The Pros and Cons of Car Warranty

February 29, 2024

What is a Car Warranty? 

A car warranty is a contract that covers certain repairs and parts in case something breaks down. There are two main types of warranties:

What is a Car Warranty? 

A car warranty is a contract that covers certain repairs and parts in case something breaks down. There are two main types of warranties:


A bumper-to-bumper warranty, also called a basic warranty, covers almost all major components of a vehicle like the engine, transmission, and electronics. This warranty typically lasts 3 years or 36,000 miles, whichever comes first. Bumper-to-bumper warranties cover everything except for normal wear-and-tear items like brake pads and wiper blades.


A powertrain warranty covers the most important and expensive parts related to actually moving the vehicle forward. This includes the engine, transmission, drive axles, differentials, and drive shaft. Powertrain warranties typically last longer, around 5 years or 60,000 miles. This coverage ensures these major components are protected for the lifespan of the car loan.

The main distinction is that bumper-to-bumper provides more comprehensive coverage on most parts whereas the powertrain focuses solely on the components that generate power and enable movement. All new vehicles come with some type of factory warranty to protect against defects and premature failure during the first few years of ownership. Warranties provide peace of mind to car buyers.

Pros of Getting a Warranty  

One of the biggest benefits of getting a car warranty is that it covers repair costs for mechanical breakdowns and electrical failures after the manufacturer’s warranty expires. This can provide substantial savings, as repair bills can easily run into the thousands of dollars. With a good extended warranty plan, the majority of repair costs will be covered. This gives vehicle owners peace of mind knowing that an unexpected breakdown won’t lead to a crushing repair bill.

Additionally, having a warranty helps extend the value of the vehicle. Vehicles with an active warranty typically have higher resale values. This allows you to sell the car for a better price down the road. Or if you plan to drive the car long-term, the warranty coverage will keep it in good working condition for more years. Either way, the warranty helps maintain more value in the vehicle.

Overall, the financial protection and peace of mind are the main advantages of getting an extended car warranty. By safeguarding you from expensive surprise repairs, warranties provide security and allow you to better enjoy driving your vehicle.

Cons of Getting a Warranty

Getting a car warranty comes with some potential drawbacks that buyers should be aware of. The main downsides are the added cost, as well as limits or exclusions in what the warranty covers.

Added Cost: A car warranty is an additional expense on top of the purchase price of the vehicle. Warranty costs can range from a few hundred to a few thousand dollars, depending on the coverage plan. This extra cost may not be worth it, especially for very reliable vehicles.

Warranty Limits or Exclusions: Warranties have restrictions in what types of repairs or parts they cover. For example, most exclude “wear and tear” items like brake pads, tires, wipers, etc. Many also have mileage, time, or deductible limits. Make sure to read the fine print to understand exactly what is and isn’t included.

Repair Restrictions: Warranties may require you to use certain repair shops or mechanics. This can limit flexibility in choosing where to get work done. There is also the hassle factor if covered repairs require going back and forth to the dealer.

Cancellation Penalties: If you sell the vehicle or want to cancel the warranty, there may be fees involved. Some warranties can’t be transferred to a new owner either.

Insurance aspect: Since warranties cover repairs, they share some aspects of auto insurance plans. As with insurance, the warranty provider is betting you won’t need costly repairs. For most drivers who take care of their vehicle, the warranty is an added cost with little benefit.

So while warranties provide valuable protection, they come at a cost. Buyers should weigh the pros and cons when deciding if purchasing an extended warranty makes sense for their situation. Understanding the limitations and reading reviews of the auto warranty provider can ensure it is worth the investment.

What is Covered

Most new car warranties will cover repairs and replacements needed for defects in these major systems:

Engine – This covers internal lubricated parts like pistons, piston rings, crankshaft and bearings, cylinder heads, valves and springs, oil pump and timing chain/belt. The engine block itself is also covered.

Transmission – This covers all internal transmission parts including gears, shafts, bearings, synchronizers, axles, CV joints and driveshaft. The transmission case is also covered. 

Drivetrain – This includes components that channel engine power such as universal joints, transfer case, final drive housing and all internally lubricated parts.  

Electrical – This covers wiring harnesses, alternator, starter motor, wiper motors, switches, electronic ignition and electronic engine management systems.  

