The Best Extended Warranty
It’s an industry known for its scamminess — and for not being worth it. But the best extended warranty can provide peace of mind that you won’t have to foot a major car repair bill. To find the policies that will actually deliver, we combed through the coverage and fine print of nearly 40 providers to find three that we trust. Then we talked to two industry consultants to double-check we got it right.
If you’re scouring the internet for information about whether purchasing an extended car warranty is worth it, you’ve already read a lot of warnings about warranty scams, tips for negotiating with dishonest salesmen, and statistics that show you’ll probably never use the coverage.
The fact is, buying an extended car warranty is a gamble.
Consumer Reports puts the average cost of an extended warranty at $1,214, and the median out-of-pocket savings on repairs these products provide at $837. That’s a $377 loss. But for some, those odds aren’t a deterrent — the comfort knowing that unexpected repair costs are covered is worth a few hundred bucks. In that case, you’ll want to buy an extended warranty that fits your needs, and most importantly, front a trustworthy provider.
- Sell service contracts directly to consumers not just through a dealership
- Administer their own contracts
- Are backed by an insurance company
Our Picks for Best Extended Car Warranty
We found three extended service contract providers that met all of the above criteria. But that’s not the only thing they shared.
When we hopped on the phone with each of them, we were able to speak with a well-informed customer service agent who was happy to answer our list of questions — without hounding us to buy.
To put this in perspective, another provider we contacted and don’t recommend, Delta Auto Protect (which administers its own contracts, but isn’t insured), wouldn’t let us speak to anyone without first providing a full name, phone number, email address, and ZIP code. When we asked to be connected to the extension of the agent who had contacted us about the quote we requested online, we were told it was outside of normal business hours (funny thing: It wasn’t). After quite a few unreturned phone calls, we realized that Delta wasn’t actually licensed in all the states it claimed to be.
Our experience with our three top picks wasn’t like that at all; our questions were answered quickly and courteously. So how do you pick which one to buy a warranty from? First, you’ll want to see if they cover your car. That’ll depend on its age, mileage, and if it’s known to be a troublesome model. If the company won’t cover your car, it’s out of the running for you.
Next steps: Get your hands on a contract.
There are a lot of extended warranty scam companies — so many, in fact, that the Federal Trade Commission issued guidance for consumers on this topic. Scam companies will usually say you have to buy without ever seeing a contract — even a sample one.
Sample contracts won’t show you your actual premium (that will depend on a number of factors, including your car’s make and model). But they will detail the company’s specific terms and conditions, giving you a clearer idea of what you’d be signing up for. (And before you fork over any cash, read your real contract’s full T’s and C’s — not just the sample.)
EasyCare posts its sample contracts right on its website. .
Once you have a quote and sample contract, compare the warranties in these three areas:
1. Who can do the repairs?
Warranty Direct lets you pick any repair facility — local, chain; licensed or unlicensed. It’s up to you. Both Endurance and EasyCare let you choose your own repair facility as long as it’s licensed. One of the most recognized licenses is issued by the National Institute of Automobile Service Excellence (ASE). With nearly 1,500 facilities across the country with ASE-certified technicians, this isn’t much of a hurdle, and you can search for licensed shops right on ASE’s website.
2. How long do you have to you change your mind?
Endurance and EasyCare both have a 30-day review policy, meaning if you decide within 30 days that its coverage isn’t for you, you can cancel and get a full refund. Warranty Direct offers both 30- and 60-day options. Just keep in mind: Your policy doesn’t actually go into effect for 30 days and 1,000 miles, so you can’t exactly take your policy for a test-drive (not that it would make sense for the company to pay for your repairs in the first month and then give you all your money back).
3. Do they have a coverage option that fits your needs?
When Consumer Reports ran the numbers, it found that the best bet is to get the most coverage you can — the small price jump over more a basic plan pays off over the life of the warranty. But, not every model and mileage can get complete coverage with every company, and not every company covers the things you might want protected most. Our advice: always double-check the fine print.
Endurance lets you choose from three tiers of coverage.
What We Looked For in the Best Extended Car Warranty Providers
We started with 37 providers of extended car warranties and ended up with three standouts. Along the way, we uncovered a lot of companies that were actually third-party sellers offering the exact same products. What’s more, not all of those providers were backed by insurers, meaning that if their business failed, your repair bills would be left unpaid.
