Extended warranties cover mechanical breakdown and not necessarily the normal wear and tear a vehicle experiences. Extended warranties are much like vehicles; they come in every shape and design.
Before purchasing an extended warranty product ask yourself:
- How long do I expect to keep my vehicle?
- How much do I know about general vehicle repairs?
- Can I afford to pay for my own major vehicle repairs?
- Is there a claim limit (a maximum amount the warranty company will pay regardless of the actual cost of repairs)?
- Does the warranty company require repairs to be carried out only at a specified repair facility?
- How many kilometres do I plan on driving?
- Is there a deductible (an amount the consumer must pay towards the repairs before the warranty coverage begins)?
- Do I have the financial ability to cover a significant deductible?
- Is the extended warranty provider insured or not?
- Read the fine print: does it contain an exclusionary period for pre-existing conditions (i.e. a period during which no coverage is provided)?
If an extended warranty is something you're thinking about purchasing or adding to an upcoming vehicle purchase, consider the following:
Do I need an extended warranty?
Whether buying new or used, if your vehicle comes with a factory warranty that will cover you for the time you plan to drive your vehicle then an extended warranty doesn't make sense.
If you plan to drive your vehicle longer than this period, you may consider purchasing an extended warranty which goes beyond the factory coverage period.
If you purchase a vehicle no longer covered under factory warranty an extended warranty may be your only coverage.
Who offers warranties?
Extended warranties are provided by vehicle manufacturers (Ford, Toyota, GM), third-party companies and some registered motor vehicle dealerships.
Extended warranties can be offered by a motor vehicle dealership during, and sometimes even after, a vehicle has been purchased.
Note: If you're buying a vehicle from a dealer do not assume the warranty is from the manufacturer. The dealer may offer extended warranties from the manufacturer as well as third-party warranties.
Type of Coverage
Extended warranties can be tailored to cover parts and labour and specific items such as: transmission, engine and other major components. Beware of exclusions (such as seals and gaskets) that limit coverage.
Be sure to understand what is covered under your agreement and what is excluded as they vary by provider.
Extended Warranty Terms
Length of time and kilometre limits vary.
If you are buying a manufacturer's extended warranty for a vehicle already under a manufacturer's warranty, the extended warranty starts the day you take delivery of your vehicle. This will cause an overlapping of warranty coverage.
Extended warranties may be negotiated - no two are the same.
Dealers usually mark up extended warranties so there usually is room for negotiations.
Dealers offer different types of extended warranties with a wide range of coverage and as you increase coverage or term the price normally increases.
If the price seems too good to be true pay close attention to time and kilometre limits, the deductible along with items covered and claim limits.
A deductible is the predetermined dollar amount related to each claim for which you are responsible.
Deductibles are found in most extended warranty products and vary just like with insurance policies.
A deductible is payable for each claim you make under the extended warranty.
Some extended warranty providers charge more than $100, in addition to costs for the extended warranty, to activate its coverage.
Consumers may need to call the provider to activate its coverage as the dealer may not be able to do this for you.
This call for activation is simply a marketing tool by the extended warranty provider to up-sell you on their products which may be more costly.
You should ask your dealer ahead of time if there is an activation fee and get the amount in writing.
All-in pricing legislation requires this fee to be included in the advertised vehicle price. Notify OMVIC if it isn't.
Most extended warranties require consumers to maintain their vehicle within manufacturer specifications or those specifications set out within an extended warranty.
OMVIC recommends consumers keep records of all maintenance performed on their vehicle, including fluid changes, and any work done to the body or mechanical components to help ensure a repair claim isn't disputed.
A manufacturer's extended warranty may allow you to complete repairs at any franchise dealership. A third-party product may direct you to specific repair facilities. A dealer warranty offers repairs at their facilities. Consider this carefully when reviewing your options especially if you travel.
If your warranty provider requires you to have repairs, or an inspection done, at the premises they own and operate you may be charged more than fair market value which deems your warranty useless.
Before you purchase your extended warranty, be sure to understand any claim limits which restrict coverage. Consider whether those limits will provide adequate coverage in the event a repair is required.
For example, some extended warranties have claim limits of only $500 while an engine or transmission repair may cost $2,500 or more.
Always inquire about the ability to transfer your extended warranty. It can add value to your vehicle and may help when reselling.
After purchasing an extended warranty
- Follow up with the extended warranty provider to ensure it is activated
- Ensure you receive a copy of your contact with specific details
- Review your obligations to maintain the extended warranty coverage