Steering – This includes steering gear box, power steering pump, steering column, tie rods, idler arms. 

Brakes – This includes master cylinder, calipers, wheel cylinders, disc brake rotors, brake lines and hoses.

Air Conditioning – This covers compressor, condenser, evaporator, accumulator and factory installed air conditioning lines.  

Front/Rear Suspension – This includes struts, ball joints, wheel bearings, stabilizer bar links, bushings.

Cooling System – This covers the water pump, radiator, cooling fans, temperature sensors, coolant reservoir.

So in summary, the major systems like engine, transmission, drivetrain, electronics and more are covered under standard new car warranties. Specific inclusions depend on the manufacturer’s warranty terms.

Not Covered 

A car warranty does not cover every conceivable repair or replacement. There are certain exclusions that every auto warranty contains in order to limit costs and prevent abuse. Here are some of the most common items not covered under a standard car warranty:

Normal Wear and Tear: Parts that naturally wear out from normal driving are not covered. This includes brake pads, tires, wiper blades, light bulbs, filters, etc. These need periodic replacement as part of regular car maintenance.

Scheduled Maintenance: Routine maintenance services specified in your owner’s manual are your responsibility. This includes oil changes, inspections, fluid flushes, alignments, etc. These scheduled services ensure your car runs properly but are not covered repairs.

Damage from Accidents: Any problems that result from an accident, even minor ones, are not covered under the warranty. This is because the damage was not due to a defect in material or workmanship. Insurance should cover accident repairs.

Modified or Misused Vehicles: If you use your vehicle in racing or off-roading, exceed payload capacity, alter the engine, install aftermarket parts, or misuse your car in other ways, related repairs will not be covered. The warranty only applies to factory-installed parts used as intended.

Normal Deterioration: Things like faded paint, worn seats, surface rust, and minor squeaks are not covered after the limited corrosion/perforation protection expires. These are normal wear issues over time.

Pre-Existing Conditions: Any defects your car had before the warranty period are excluded from coverage. The warranty only covers failures that occur after purchase. A thorough inspection before purchase can identify these pre-existing flaws.

So in summary, while warranties provide valuable protection, there are common limitations. Exclusions help keep costs reasonable but mean you pay some repair bills yourself. Understanding what’s not covered helps avoid surprises down the road.

Third Party Warranties 

In addition to warranties offered directly by auto manufacturers, there are also warranties available from third party providers. These can extend coverage beyond the manufacturer’s warranty period and terms.

One of the largest third party warranty providers is Carchex. They offer a variety of extended auto warranty plans that can be customized for different makes, models, mileage, and coverage needs. Carchex warranties can kick in after the factory warranty expires. Coverage options include powertrain, bumper-to-bumper, exclusionary, and high-tech component warranties.

Some key benefits of a Carchex extended warranty include:

Ability to choose your preferred repair shop, unlike factory warranties which require dealership service.

Coverage of repairs nationwide, so you’re protected even when traveling.

Variety of terms available – you can get coverage for up to 7 years/125,000 miles from the original in-service date.

Added peace of mind and financial protection from unexpected repair bills.

24/7 roadside assistance may be included.

No deductible on most covered repairs.

Warranty is transferable for a fee if you sell the vehicle.

Monthly payment plans available to make the warranty more affordable.

The drawback of third party warranties is that they do add cost on top of the vehicle purchase price. However, for drivers wanting to maximize their protection on a less reliable vehicle model, an extended warranty from a reputable provider like Carchex can provide valuable and customizable coverage.

Factory Warranties

Factory warranties for new cars are provided by the manufacturer directly. They typically cover most major components of the vehicle like the engine, transmission, electronics, etc. Factory warranties often last for 3 years or 36,000 miles, whichever comes first. This is sometimes called a “bumper-to-bumper” warranty since it covers most parts of the car from front to back.

The main benefit of a factory warranty is that repairs are covered by the manufacturer during the warranty period. This provides peace of mind to buyers that major repairs will be taken care of. Factory warranties also transfer to subsequent owners during the coverage period.  

However, factory warranties have limits on what is covered. Regular maintenance like oil changes, brake pads, and tires are usually excluded. Factory warranties also don’t cover damage from accidents, misuse, or lack of proper maintenance. Once the time or mileage limit is reached, the factory warranty expires and the owner is responsible for repair costs.

