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Common extended car warranty terms, and what they mean

Common extended car warranty terms, and what they mean
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If you are thinking of investing in one of the best extended car warranty services you should make sure you navigate the paperwork very carefully and be clear you know what the terms mean before you sign-up to anything. 

It's also worth remembering that calling them extended car warranties is not quite accurate: they are in fact not a form of insurance, but a service, so are not regulated in the same way as insurance providers are. 

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Administrator

This is the company who approves, denies, processes and pays for the repairs to your vehicle. In most cases, the administrator is not the same company as the service that sold you the contract. You can find the administrator of your extended vehicle warranty on the contract.

Broker 

A broker is a company consisting mostly of salespeople who market and sell vehicle service contracts. A broker doesn’t have any role in approving, denying, paying or processing repairs.

Bumper-to-bumper coverage

Also referred to as exclusionary coverage, a bumper-to-bumper contract covers most parts of your car. In most cases, manufacturers only provide powertrain warranties to new vehicles, so this is ideal for new vehicles.

Deductible

This is the amount you are required to pay before the administrator pays the rest of the bill. Almost every vehicle service contract requires a $100 deductible or a percentage deductible where you pay a percentage of the repair bill.

Exclusionary coverage

Also referred to as bumper-to-bumper coverage, an exclusionary contract is so comprehensive it’s easier to list what is excluded from coverage than what is covered. These contracts are made specifically for new vehicles with low mileage. In most cases, manufacturer warranties only provide powertrain warranties, covering the most expensive and critical parts of the vehicle. An exclusionary coverage contract is designed to expand the coverage for newer vehicles, which is why these contracts are not typically eligible for used cars or high-mileage cars.

Extended warranty

An extended warranty is another term for vehicle service contract. In fact, it’s a misnomer often used in marketing for vehicle service contracts. A warranty can only be offered by the manufacturer, by definition. And manufacturers don’t extend warranties past the original date. Rather, a vehicle service contract is meant to serve a similar purpose by providing protection against breakdowns.

Gray market vehicle

This is a vehicle not manufactured for sale in the U.S. It often means they don’t meet U.S. regulations. As such, gray market vehicles are not eligible for vehicle service contracts.

Powertrain coverage

This is the minimum amount of coverage you can get for a car. The coverage can vary a bit, but it typically covers the most expensive parts to repair – engine, transmission, drive shafts, differentials.

Trip interruption benefits

This is part of a vehicle service contract defining the reimbursements for breakdowns when you are more than 100 miles from your destination. Typically, it covers one to three nights in a hotel at a specific rate per day. Some contracts also cover meals.

Vehicle Identification Number

This is a number specific to your vehicle. Many vehicle service contract providers require the VIN to provide an accurate quote because this tells them the history of the vehicle. You can typically find your vehicle’s VIN on the dashboard near the windshield on the driver’s side.

Vehicle Service Contract

This is correct term for an extended car warranty. It’s a contract between you and an administrator to pay or help pay for repairs to your vehicle. The manufacturer of your vehicle has no part in this contract.

Warranty

This is a promise of performance provided by the manufacturer of a vehicle. While the vehicle is under the warranty, specifics parts covered in the warranty are repaired by the manufacturer at no cost.

Wear and tear

This one of the most common phrases in a vehicle service contract, particularly when describing repairs not covered under the contract. It refers to issues resulting from everyday use of the car. If a repair facility determines your transmission’s breakdown was the result of wear and tear, the administrator won’t cover the repair.