Because many of the disputes between consumers and extended warranty providers starts with misleading sales practices, we have provided some important questions that you should ask prior to buying an extended warranty.

• Why do I need an extended warranty?  Many people purchase extended warranties that offer little protection beyond the manufacturer warranty that is included with the vehicle purchase.  An extended warranty has minimal value unless it extends the coverage to components and systems not covered by the manufacturer’s warranty or extends the term of the included warranty.  For example, a vehicle service contract may take the form of a “powertrain warranty” that is good for 5 years or 100,000 miles.  Almost all manufacturer warranties on new vehicles offer similar protection so there may be no value to such a warranty.  It is important to determine if the term of the extended warranty begins at the end of the manufacturer warranty or from the time of purchase.  A purchaser should is also ask exactly what will be covered that would not be covered by the manufacturer warranty.
• What costs are associated with the extended warranty? The extended warranty will have a number of costs associated with it including the premium or purchase price, deductibles paid at the time of repair and maintenance costs that you may need to cover to prevent the cancellation of your policy.
• What company is the policy administrator for my extended warranty? Many people who purchase an extended warranty at the time of buying their vehicle do not realize that the dealer is really just a vendor for this third-party insurance product.  The dealership sells the extended warranty on behalf of the third-party warranty company and receives a commission.  The third-party warranty company is called the policy administrator.  It is important to research how long this company has been in business and to check with the better business bureau or online for complaints against the company.  If there are many complaints or the company has not been around long, this may be a red flag indicating that the company may not be around when you need them or may not cooperate in processing your claim.
• How is the deductible calculated? The deductible associated with a vehicle service contract is a trap to which many unsuspecting consumers fall victim.  A significant number of car buyers do not know and are never informed that there is a deductible associated with repairs under their extended warranty.  Further, the method used to calculate the deductible can have a huge impact on the cost of the protection plan.  Some contracts charge a single deductible for each visit while others charge a deductible for each needed repair.  An extended warranty that charges for each individual repair can be much more expensive.
• What scope of coverage does the extended warranty provide? Some vehicle protection plans cover only components that break while other plans cover parts that deteriorate from ordinary wear-and-tear.  You also need to determine what systems are covered because some extended warranties cover only the powertrain, which may offer no more coverage than the manufacturer warranty.  Other extended warranties may be labeled “bumper to bumper” but be far more limited in coverage.  It is important to note any systems or components that are explicitly included or excluded from coverage.
• What maintenance is required? All extended warranty plans will require that you have certain maintenance performed and failure to do so may void the extended warranty.  A buyer should always ask what maintenance is required because the cost of the maintenance adds to the overall cost of the extended warranty.  It is also important to ask where the maintenance must be performed because it may need to be done at the dealer where the car is purchased or a short list of approved shops.  The dealer or approved shops may have higher costs so this may also increase the cost of the vehicle service contract.
• How are claims handled? The claims process may simply entail bringing the vehicle to an approved shop or the dealer and having the vehicle inspected.  Once the problem has been diagnosed, the repair facility will contact the warranty provider and obtain authorization for the repair.  In other cases, you may be required to pay for the cost of repair and seek reimbursement.  A buyer should also ask how long the process normally takes to get the repair approved or reimbursed.