The extended car warranty industry has a fairly incestuous business model, with many companies acting as middlemen for a handful of contract administrators. Basically, there are three types of companies: ones that sell these protection products, ones that actually fulfill the terms of the contract you’ve purchased, and ones that do both.
We looked for providers that sell service contracts directly to consumers, not just through a dealership.
The first place you’ll most likely hear about extended car warranties is at the dealership when you purchase your car. Once you go to fill out the paperwork, you’ll meet with a finance manager who will try to sell you ancillary products like an extended warranty, dent and ding protection, or tire and wheel coverage.
Laws vary by state For California car owners, your only option is to purchase an extended warranty through a dealership. That’s because it’s illegal in that state for companies to sell extended car warranties directly to consumers. A similar law exists in Maryland, but residents there can purchase directly from providers that administer their own contracts — meaning our top picks are fair game.
So why did we cut companies that only sell through dealerships? The fact is, when purchasing one of these warranties through a dealer, you won’t be picking the provider. Instead, you’ll be buying a contract from whatever company the dealer has an existing relationship with. Are you going to call around to find out which dealers offer coverage from a company you like and then buy your car from them? Probably not.
And if you’ve already bought a car, going back to the dealership to get an extended warranty will cost you a hefty vehicle inspection fee. That’s the dealer’s way of ensuring it won’t be on the hook for pre-existing conditions. “There will be some sort of check up on the car if you go back to the dealer. But if you’ve taken good care of your car by maintaining it at the correct service intervals, you don’t have anything to worry about,” says James Bell, an industry consultant formerly of General Motors and Kelly Blue Book. On the flip side, a company that sells directly to consumers won’t charge this fee, but there will typically be a waiting period of 30 days and 1,000 miles before coverage starts for the same reason — the company doesn’t want to pay for the repairs you already need.
Allstate, Ally/GM Protection Plan, Alpha Warranty Services, American Auto Shield, AUL, CNA National, EFG Companies, Forever Car, GWC Warranty, HondaCare, OwnerGUARD, Portfolio, Warranty Solutions, Zurich
We looked for providers that administer their own contracts.
At this point, we were down to companies that sell directly to you, rather than through a dealership (there is some crossover — Endurance sells both directly to consumers and through dealers). But that left us with two types of companies: ones that sell their own contracts and ones that sell somebody else’s. We decided to cut out the middleman entirely. We couldn’t see recommending one company over another if both companies were selling you the same thing.
What’s more, once you buy the extended warranty, you likely won’t be going back to that seller. You’ll have to go to the administrator of the contract to get your claims paid. That’s right: Once you buy, you’ll be dealing with a completely different company that you have no experience with and likely don’t know anything about. If that company ends up having great customer service and an easy claims process, awesome! If it’s a nightmare to deal with, how were you supposed to know? You didn’t even buy from it in the first place.
We’d rather recommend the company you’d actually be doing business with, rather than just some random seller.
AA Auto Protection, AAA, Atlas Auto Protection, AutoAssure, AutoPom!, Carchex, Continental Warranty, Key Vehicle Resources, National Repair Solutions, National Vehicle Protection Services, Nationwide Auto Guard, Repair Defense Network, The Auto Warranty Agency, Toco, True Auto, USAA, Vehicle Assurance, Vehicle Protection Headquarters
We looked for providers that are backed by an insurance company.
Most states require providers to register with the Department of Insurance and prove they can pay their customer’s claims. There are usually three ways providers can do this: They have $100 million in assets, are backed by an insurer, or have a sizeable reserve account.
Providers with $100 million in assets are typically auto manufacturers, so they are probably a safe bet. However, you usually can only buy these products through a dealership. (If you’re buying from a dealer and you want an extended warranty, definitely check if the manufacturer’s extended warranty is an option.)
“You can buy an extended warranty from the manufacturer that literally says, ‘Go into your glove box and take a look at your owner’s manual; this covers everything in your original manufacturer’s warranty for an additional three years.’ It’s a rare product, but it exists.”
If you’re buying directly from a company, your choices are insured providers and providers with a reserve account. But for providers with a reserve account, there’s no backup plan. If the business goes under, you’ll likely be stuck paying for your own car repairs. On the other hand, if your provider is insured, the insurer will step in to pay your claims — no matter what happens to the company you originally bought the coverage from.
