What does a car warranty cover?

A vehicle is one of the most valuable things many Americans own. Repair bills can be financially challenging, and when you’re responsible for insurance and a car or lease payment, coming up with the money to handle necessary and unexpected repairs can be stressful.

Getting a car warranty on a vehicle with an expired manufacturer's warranty may seem like the natural solution to high repair bills. An auto warranty from a reputable company can help you cover repair costs if your car breaks down, but not every warranty is worth the price. Understanding the types of policies can help ensure you receive the coverage you expect.

Types of car warranties

There are a few different types of car warranties available. These differ in when they provide coverage (e.g., manufacturer’s warranty, extended vehicle service contract) and what parts of your car they cover (e.g., powertrain warranty, exclusionary warranty). Generally, a car warranty covers most, if not all, of the cost associated with repairing a mechanical failure or defect for a certain time period or specific number of miles. A deductible may apply.

An extended auto warranty is also known as a vehicle service contract.

• Bumper-to-bumper or basic warranties come with all new cars directly from the manufacturer and can be purchased for extended coverage after the manufacturer's warranty runs out. These typically cover all major parts and systems but excludes damage caused by normal wear and tear.
• Extended warranties are designed to extend coverage after the manufacturer’s warranty expires. Vehicle owners can purchase this at the time they buy a car or at any point after. Also known as a vehicle service contract if purchased from a third-party provider.
• Dealership warranties provide coverage for a car that's no longer covered by a manufacturer's warranty. Dealerships may provide their own warranty for a certain number of months or miles. Dealership warranties usually require the car owner to have the vehicle serviced only at the dealership.
• Rust and corrosion coverage often comes with a new car warranty and covers body panels that become perforated due to corrosion.
• Roadside assistance is also included on many new cars as part of the manufacturer's warranty. If your car breaks down, you can call a phone number or contact customer assistance through the company's app. Coverage typically includes lockout service, fuel delivery if you run out of gas, jump-start service and tire changes if you have a slow leak or flat tire.
• Emissions warranties cover the parts and systems associated with emissions.
• Powertrain warranties cover major parts of the vehicle like the engine and transmission. While some companies offer zero-deductible powertrain coverage, others require the car owner to pay a deductible at the time of service.

Warranty coverage varies depending on the warranty type, the provider's restrictions and the deductible (the amount you pay before the provider starts to cover repair costs).

What do powertrain warranties cover?

Powertrain warranties cover the parts and systems that power the car. Many manufacturers' powertrain warranties last 50,000 to 100,000 miles but cover fewer parts and systems than a bumper-to-bumper warranty.

The parts and systems typically covered by a powertrain warranty include:

• Engine
• Transmission
• Transfer case
• Drive shafts
• Axles
• Differentials

What does a bumper-to-bumper warranty cover?

A bumper-to-bumper warranty, also called an exclusionary policy, often covers the same parts and systems as the original manufacturer's warranty. It's widely considered the most comprehensive warranty coverage you can buy.

When you’re shopping for a bumper-to-bumper warranty, read the fine print so you understand exactly what's covered and which potential repairs may be excluded.

Here's the coverage you may get with a bumper-to-bumper warranty:

• Powertrain: Transmission, engine, drive box, transfer case, axles, differentials and drive shafts
• Steering: Rack-and-pinion or power steering components
• Electrical: Alternator, battery and electric-powered parts and systems, including power locks and windows
• Air conditioning: Condenser, evaporator, compressor and other systems your cooling system depends on to properly function

Bottom line: Is a car warranty worth it?

Whether you purchase an extended warranty from the dealership where you bought your car or from a third-party provider, it's crucial to research the coverage provided before you sign the paperwork and pay for an extended warranty. If your car is covered by the original manufacturer's warranty, it may be better to wait until it's nearly expired to shop for extended warranty coverage.

Car warranties can help protect you from financial stress when your car needs expensive repairs, but it's important to choose a policy that provides the most coverage for your dollar. Before you choose an auto warranty provider, research its reputation. Does it pay claims in a timely manner? Does it honor contracts with customers? What restrictions does it place on claims? Is the deductible affordable?

Evaluate several companies and compare pricing before you choose an extended auto warranty so you can get the financial protection you expect.