Manufacturer's Warranty vs. Extended Warranty

What is a manufacturer's warranty?

A manufacturer's warranty, or factory warranty, is a coverage package that’s included with a new car. These are included in the cost of the vehicle, so you don’t need to purchase one separately.

What does a manufacturer's warranty cover?

The coverage included in a manufacturer's warranty varies somewhat by automaker. However, all factory auto warranties cover the cost of repairs for mechanical failures resulting from defects in materials or workmanship. That coverage falls into two categories:

• Bumper-to-bumper warranty: The most comprehensive part of a factory warranty is the exclusionary coverage, which excludes all but a few specific components named in the contract.
• Powertrain warranty: These are more limited plans that only cover the vehicle’s most essential components, such as the engine, drive axles and transmission. Manufacturer’s warranties have different term lengths for powertrain coverage.

What isn’t covered under a manufacturer's warranty?

While factory warranties cover a broad range of parts and systems in a new car, they also have exclusions (items that aren’t covered). These commonly include:

• Repairs needed due to failure to follow the maintenance schedule
• Mechanical issues caused by a collision, fire or other source covered under an insurance policy
• Routine maintenance, like balancing and rotating tires or changing the oil
• Wear-and-tear items like tires, windshield wipers or brake pads
• Damage caused by unauthorized aftermarket accessories
• Preexisting mechanical problems
• Cosmetic repairs
• Mechanical issues caused by misuse

A manufacturer's warranty comes with a new car and covers defects in materials or workmanship, not repairs.

How long does a manufacturer's warranty last?

Factory warranty terms vary by manufacturer. The average manufacturer's warranty lasts three years or 36,000 miles, whichever comes first. However, some automakers provide factory coverage for up to 10 years or 100,000 miles. In many cases, these warranties have longer powertrain coverage terms than bumper-to-bumper coverage.

Can you transfer a manufacturer's warranty?

Generally speaking, the factory warranty coverage will transfer to a new owner if a vehicle is sold with coverage remaining. Manufacturer’s warranties are typically tied to the vehicle, not to the person who owns it. In some cases, a fee may be required to transfer the warranty.

What is an extended warranty?

An extended car warranty is coverage you can get for a vehicle after the manufacturer's warranty expires. Some certified pre-owned vehicles come with extended coverage from the manufacturer or dealership, but it’s most commonly available as an additional purchase sold separately from the vehicle.

Many automakers offer their own extended warranty plans, but you can also get coverage from a third-party provider. For many car owners, extended warranties are worth the cost for the peace of mind they provide.

What does an extended warranty cover?

Extended warranty coverage varies much more than factory coverage. Some plans are broad, while others only cover specific named parts or systems. Most third-party providers and many manufacturers offer multiple coverage levels to pick from. The three most common plan types are:

• Exclusionary warranties: The most comprehensive plans available offer coverage comparable to bumper-to-bumper warranties. These cover nearly everything except the items specifically excluded in the contract.
• Named component warranties: Mid-level plans that cover a few additional systems identified in the contract beyond the basic essential components.
• Powertrain warranties: The lowest level of coverage available is usually a powertrain plan, which, like a factory powertrain warranty, covers only the major mechanical parts of your vehicle.

» MORE: Inclusionary vs. exclusionary warranty

How is an extended warranty different from a manufacturer's warranty?

There are several ways in which an extended car warranty differs from a manufacturer's warranty. Here are the biggest differences:

• Extended warranties are optional. Manufacturer’s warranties come with every new car.
• You can buy an extended warranty from a provider of your choice. Manufacturer’s warranties only come from the automaker.
• Extended warranty companies typically offer several coverage plans. Manufacturer’s warranties have set terms and conditions.

» MORE: How much does an extended car warranty cost?

Third-party vs. manufacturer’s extended warranty

Many car brands offer extended warranty plans of their own, but you aren’t obligated to get coverage from the manufacturer. You can also buy a protection plan from an independent warranty provider. Depending on your needs and preferences, one may be a better choice for you than the other.