Delta Auto Protect, Wanted Auto Protect
Did You Know?
The extended car warranty business gets much of its bad rap from the 2010 bankruptcy of US Fidelis.
At the time, US Fidelis was one of the largest extended car warranty providers in the United States, yet it was selling illegal insurance contracts that were unlicensed and unauthorized, as well as engaging in illegal sales tactics. Yikes. The resulting consumer fraud lawsuits drove the company into financial ruin — but not before it had defrauded consumers in at least a dozen states.
Even today, there are companies running extended warranty scams, mostly through mailings or over the phone. And even if we didn’t have any outright scammers on our initial list, we did come across more than one business with very low online ratings and a high number of consumer complaints (one company, called Auto Assure, has fielded more than 160 complaints with the Better Business Bureau in the past three years alone). So yes, it’s easy to come across bad players that look legit.
Extended car warranties aren’t really warranties.
Strange, but true: These products don’t fit the legal definition of a warranty. Technically speaking, the cost of a warranty is included in the purchase price of the product you’re buying (in this case, a car). The term “extended car warranty” is mostly used as a marketing gimmick — it makes the product sound like it’s an extension of the manufacturer’s coverage, when in fact it’s a vehicle service contract sold by a third party.
So, just because you’re buying an “extended warranty” doesn’t mean you’re actually extending the coverage you got when you bought your car. This isn’t necessarily a bad thing: Extended warranties can actually be tailored to fill the gaps of a manufacturer’s warranty. For example, J.D. Power found that problems with technology like Bluetooth and GPS are the top reasons for declines in vehicle dependability — features manufacturer warranties won’t cover, but extended warranties might (Endurance and EasyCare cover in-car technology that was installed by the manufacturer in some of its policies, but not aftermarket items; Warranty Direct offers that protection as an add-on). Other bonus coverage: key fob replacement and rental car service for when your vehicle is in the shop.
“You can buy a service contract that covers lost or stolen key fobs. But if you call an auto manufacturer and say, ‘I lost my key fob,’ they will tell you, ‘That's not covered under the manufacturer's warranty — that'll be $800 please.’”
A disclosure on Endurance’s site discusses what happens when a “warranty” really isn’t a “warranty.”
If you don’t buy from a dealer, your coverage won’t start right away.
Your extended warranty coverage starts immediately if you purchase from a dealership, while coverage you buy directly typically won’t kick in until 30 days and 1,000 miles have passed. That’s because direct-to-consumer companies aren’t going to see your car in person, so they’re betting that any pre-existing condition your car has will make itself known before then — and they won’t be on the hook for it.
One thing to keep in mind: If you’re buying coverage from a dealership after you’ve bought your car, the dealer will charge a hefty inspection fee. The delay in direct-to-consumer coverage is intended to mitigate this extra cost.
The Bottom Line
Extended vehicle warranties are among the most controversial protection products, with many major outlets — including Consumer Reports — claiming they aren’t worth the money. But if it’s peace of mind you’re after, and don’t mind paying extra for it, go with a company that’s insured and sells its own policies.
Check if the provider is licensed. This is the quickest way to determine if an extended warranty provider is legitimate. Thirty-five states (including Florida, Missouri, and New York) now have laws requiring that extended warranty companies apply for a license with the Department of Insurance. If your state doesn’t have such a law, it’s likely the company does business in a state that does — which means you can look it up elsewhere. (The Missouri Department of Insurance makes it easy to search for providers by company name.)
Request a copy of the full terms and conditions. The quickest way to ensure that you’re dealing with a real company is to request the full terms and conditions be emailed to you. Scam companies will usually say you have to buy before they send this information.
Study those terms. There are always exemptions that outline what’s not covered. It’s not unusual for a service contract to exclude repairs you haven’t reported in a specified amount of time, fees for ordering special parts, or to require standard maintenance to keep the warranty valid. But if the engine or transmission is excluded, you might want to reconsider. As Bell suggests, “You want to make sure that whatever program you enroll in is comprehensive enough. You want to really take a look at the fine print and see what it’s going to cover, and see what limitations are on you as the owner of it. Is it transferable if you want to sell the vehicle to somebody else; is there a deductible? It’s not a matter of saying, ‘Oh, I can afford it,’ and signing on the bottom line. It’s making sure you’re getting what you need.”