What is a car warranty?

For many, purchasing a new or used car is a major financial investment, an investment they would like to protect. As such, people want to safeguard against possible repair costs associated with a malfunctioning vehicle. While auto insurance may cover the cost of repairing a car after an accident, it does not reimburse car owners for a mechanical failure that is not the result of an accident. So, how do car warranties work?

If you’re buying a new vehicle, there is a good chance that it will come with a manufacturer’s warranty. Many used cars, especially certified pre-owned used cars, will come with a warranty as well. A standard manufacturer’s warranty will either cover a period of time after purchase (usually a few years), or a specified number of miles - usually anywhere from 36,000-100,000. However, the best car warranty for you depends on a variety of factors. Read on for more information about different types of warranties.

What is a bumper-to-bumper warranty?

A conventional, “bumper-to-bumper” warranty typically covers mechanical components not susceptible to wear through use. These parts are defined in the warranty details and typically cover things like air conditioning or the electrical system, so if these parts fail, you can take in the vehicle for repair free of charge. Something of a misnomer, a “bumper-to-bumper” warranty does not cover things like tires, windshields, engine, or even bumpers. For a warranty on the major operating mechanisms, like your engine or transmission, look for a powertrain warranty, which will cover these components for a set period of time or specified mileage.

Beyond these basic car components, warranties do not tend to apply to several features in your car. You are still typically liable for oil changes, fluid refills, tires, stereos and sound systems, and any additions you made to the vehicle (rims, tinted windows, etc.). Warranties vary by manufacturer and model of your vehicle. Always be sure to read the fine print on any warranty offer and ask specific questions about what will and will not be covered before you purchase.

Bumper-to-bumper & powertrain warranty coverage

Warranties for used cars

If you’re buying a used car, you might consider obtaining a used car warranty. Used car warranties are less common than warranties for new cars, but they’re sometimes worth the investment, depending on the year, make, and condition of the vehicle you’re purchasing. Studies have determined that the two biggest factors involved in evaluating warranty value are vehicle age and usage history.1 If you’re worried that a used car may experience some kind of mechanical failure, you should ask about extending the basic warranty that a used car may have if you purchased from a dealership.

Practical buyers keen to avoid repair issues or mechanical failure tend to purchase cars highly rated for their reliability and efficiency. Car enthusiast magazines, websites, and consumer watchdogs like consumer reports publish facts, research, and testimonials annually - typically covering things like automobile reliability and consumer experience. Reading these can help you learn which vehicles are most reliable and least likely to experience maintenance concerns.

Lemon cars and lemon laws

Prior to modern consumer protection laws and enhanced manufacturer standards, car makers in America occasionally sold defective vehicles without being held accountable. Beginning in the 1980s, individual states began passing legislation to protect consumers from” lemons,” a term indicating a faulty machine or vehicle. These lemon laws focus on preventing the sale of vehicles with prominent or terminal flaws. Cosmetic imperfections or minor issues like chipped paint or worn tires are not covered.

If you purchased a new car with serious defects, you should inform the manufacturer or dealership that sold you the vehicle as soon as possible and request repairs or a replacement vehicle. The manufacturer should then proceed to perform repairs, some of which may also be covered by your warranty. If dealership personnel suspect that damage to a vehicle is the result of owner abuse, they may refuse the claim, and the owner may be forced to take them to court.

Only a handful of states have lemon laws for used cards, so in most cases, lemon laws do little to regulate defects in used cars once they have been sold. Consumers should take extra precaution to research their used car purchase to ensure the quality of the vehicle. Hiring a mechanic to inspect a vehicle before you purchase is the surest way to predict if the vehicle is likely to experience problems.²

You can sometimes lessen the likelihood of buying a faulty used car by searching for “certified pre-owned” vehicles. Used cars don’t always come with a warranty, but certified pre-owned vehicles often carry the balance of the manufacturer’s warranty. These vehicles usually undergo a mechanical inspection that often includes refurbishments and minor repairs. Certified pre-owned vehicles may also extend the warranty beyond the manufacturer’s original term. Be sure to ask your salesperson about all that’s included in their certified pre-owned designation for the vehicle you want to purchase.

Finally, if you’re buying a used car from a private seller, you typically won’t be able to purchase any kind of extended warranty from the seller. It’s possible that a used car from a private seller will still be under manufacturer’s warranty, but you should not expect that this will be the case. If you want a warranty for a used car, or you want a supplemental warranty for a new car, you can investigate third-party warranties. These involve private companies that issue warranties that are not affiliated with the manufacturer. A third-party warranty can be a good option for a used car, but some industry observers advise caution when dealing with third-party warranty companies, stating the consumers should thoroughly research the company to ensure its legitimacy.

Extended car warranties

An extended car warranty will prolong the original warranty period or extend the mileage limit. For instance, a standard warranty might be three years or 36,000 miles, but a car buyer could extend that warranty to ten years or 100,000 miles if desired. Sometimes buyers have specific reasons for purchasing the extended warranty. This is especially the case for luxury car owners because luxury car parts tend to be more costly than parts for non-luxury vehicles.

While extended car warranties can provide peace of mind, some believe such warranties are often unnecessary. Many pundits argue that consumers are better off researching the vehicles they’re interested in prior to purchasing to make sure the car or truck they buy is unlikely to break down - saving them the costs associated with the extended warranty and the hassle associated with the break-down. Of course, the final decision is up to you.

[2] "Lemon Laws." Gale Encyclopedia of American Law. Ed. Donna Batten. 3rd ed. Vol. 6.