Extended Warranty For Used Cars: What Does It Cover?

Before we answer this question, let's first look at the difference between a manufacturer warranty and an extended warranty since both can apply to the sale of a used car.

What does the manufacturer warranty cover?

When a car is purchased brand new from the dealership, it comes with the new vehicle warranty included in the price. The following coverage typically comes standard:

• The New Vehicle Warranty (aka comprehensive or bumper-to-bumper) covers the complete vehicle against electrical or mechanical problems, minus a handful of maintenance or wear items. For most carmakers, the new vehicle warranty is set at three years or 60,000km from new, whichever comes first. Components not included under any standard bumper-to-bumper warranty include tires, brakes, belts, and hoses.
• The Powertrain Warranty covers major components that are required for the vehicle to power its own movement. Powertrain coverage is often longer than bumper-to-bumper coverage (up to five years and 100,000 km). Some carmakers have powertrain coverage up to 10 years or 160,000 km. The powertrain consists of the engine and transmission and a few related parts. 
• The Emissions Warranty is a federally-required coverage for components that directly affect a car’s emissions. Items like the powertrain control module and catalytic converter are commonly included.

Generally, if you buy a used car that is less than three years old and has clocked fewer than 60,000km, the new vehicle warranty is usually still in effect. The same goes for the powertrain coverage. Make sure to ask the seller if the factory warranty is still in effect because it can be transferred to the new owner.

But what happens if you want more coverage, or if the car you have your eye on is no longer covered by any warranty? That’s where an extended warranty comes to the rescue.

What does an extended warranty cover?

When you buy a used car with a manufacturer warranty still intact, an extended warranty can be purchased for extra coverage. However, most buyers choose to purchase an extended warranty to replace an expired manufacturer warranty. Extended warranties are available from the carmaker itself (OEM) or from aftermarket providers. OEM extended warranties very much mimic the warranty offered by the carmaker when the vehicle was brand new (i.e. bumper-to-bumper), and maybe even a few extras such as roadside assistance.

Aftermarket extended warranties are very similar to OEM extended warranties, but instead of being offered by the carmaker, they are offered by independent retailers or insurance companies. They are optional and customizable—you can forego the purchase or you can opt into a plan that fits your needs to a tee. There are variables to choose from, such as how many months you want coverage (24 months, 48 months, etc.) and distance limitations.

When you're looking at extended warranties, you'll notice that different tiers exclude some components to help keep the cost low. The most basic extended warranty you can get is extended powertrain coverage. If you want a warranty that will only cover the major components (the engine, transmission, differential, transfer case, and related parts) then this is for you. You can also purchase a policy with a higher deductible to keep the cost of the policy low. Accepting a higher deductible means that, in the event that you need to make a claim, you'll be responsible for covering a higher portion of the repair costs out of pocket.

What types of extended warranty protection exist?

Although not every provider offers the same benefits and some of the cheaper plans offer only the basics, here’s what you can expect from most extended warranty companies in Canada.

1. Vehicle repairs

Protection from the cost of unexpected vehicle failures is the main reason people buy an extended warranty. It includes the labour to correct the issue and the parts required for the reparation. Depending on the plan, some necessary fluids or associated parts are not covered, so you may have a portion to pay.

2. Roadside assistance

If you experience a problem that leaves you stranded with an undrivable car, the extended warranty will cover the cost of a tow to the repair shop. Many roadside assistance plans also include fuel or oil delivery and battery boost services.

3. Rental car coverage

Unplanned repairs at the garage can leave you without wheels to get around. Many extended warranty contracts include rental car reimbursement if your car needs to stay in the shop overnight. It’s often limited to a maximum of five days, and only if the repair is covered by the warranty.

4. Tire & rim warranty

Some warranty providers include road hazard coverage for tire punctures and blowouts and any related rim damage. 

How to make a claim

If you have a problem that you suspect is covered by your warranty, it needs to be diagnosed by an authorized repair facility. Your dealership or retailer is usually a good place to start but if that’s too far to go or you’re out of town, you can call your provider's customer service line to enquire about your next steps. 

