Thinking about a new car? Wondering about the difference between a warranty and an extended warranty?

We asked the Federal government’s Consumer Action Handbook to help explain the distinction.

We know: Car Warranties and Extended Warranties

What’s is an automobile warranty?

When you buy a new or used car, it may come with a warranty covering many of the parts and repairs that might be needed for a specific period of time. The warranty is included with the price of the car.

Ask to see the car’s warranty, and to have the dealer or salesperson explain to you what is covered (parts, labor etc.), and for what period of time.

Is there a difference between new and used car warranties?

On new cars, there is almost always a warranty, although new car warranties can differ widely, so find out what you’re getting.

Used cars may or may not come with a warranty, and if there is a warranty, it may cover very little. Be sure to ask.

What's an ‘extended warranty’?

Car salespeople often try to sell you an extended warranty when you buy a car. This is really a service contract and is sold separately. It promises to pay for certain repairs and services. These extended warranties are usually high profit add-ons, costing hundreds to more than $1000.

The extended warranty may actually duplicate things covered in the warranty that already comes with the car, so it’s a good idea to check out what you’re getting before you commit to buying something extra.

What questions should I ask about the extended warranty or service contract?

Ask the following:

  • What exactly does the warranty cover and for how long?
  • Who backs the service contract, the dealer, the manufacturer, an independent company? (Who’s going to back this service contract when you take the car in?)
  • What happens to the service contract or extended warranty if the dealer or company backing it goes out of business?
  • Who does the repairs? Can you take the car anywhere and use the contract, or must you bring the car some specific place?
  • Is the car covered if it breaks down on the road or you move out of town?
  • Do you need prior authorization before the work can be done? Who gives it and how?
  • What requirements must you meet in order to use the service contract, i.e., must you meet certain maintenance requirements, does the dealer have to do the maintenance?

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