What is an Extended Car Warranty?

Topics: specialty risk

Summary: Extended car warranties, also known as vehicle service contracts (VSCs), can give car buyers additional coverage beyond the factory warranty. This article explains the types of VSCs, what they cover, how they differ from the factory warranty and automobile insurance coverage, and more.

Everyone loves the feeling of driving a new vehicle off the dealership lot. Before the salesperson hands over the keys, he or she might discuss the different types of warranties available. This discussion can often confuse consumers, making them wonder if the factory warranty offers sufficient coverage to protect the car for the long term.

Many dealerships offer extended car warranties on top of the factory one. So, what exactly is the difference?

What is an Extended Auto Warranty?

An extended car warranty is also known as a vehicle service contract (VSC). A VSC does not extend the coverage of the original factory warranty, which is included in the car's price. An extended car warranty is purchased separately, and it pays for covered repairs or replacement costs in the event of a breakdown or mechanical issue. While car buyers are not required to buy an extended warranty, having the extra coverage can help extend the factory warranty's coverage limits – and save the buyer money in the long run.

Types of Extended Car Warranties

There are two types of extended car warranties:
  1. Original Equipment Manufacturers (OEM): Offered from the vehicle manufacturer, these service plans include extra coverages for a cost on top of the factory warranty. An extended warranty from an OEM often mirrors the coverage provided when the car was brand new, but extends the coverage and mileage length.
  2. Aftermarket or Third-Party Administrators (TPAs): A third-party provider, such as an insurance carrier or warranty company, offers a variety of warranty options that can be customized to the consumers' needs.

What Does an Extended Car Warranty Cover?

couple buying an extended car warranty

Extended auto warranties can help car owners avoid unexpected auto expenses for an agreed-upon period and mileage. Each contract is different, so buyers should make sure to review it in its entirety before moving forward. Each warranty will have a list of inclusions and exclusions that breaks down which repairs are covered. Extended car warranties will also detail the types of issues or breakdowns they cover.

Some vehicle service contracts also provide additional extended auto warranty insurance products that cover tire and wheel damage, key fob replacement, dent repair, lease wear and tear coverage, theft protection and more.

What's the Cost of an Extended Car Warranty?

The VSC price will depend upon several factors: the make, model, condition of the car (used or new), plus the amount of coverage and the length of the contract. Some warranty providers also consider the owner's driving record when determining the final cost. A warranty that covers a longer period and provides more comprehensive coverage than a basic plan will be more expensive, too.

Are Extended Car Warranties Worth Getting?

When purchased from a reputable company with experience in the automotive industry, a vehicle service contract is worth the money for the peace of mind it can offer. Many VSCs are flexible, require no down payment and give the consumer the ability to cancel at any time.

Many car owners think they have sufficient coverage for any issue with their vehicle because they have automobile insurance. However, insurance and warranties cover very different things. Without an extended warranty, car owners may pay out of their own pocket for certain repair needs, especially those that fall outside of a collision accident.

Automotive Extended Warranties from AmTrust Specialty Risk

As one of the nation's largest warranty writers, AmTrust Specialty Risk has been customizing innovative insurance solutions for over 20 years. Our coverage team works directly with the industry's largest manufacturers and administrators around the world to create vehicle service contracts, Guaranteed Asset Protection coverage and ancillary protection products for the automotive, RV, motorcycle, marine and powersports industries. For more information about partnering with AmTrust Specialty Risk, please contact us today.

This material is for informational purposes only and is not legal or business advice. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is appropriate or suitable for any specific business or legal purpose. Readers seeking resolution of specific questions should consult their business and/or legal advisors. Coverages may vary by location. Contact your local RSM for more information.

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