Cost

Third-party extended warranties generally cost less than automaker-branded coverage. Prices can range from several hundred dollars to several thousand, depending on the vehicle, the term and the coverage level.

Coverage

Most automakers offer a more limited selection of coverage levels than third-party companies do. In some cases, manufacturers only offer a single extended warranty plan. Independent providers, on the other hand, usually offer at least three levels of coverage to choose from.

Purchase windows

Most automakers only allow you to purchase their extended coverage while the factory warranty is still active. However, you can buy a protection plan from a third-party provider at any time as long as the vehicle is eligible for coverage.

In addition, most manufacturer plans can only be purchased at a dealership. Third-party extended warranty companies allow you to purchase coverage online or over the phone.

Repair facilities

Manufacturer's warranties usually restrict repair work to service at authorized brand dealerships. Third-party providers allow you to use any licensed repair facility certified by the National Institute for Automotive Service Excellence (ASE), giving you access to thousands of independent mechanics across the country.

Deductibles

Extended warranties from third-party companies typically include a deductible, or the amount you must pay out of pocket for a repair. Deductibles for third-party warranties tend to range from $100 to $500. Most factory warranties do not have deductibles.

Payment options

With both third-party and manufacturer’s extended warranties, you have the option to pay the full cost of the plan upfront. You can also spread that cost out over time. With third-party providers, you can make monthly payments. With manufacturer’s plans, you can often roll the cost of your plan into your purchase financing or refinance the vehicle to include the warranty cost.

Benefits

Some manufacturers package a few benefits with their extended warranty plans, but third-party providers tend to be a little more generous with what they include. Some of the most common benefits you’ll find from independent providers are:

• Roadside assistance and towing
• Trip interruption coverage
• Rental car or rideshare reimbursement

Third-party extended warranty pros and cons

Third-party extended warranties can offer a flexible and convenient way to protect your vehicle beyond the manufacturer's original warranty. They come with a variety of plan options and are often more affordable than manufacturer’s plans, but there are some important considerations to keep in mind.

Manufacturer’s extended warranty pros and cons

A manufacturer's extended warranty extends the original factory coverage, ensuring repairs are performed by brand-certified technicians using genuine parts. While these plans offer peace of mind and can be included in your car loan, they also come with certain limitations and a higher price tag.

Should I buy a third-party or manufacturer’s extended warranty?

The benefits of extended warranties from third parties make them the right option for many car owners, but others may prefer coverage from their car manufacturer. Which option is right for you depends on what you value in an extended warranty.

Third-party extended warranties are a good choice for:

• Older vehicles that aren’t eligible for manufacturer’s coverage
• Cars with an expired factory warranty
• People who prefer their local mechanic shop
• Car owners who want more options for coverage
• People who want to avoid the dealership

Manufacturer’s extended warranties may be a better option for:

• People who value branded service and OEM components
• Car owners who live close to their dealership
• Vehicles from manufacturers with large dealership networks

Prepaid maintenance plans vs. extended warranties

Another form of additional coverage you can purchase for your car is a prepaid maintenance plan. These plans provide a completely different type of coverage but are available from many third-party extended warranty companies and car manufacturers. Think of them as a supplement to, rather than a replacement for, an extended car warranty.

What is a prepaid maintenance plan?

A prepaid maintenance plan is a service contract that covers the cost of certain routine maintenance services for a set term or mileage interval. Coverage and service intervals vary by plan and manufacturer, but maintenance plans typically pay for:

• Oil changes and filter replacements
• Tire rotation and balancing
• Vehicle inspections
• Brake fluid, transmission fluid and coolant flushes
• Cabin and engine air filter replacements

Prepaid maintenance plan benefits

There are several advantages to buying a prepaid maintenance plan, including the following:

• Prepaying for suggested maintenance can help keep you on schedule and ensure your third-party or manufacturer’s extended warranty coverage stays valid.
• Maintenance plans often offer a discount on services compared with paying for them individually.
• The cost of plans can often be rolled into vehicle financing or split into monthly payments with third-party providers.
• Prepaid plans provide peace of mind in knowing you won’t have to come up with money to pay for maintenance services.

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