A mechanic will diagnose your concern and the service advisor will register the issue with a claims adjuster. They’ll let you know if the repair is covered or not and if there’s a portion you have to pay.

How to keep your warranty valid

In the event of an electrical or mechanical issue, you might be tempted to bring your car to your local mechanic for repair, but always check with your warranty provider first. Some factory or OEM warranties will state that this work can only be done by a certified OEM (Original Equipment Manufacturer) repair centre. With extended warranties, check the terms of your contract or speak with a customer service rep. You might need to choose a repair shop within a network that has been authorized by your provider. Any repairs completed outside your network may not be covered or only covered up to a certain amount.

It's also very important to understand how routine maintenance keeps your (manufacturer or extended) warranty valid. Car owners are required to do their part in preventing avoidable breakdowns and failures by maintaining the vehicle to the manufacturer's recommendations.

If an issue is directly related to the lack of maintenance, that repair may not be covered under warranty. For example, if you neglect to change the oil in your car’s engine for more than two years or 40,000km and it seizes, it’s probably because the engine is oil-starved and you might have to pay for the repair out of pocket.

Essential routine maintenance requirements are listed in your owner’s manual or maintenance schedule. There will be oil changes and fluid maintenance to perform at regular intervals or according to your vehicle’s oil life monitoring system. 

Required maintenance items for manufacturer and extended warranties alike include: 

• Routine oil and filter changes
• Transmission flushes
• Cooling system flushes
• Timing belt replacement
• Spark plug replacement
• Engine valve clearance adjustment (for some cars)
• For 4x4s and AWD vehicles, differential and transfer case fluid services

Important: All tasks listed above should be recorded in your maintenance schedule. Keep all the receipts and invoices filed away for future reference. 

Where can I go for routine servicing?

Since a few providers have stringent service requirements, you should double-check, but generally, visiting a non-authorized shop for routine maintenance and service will not void your warranty. You can do the work yourself or bring your car to a competent neighbourhood mechanic, local dealership service department, or franchised service centre like Mr. Lube. However, it’s very important that the person carrying out the work:

• Always follows the factory maintenance guide
• Keeps meticulous service records
• Provides detailed receipts and invoices

Oil changes, tire rotations, chassis lubrication, fluid and filter purchases, and more – if you can’t clearly prove it’s been done in the event of a mechanical breakdown or failure, you risk having the claim denied. 

Can the warranty be transferred from owner to owner?

Vehicles are constantly changing hands in Canada, but what happens to the warranty on a car when you sell or trade it? Manufacturer (or factory) warranty carries along with the vehicle until its expiry, so any subsequent owner can take advantage of any remaining warranty whether they buy it directly from you or from a dealership or online retailer. While it’s advisable to change owner information with the manufacturer, it often doesn’t usually affect whether the warranty is still valid or not. 

Just like the factory warranty, extended warranty contracts are attached to the VIN and cannot be transferred to another vehicle. However, you can usually transfer the remainder of an extended warranty to a new owner. The warranty needs to be transferred by the original contract purchaser and should usually be done within 30 days of the sale of the car. The seller should include the sale documents, maintenance history, odometer reading, a transfer application, and a processing fee. To understand everything that’s entailed with transferring a contract, make sure to read the terms and conditions of your service contract.

If you sell or trade in your vehicle with a dealership or retailer, the extended warranty cannot be transferred.

Should I purchase an extended warranty?

Unlike buying a brand new car (that comes with warranty protection built into the price), extended warranty protection for a used car is optional. There’s a ton of value in having the protection of an extended warranty on a pre-owned car. A standard policy is an additional cost to consider but this cost could be minimal compared to what some repairs could set you back. If you do decide to sign up, it’s a good idea to organize warranty protection when you purchase the pre-owned car. You can add the cost of an extended warranty to the total amount you’re financing rather than paying it in one lump sum.

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