There are many reasons for buying a warranty when you purchase a new vehicle, but some of those reasons might be based on inaccurate information or even lies.  Dealers are often offered incentives if they make certain financial quotas, and therefore put pressure on customers to purchase warranties that are overpriced or completely unnecessary.

Auto warranties can provide you with important coverage in the event that something goes wrong with your vehicle, but many include numerous exclusions that are hidden in the fine print, and others provide coverage only for a limited amount of time or miles.  It is extremely important to read every warranty fully before agreeing to purchase it.  Some warranties are definitely worth the added expense when purchasing a new car, but others simply put more money into the pocket of the dealer.

Basic Warranties:

Basic warranties, also called bumper-to-bumper warranties, cover nearly everything on a vehicle, with the exception of general wear-and-tear items such as hoses, brakes, wiper blades, and tires.  This type of warranty typically provides protection for three years or 36,000 miles, but may be extended by some manufacturers.

Powertrain Warranties:

Powertrain, or drivetrain, warranties cover major components of a vehicle, including the engine, drive shaft, and transmission.  Wear-and-tear items are not covered, and coverage generally lasts for three years or 36,000 miles.  Before agreeing to purchase this type of warranty, make certain it covers all critical internal engine components and contains no fine print listing exclusions.

Extended Warranties:

This type of warranty is often unnecessary, unless you intend to keep and use your vehicle for many years.  To prevent your claim from being denied, it is essential that you ask your warranty provider a number of questions before agreeing to purchase an extended warranty.

1. Does the vehicle need to be inspected by an approved expert before repairs can be performed?
2. Are repair costs paid for upfront, or will you be required to pay for them yourself, file a claim, and then wait to be reimbursed?
3. If your warranty is bought at the time you purchased your vehicle, are you allowed to use your coverage for repairs made at a location other than your dealership?

It is not unusual for customers to pay for repairs out-of-pocket, and then not receive reimbursement because their claim is denied.  Extended warranties should be fully researched before purchase, and the rules set forth in the policy need to be strictly followed.

Luxury Items Warranties:

This type of protection provides coverage for luxury (generally electronic) components, including navigation systems, DVD players, phones, and other equipment.  While the thought of replacing these expensive items in the event that they become damaged or lost is unsettling, often the cost of the warranty is higher than the repair or replacement cost of the equipment.

Rust / Corrosion Warranties:

Rust and corrosion warranties will cover the cost to repair the damage done to the body of your vehicle by rust or corrosion.  However, this type of warranty typically does not cover surface rust, which means the corrosion must be long-term in order to be covered.  Proper washing and waxing of a vehicle generally provides adequate rust and corrosion prevention, and costs significantly less than this type of warranty.