Overall, factory warranties provide valuable protection during the first few years of ownership. But they are limited in duration and exclusions. Savvy buyers may want to consider extending the factory coverage with an additional extended warranty.

Certified Pre-Owned 

Buying a certified pre-owned (CPO) vehicle can give you peace of mind when purchasing a used car. CPO cars undergo rigorous inspections by the manufacturer or dealer to ensure they meet certain standards before being sold. As part of the CPO program, the car will come with an extended warranty that goes beyond the original factory warranty.

CPO warranties typically cover the vehicle for an additional 12 months or 12,000 miles beyond the original new car warranty. This helps protect you from expensive repairs during the first year or so of owning the used vehicle. Coverage varies by manufacturer but often matches the original factory warranty and includes items like the engine, transmission, electrical system, etc. 

One key benefit of CPO warranties is they also require a full vehicle inspection before certification. This means any issues or wear items will be identified and many are required to be repaired or replaced before the car can be sold as certified pre-owned. So you can have confidence the car meets the manufacturer’s standards when purchasing.

While CPO warranties do not cover everything, and you still want to maintain the vehicle properly, they provide nice peace of mind protection when buying used. Just be sure to fully understand what is and is not covered. The extended coverage offered by CPO warranties can make them worthwhile, especially for models or brands that may have expensive repair costs outside of warranty.

Warranty Claims 

Filing a warranty claim can seem daunting, but it doesn’t have to be. Here’s a step-by-step guide on how to successfully file a car warranty claim:

Inspect and Diagnose the Problem

First, you’ll want to fully inspect your vehicle and make sure the issue is covered under your warranty. Refer to your warranty agreement to understand what is and isn’t covered. Thoroughly diagnose the problem – don’t rely on guesses. The more details you can provide the warranty company, the smoother the claims process will be.

Contact the Dealer or Repair Facility

Next, contact the dealer or licensed repair facility and explain the issue. They should be able to advise you on next steps and let you know if they can perform the repair under your warranty. If not, ask them to recommend a facility that can.

Call Your Warranty Company

Before any repair work begins, you must call your warranty company and file a claim. Have your warranty agreement, vehicle information, and repair details ready. Explain the issue and get a claim number for reference.

Authorize the Repair 

With a claim filed, the warranty company can authorize the repair facility to complete the work. The facility may need you to provide the claim number and sign a consent form for the work.

Pay Any Costs

While the warranty will cover most costs per your agreement, you may need to pay a small deductible or fees for certain repairs. Be prepared to pay these out of pocket. Get an invoice detailing the work performed and costs.

Follow Up

Once the repair is complete, follow up with the warranty company to ensure proper payment to the facility. Also ensure you receive any refunds you may be owed for covered costs you paid upfront.

Filing a warranty claim takes coordination, but following these steps will ensure you get quality repairs covered under your car’s protection plan. Knowing the process ahead of time reduces stress when issues inevitably arise. With some preparation, you can smoothly handle any warranty repairs your vehicle requires.

Warranty Decision

When deciding whether to purchase an extended warranty or service contract, there are several factors to consider:


Extended warranties can add a significant cost to the purchase price of a vehicle. Evaluate whether the price of the warranty is worth the protection and peace of mind offered. Also consider whether you could self-insure by putting the money you’d spend on a warranty into a savings account for repairs.


Research the repair records and overall reliability of the make and model you’re purchasing. More reliable vehicles may not need the protection of an extended warranty. High-maintenance models could benefit more from the extra coverage.

Length of Ownership 

If you plan to keep the vehicle long-term after the factory warranty expires, an extended plan could provide useful protection. But if you trade cars frequently, you may not keep this auto long enough to need the extra coverage.


The lower the deductible, the more expensive the warranty. Choose a higher deductible to reduce costs if you can afford to pay that amount for a repair if needed.

Reputation of Provider

Research third-party extended warranty companies carefully before purchasing a policy. Look for providers that are financially stable with a solid history of paying claims fairly and quickly.

Coverage Details

Read the fine print! Some plans exclude common repairs or place limits on covered repairs. Make sure you understand exactly what’s covered and any exclusions or limitations.

Considering these key factors will help you make an informed decision about purchasing an extended auto warranty. Protecting your investment is wise, but make sure the coverage fits your needs and budget.

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