Car Warranty Prices: Secrets Every Shopper Should Know

Car Warranty Prices

Car warranty prices can vary, depending on the make and model of your vehicle, it’s age, it’s mileage, and many other factors.

Generally a warranty will cost less than one major repair on your vehicle.

One thing you don’t want to do is simply buy the cheapest or lowest-cost warranty you can find. Here’s why:

Whether you want a new car warranty or a used car warranty, when you buy the cheapest one you can find, you may as well be taking money out of your wallet and flushing it down the toilet.

Here are the unseen costs of buying a warranty based only on price:

No insurance backing

The company selling the warranty is what’s called a “risk retention group”, meaning they pay tomorrow’s claims with today’s profits, instead of having an administrator that is backed and underwritten by a reputable insurer.

These products will usually have very low car warranty prices, since they are not backed by an insurance company that makes sure funds are always available to pay for your repairs.

Companies like this eventually sell so many warranties at such low prices that they can’t afford to pay claims. In order to stay in business, the company will do one (or more) of three things:

  • Sell you less coverage than you think you’re getting
  • Require that you pay for repairs in full up front and then
    send in your receipts.
  • Deny legitimate claims altogether, for no reason.

Since there is no safety net in the form of an insurance-backed reserve fund to pay claims, you aren’t guaranteed that your claims will be paid or that you’ll get a refund of any of the money you’ve paid if they go out of business or decide to close their doors for any reason.

Labor and coverage caps

Uninsured warranties will have very low labor caps and even lower car warranty prices. Standard labor rates can be anywhere from $35/hr to upwards of $100/hr. If your dealership or mechanic charges more than the cap on your plan, you’re responsible for paying the leftover cost out of pocket. This can mean hundreds of dollars out of pocket in addition to your deductible.

You might also have a coverage cap, where on a full-coverage plan, the limit of liability is $3500, instead of the value of the vehicle.

You want a warranty that covers you up to the value of your vehicle every time you go in for repairs, not a warranty that is done after one major repair. On a Powertrain warranty it’s best to have a plan that covers you up to at least $5000.

Limits on where you can use it

There might be a list of “approved facilities” that you have to use. Or, if you bought it from a dealership, you’ll have to return to that specific dealership any time you need repairs.

What happens if you move? Or if the dealership you got the vehicle from goes out of business? Or what if you have a breakdown out of town or out of state? So much for being worry-free while you’re on vacation.

Stay on the safe side by going with a well-established and reputable company. You may pay a little more but you will have coverage that you can use at any service facility (or any dealership that services your vehicle’s make) in the U.S. or Canada.

Cash Payout/Reimbursement Plan

You may be required to pay for the repairs in full up front, then send in your receipts and hope that the claim is approved. If they claim is approved, you’ll receive a check (sometimes it can take anywhere from 6-8 weeks) for however much the warranty company decides they want to pay you.

Save yourself the hassle down the road. Instead of shopping based only on car warranty prices, always make sure you basing your final decision on the quality of the coverage, company reputation and the financial stability of the insurer.

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