Car Warranty vs. Car Insurance: Differences Explained
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A car warranty insures your vehicle against breakdowns caused by defective parts and other internal failures, while car insurance can more broadly cover medical bills for you, your passengers and others involved in a car crash you cause along with car repairs following both collision and non-collision sources of damage.
Read below to learn more about what a car warranty is including what it is likely to cover, how much you may have to pay for it and whether it is a better deal than auto insurance.
What Is a Car Warranty?
A car warranty is a service contract you can buy from a car manufacturer, dealership or independent carrier to receive coverage for vehicle repairs and replacement components in certain situations. As long as the warranty is active, your provider should cover sudden engine failures and other unpredictable breakdowns that arise during the regular use of your car.
When you buy a new car, it should automatically be covered by warranties through the manufacturer. In addition, warranties generally follow the vehicle, which means you may be covered by someone else’s warranty if you buy a used car from them. However, you should look into the details of the warranty when you buy a used car since coverage may be limited in some cases if the original owner sells the vehicle.
What Is an Extended Car Warranty?
You can purchase an extended auto warranty to receive similar coverage for sudden internal failures after your car’s initial manufacturer’s warranty expires. Extended warranties differ from initial factory warranties in that they may require deductibles like car insurance policies do.
A deductible is what you have to pay out of pocket for covered claims before your warranty provider will pitch in toward the repair bill. For example, if you have a $100 deductible and you need to spend $2,000 to replace your engine, your warranty provider would contribute $1,900 toward your claim.
The type of parts that will be used in your car repairs will likely depend on the type of company you purchase your extended warranty from. You may be able to buy an original equipment manufacturer (OEM) warranty from the vehicle manufacturer or an aftermarket warranty from a third-party provider.
How Long Does a Car Warranty Last?
Manufacturer’s warranties usually cover repairs and replacements for the first three years after you purchase a new vehicle or until you drive 36,000 miles, whichever comes first. However, your exact coverage period may depend on the type of warranty you have. Meanwhile, extended warranties can vary substantially when it comes to the length of their coverage periods, often lasting between two and seven years.
What Voids a Car Warranty?
There are multiple types of damage and misuse that can void a car warranty, meaning your provider will no longer cover car repairs under any circumstances. For example, your warranty may be voided if your vehicle is issued a salvage title after being totaled or incurs damage due to a natural disaster such as a flood.
In addition, your warranty can be voided because of actions you take like tampering with the odometer and participating in dangerous activities like drag racing or off-roading. Finally, car warranty companies may cancel your coverage if you install an unauthorized aftermarket part in your vehicle, although this only applies if the part can be linked to vehicle damage.
What Is Covered by a Car Warranty?
Generally, car warranties only cover vehicle parts that stop working due to design flaws and other unexpected internal failures. Not all warranties cover every part of your vehicle but you can generally cover the majority of your car’s components with the right set of warranties.
What Isn’t Covered?
Vehicle warranties don’t cover any external sources of damage such as car accidents or falling objects. They also won’t cover your regular maintenance costs and won’t pay to fix damage that can be attributed to neglect or poor maintenance on your part.
In addition, warranties don’t cover normal wear and tear or anything that could be considered an expected failure. For example, car batteries usually last three to five years. As a result, a warranty may cover a car battery replacement if your battery dies within one year but likely won’t cover a car battery that dies after 10 years.
Finally, you should note that warranties may exclude coverage for certain car parts altogether. For example, parts that experience wear and tear rapidly like wiper blades and oil filters often aren’t covered. Meanwhile, tires and batteries may require their own separate warranties.
What Are the Benefits of a Car Warranty?
The main benefit of a vehicle warranty is that it can provide coverage for breakdowns that wouldn’t be covered by a standard car insurance policy. Combined with full coverage auto insurance, a car warranty may offer you peace of mind since your vehicle will be insured against most perils that could possibly damage it or keep it from functioning properly.
What Are the Disadvantages of Car Warranties?
However, a major drawback of car warranties is that they only cover problems that originate within the vehicle itself. This means your warranty won’t cover damage caused by you, another driver or any other outside force. In addition, warranties don’t include any sort of liability coverage.
What Types of Car Warranties Are There?
There are multiple types of warranties that may come with your new car. See the below table for an overview of several auto warranty types including what vehicle parts they cover and examples of how long they can remain active.
Sample Coverage Period
Also known as a bumper-to-bumper warranty, this warranty covers every OEM part in your vehicle
Three years or 36,000 miles
Covers the engine, transmission and other components responsible for moving your vehicle forward
Five years or 60,000 miles
Covers seat belts and air bags
The vehicle’s whole lifespan
Covers body panels that have completely rusted through
Five years with no mileage limit
Covers catalytic converters and other components responsible for limiting vehicle emissions
Up to eight years or 80,000 miles
Hybrid and EV Component
Covers batteries, electric motors and other components of hybrid and electric vehicles (EVs)
Up to 10 years or 150,000 miles
Are Car Warranties Required When Buying a Vehicle?
Manufacturer’s warranties are required in the sense that you will automatically receive them when you buy a vehicle since their price is included in the amount you have to pay for your new car. However, you are not required to buy an extended warranty after your initial warranties expire.
How Much Do Car Warranties Typically Cost?
You won’t have to pay anything extra for a factory warranty since it should be built into the price of your new car. Meanwhile, extended warranties average around $1,000 per year for bumper-to-bumper coverage but costs may vary depending on the age and mileage of your vehicle and what components the warranty covers.
Is a Car Warranty the Same as Car Insurance?
No, car warranties differ from car insurance in numerous ways. For example, auto insurance policies tend to have lower premiums than extended warranties but may also require higher deductibles.
Will My Car Warranty Cover Me in an Accident?
No, you will need to rely on your car insurance after an accident since warranties don’t provide any coverage for car crashes. Property damage liability coverage can pay to repair or replace someone else’s vehicle if you damage it in an accident, while collision insurance, uninsured motorist coverage or underinsured motorist coverage could cover your own car repairs after an accident depending on the details of the collision.
Meanwhile, bodily injury liability insurance can cover someone else’s medical bills after you injure them in an accident, while your own medical expenses and your passengers’ medical expenses may be covered by personal injury protection, medical payments coverage, uninsured motorist coverage or underinsured motorist coverage.
Do I Need Car Insurance if I Have a Car Warranty?
By and large, you must still maintain auto insurance even if you have a car warranty. Car insurance is required by law in every state except for New Hampshire and Virginia and a warranty is not a legally acceptable substitute for insurance coverage.
Should I Get a Car Warranty if I Already Purchased Car Insurance?
While an extended warranty may seem like an appealing option to fill in the gaps in your car insurance coverage, it’s generally better to simply add mechanical breakdown insurance (MBI) to your auto insurance policy. MBI provides similar coverage to a warranty and usually costs around $30 to $120 per year, making it a far better deal than an extended warranty.
That said, an extended warranty could still be worthwhile if your car doesn’t qualify for MBI since warranties may have more lenient eligibility requirements. For example, GEICO only offers new MBI policies for cars that are less than 15 months old or have less than 15,000 miles. Conversely, Endurance offers extended warranties for cars that are less than 20 years old regardless of mileage.