Old Car, New Warranty

Extended coverage is available well after you buy

So you love your car. But now that it's no longer brand-new, maybe you wish you had paid a little more attention when the dealer was pushing that extended warranty. At the time, you saw little point in adding $12 to your monthly payment for protection that would probably put more money in the dealer's pocket than in yours. Little did you know that it would cost $400 to replace a power window motor, or more than $100 for that tiny light that tells you what gear you're in.

It's not too late. You can still buy an extended warranty for the car you own, or the used car you're thinking of buying. These contracts--also called vehicle service or extended protection plans--run from a year and 12,000 miles up to 10 years and 100,000 miles. The price depends on the make, model, mileage, and age of your car, and how long you want it covered. It can range from a few hundred dollars for basic coverage on a subcompact to $2,000 and up for more-or-less complete coverage on a high-maintenance vehicle, such as a Range Rover. Generally, the earlier you buy the warranty, the cheaper it is, especially if you get it before the manufacturer's warranty runs out.

You can purchase extended warranties from a car dealer, even after you've had the car a while, but be prepared to pay premium prices, says Bob Kurilko, a vice-president at Edmunds.com who formerly developed protection plans at Nissan Motor (NSANY ). That's because they're designed to give the car manufacturer and the dealer each a 100% markup. Despite what the dealer says, the price is negotiable.

Old Car, New Warranty
Watch out for warranties not backed by the car manufacturer. Many dealers put together their own service plans; in that case, the dealership is often the only place that will honor the warranty. Even if you buy from the dealer, start your shopping on the Internet. Dozens of Web sites will give you an instant quote, and some, such as Viking Warranty and 1SourceAutoWarranty.com, will let you read the fine print online (table).

Many companies require an inspection if the car is no longer covered by the manufacturer's warranty. Usually, they'll send you to an auto-repair chain, such as Pep Boys (PBY ) or Penske Auto Centers, and the inspection will cost about $50, or $100 if a mechanic comes to your house. You can usually apply the fee to the purchase price of the plan if you buy soon after.

Make sure the warranty covers wear and tear, not just mechanical breakdowns. While that won't replace, say, windshield wiper blades, it will cover the piston rings in the engine, which usually wear out instead of breaking. The key word to look for in the contract is "failure" instead of "breakdown."

Most companies offer three levels of coverage. The basic one covers the power train: engine, transmission, axles, and other critical components. Top-end warranties, usually called bumper-to-bumper or "exclusionary" coverage, take care of everything except components specifically excluded, such as upholstery, glass, paint, and parts that wear out in normal use, such as shock absorbers, brakes, and tires. In-between policies list only the systems they will replace. Caution: Some costly parts, such as door locks or air conditioning, may not be included.

Make sure the deductible, usually $50 or $100, is per visit, not per part. Look for a warranty that's renewable as long as you own your car, and transferable should you sell it. Keep up your end of the agreement: If it requires you to change the oil every six months, keep receipts.

Unfortunately, no major ratings organizations have looked at extended warranties, and many consumer advocates say they're not worth the money. Think about it: You can pay $200 a year for an extended warranty on a four-year-old car worth $12,000, vs. $600 a year to insure a $400,000 house. But if a major breakdown would strain your finances, or you just want peace of mind, the right warranty could keep you from having to face another eye-popping repair bill.

By Larry Armstrong

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