 

When searching for the peace of motoring mind that an extended auto warranty can bring, it's vital to remember that terms will often vary between each provider. Complicating matters further, each provider will usually have a number of different plans that they are offering too. As a result, making sure you fully understand all that a particular warranty will offer you in terms of protection is vital. There will, of course, be some elements of coverage that seem common to almost all warranties that you find. However, scour the fine print and you might discover subtle differences that aren't immediately apparent, or clauses that put the onus on you, as the driver, to meet certain criteria or carry out particular tasks if you are to be protected. 

Ultimately, the benefits of an auto warranty plan should never be cast into doubt, particularly when used in tandem with the best auto insurance and the best roadside assistance services. However, knowing what to keep an eye out for in the policy details, and being aware of the other nuances that might come into play when making a claim is equally important too. If you want to stand the best chance of knowing what an extended auto warranty usually covers and what it does not, then take heed of our guidance below.  

What does an extended car warranty usually cover?

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Taxi service and other commercial uses

Contracts won't approve repairs if you use your vehicle for commercial purposes. In most of the stipulations, such as using your vehicle as an emergency transport vehicle, it's a reasonable exclusion. However, this includes taxi service – you can't drive for Uber, Lyft or other drive-sharing taxi apps, even if your car breaks down when you're not driving to supplement your income. If you do, you risk voiding the contract.    

Mechanical breakdowns caused by common elements

Parts break, in large part, because of the elements they are exposed to – heat, moisture, salt, vibrations and more. By including these causes in the exclusionary section of a contract, a service can deny nearly any repair. It doesn’t matter if you maintained the strict maintenance schedule and kept all your reports; if a part failed because an unseen bolt rusted out, your repair is denied.

Breakdown caused by a failure in nuts, bolts or fasteners

Speaking of bolts, your repairs are denied if the cause of the failure is deemed to be the result of a bad nut, bolt or fastener. These seemingly minor components do wear out regularly and can cause components to break down or wear out faster than usual, even if you adhere to a strict maintenance schedule and proper driving techniques.

What does an extended car warranty usually cover?

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Failure to observe warnings

The service can deny repairs if they believe you failed to properly observe early warning signs. This is a significant loophole because every mechanical failure could be argued to have some early warning signs. While some warning signs are obvious, such as an engine warning light or gauges, most warning signs are not obvious to most drivers. You may not realize your vehicle is leaking fluids unless you're looking for it. You may not know how to identify bad sounds in an engine or the ominous vibrations from bad wheel bearings. These are all listed in the clauses, and yet the contracts often state something along the lines of: "Lack of mechanical knowledge is not an excuse."

Failure to have your vehicle towed

This is a reasonable exclusion, as you should stop driving a vehicle if it breaks down to avoid further damage. However, it's far too easy to assume you can continue driving to a mechanic. For example if you have an alternator go out on your car. The car is still operating, but barely able to reach 15 mph. You rolled into the city and find a mechanic. If you have a vehicle service contract, the repair would likely have been denied. The moment you know something is wrong, you need to stop driving and call a tow truck. Fortunately, these contracts all reimburse towing costs, usually up to $50.

The potential red flag in this exclusionary clause is the point at which you decided to stop driving to call a tow truck. If they determine you should have stopped sooner, they can deny your repair.

What does an extended car warranty usually cover?

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Pre-existing issues and wait period

Every contract has a wait period before the coverage takes effect. Typically, this period is 1,000 miles or 30 days. This period makes sure you're not buying coverage because you know something is wrong. However, if a component breaks down at any time after this period, they still have the right to determine if the issue started before coverage. For example, if the wheel bearings go out on day 31, they are likely to deny coverage because wheel bearings typically start showing symptoms of wearing out weeks to months prior to seeing a mechanic. And remember, ignorance of mechanic issues is not an excuse.

Driver responsibilities

The biggest pitfall to getting repairs approved is failing to pay close attention to the driver responsibility section of the contract. Every contract has a "driver responsibility" section outlining what you need to do to receive coverage. 

What does an extended car warranty usually cover?

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The most important of these clauses is following your vehicle's owner manual's instructions for proper operation and maintenance schedule. You must have the vehicle maintained in accordance to the mileage specifications and you must keep receipts and other records of the maintenance. Some contracts even specify what type of receipts are unacceptable and not admissible as proof of maintenance, such as handwritten receipts.

Don’t modify your car

Every vehicle service contract prohibits vehicle modifications. Some small interior and exterior modifications can be approved by the administrator if they’re cosmetic, but you should make sure you get them approved first. However, any modifications meant to help your car run faster, better or more efficiently, even if required by law, are not permitted. 

If you're not the type of driver to pay close attention to your tire pressure, oil and fluid levels, mileage and scheduled maintenance, then a vehicle service contract is not for you. You must know the details of your owner's manual and records. Otherwise, your contract is meaningless.


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Tim Leonard

With over 20 years’ experience in the financial services industry, Tim has spent most of his career working for a financial data firm, where he was Online Editor of the consumer-facing Moneyfacts site, and regularly penned articles for the financial advice publication Investment Life and Pensions Moneyfacts. As a result, he has an excellent knowledge of almost areas of personal finance and, in particular, the retirement, investment, protection, mortgage and savings sectors.