Extended Warranty for Used Car: Smart Move or a Waste of Money

There’s a general belief that nothing manufactured can be truly perfect. Anything with two or more moving parts is prone to defects or failure over time. To counter this lack of guarantee carmakers offer a standard warranty for their offerings. 

While a standard warranty is free and restricted to a certain time frame and kilometres, auto manufacturers offer a paid warranty that extends beyond that. This is an extended warranty. You can avail this extended warranty even for used cars. Here we tell you if and why you should go for extended warranty for your used car.

What is a Warranty?

New cars always carry a risk of potential breakdown that can happen due to human error during manufacturing or defective parts. Carmarkers offer a standard warranty to counter this. A warranty is a written promise to repair or replace a broken or defective part free of cost. A standard warranty period typically lasts around three years or 1,00,000 kilometres, whichever comes first.

For example, if your new car’s AC stops working, the manufacturer will repair or replace the AC under warranty, at no cost to you. 

What is Extended Warranty?

Most carmakers offer extended warranty which comes into effect once the standard warranty expires. This is beneficial if you accumulate a lot of kilometres because as the car ages, it experiences more wear and tear and likelihood of a breakdown and costly repairs rises. An extended warranty is generally around 6 years / 1,60,000 kilometres. 

Lifetime Warranty: Myth or Reality

Yes, carmakers in India like Volvo offer Lifetime parts warranty for their cars while Mahindra and MG offer lifetime battery warranty for their electric vehicles. That said, there are several caveats, meaning a lifetime warranty may not be as comprehensive as it sounds. 

In the case of all three carmakers, the parts and battery warranty is exclusive to the first owner and is void once the car is sold or ownership changes hands. Volvo’s warranty also does not cover regular wear and tear of parts, just parts failure due to material or manufacturing defects. MG’s warranty will be void if you use charging setups not approved by the carmaker. 

Difference Between Guarantee and Warranty?

A guarantee is a promise to replace or refund the cost of the whole product in case of a part breakdown. A warranty generally entails repairing or replacing the defective part instead of replacing or refunding the whole product. 

For example, in the event of a car breakdown, a guarantee would entitle you to a replacement vehicle or a full refund for the car. If the car is under warranty, a technician will repair or replace the defective part instead of the whole car. In the case of automobiles, no one offers a guarantee on their products but a free standard warranty is the norm. 

Types of warranty in a Car

The types of warranties can be categorized into the following main groups:

Manufacturer's Warranty

A manufacturer warranty is the standard warranty that comes free with a new car. This type of warranty covers almost the entire car (called Bumper to Bumper warranty). This warranty primarily covers manufacturing defects.

Extended Warranty

Extended warranty is a paid feature that goes into effect once the Manufacturer’s warranty expires. Generally, this warranty has limited coverage, it is an essential feature to cover your car’s maintenance costs in the long run. This warranty can feature add ons such as free Roadside Assistance. 

Certified Pre Owned (CPO) warranty

This warranty covers used cars and is a critical tool to ensure peace of mind even while buying a used car. Most major used car portals offer a limited Certified Pre Owned Warranty for the used cars sold by them. Some portals like CARS24 go a step further by offering extended warranty at a nominal cost, over and above the standard free warranty.  

Third Party Warranty

A Third Party Warranty is a warranty on used cars provided by a third party provider instead of a carmaker or dealer. While it is important to have extended warranty on your used car, do proper research into the vendor to ensure the possibility of fraud when it comes to claim settlement. 

What Does Extended Warranty Cover?

An extended warranty generally covers the same things as a standard warranty cover, and may include additional protections depending on the add-ons selected. Here are some of the usual parts covered. 

Bodywork warranty 

Also referred to as Bumper to Bumper warranty, this warranty covers sheet metal and paint defects on the bodywork, rust spots, body panel gaps and misaligned body panels. 

Powertrain warranty

The powertrain warranty covers engine and transmission parts in terms of issues like low fuel consumption, power loss, abnormal engine noise and oil and fuel leakages. The warranty does not cover the usual wear and tear. 

Hybrid and Battery Warranty

These apply to hybrid cars and EVs and cover electrical system issues like reduced battery range, reduced performance, higher charging times and of course battery and electric motor failure. In conventional vehicles, battery warranties typically have shorter durations and limited coverage.

What Does Extended Warranty Not Cover?

Generally, the extended warranty does not cover normal wear and tear parts like tyres and clutch plates unless they are found to be defective due to manufacturing faults. Here are some parts that are not covered under standard warranty:

• Tyres. 
• Brake pads and drum shoes. 
• Clutch plates. 
• Drive and pulley belts. 
• Windshield wipers.
• Engine, gearbox, brake oils. 

Warranties do not cover routine maintenance like oil changes and wheel alignment besides damage to parts caused by an accident, vandalism or natural calamities such as flooding or fire. Also, in most cases, a warranty is void if there are modifications done to the car or the car is not serviced according to the scheduled service intervals. 

Reasons to Buy Extended Warranty

There are a lot of reasons to buy an extended warranty for your car. Also non-OEMs like CARS24 offer free standard warranty as well as extended warranty on second hand cars. Here are some of the important ones:

Additional Security

An extended warranty safeguards you from heavy expenses in case of an unexpected breakdown. Also some policies offer Roadside Assistance and Towing facilities so you are not stranded anywhere. 

Low Service Costs

Extended warranty covers most long-term repairs, so you spend less on service in the long run. Also, since the warranty covers these repairs, you do not tend to neglect them, which keeps your car in top notch condition. 

Potential Savings

Extended warranty saves you money in the long run as it covers repairs that a standard warranty would otherwise not cover. As time passes, these savings add up and surpass the additional premium you paid for extended warranty. 

Better Resale Value

An extended warranty is an add on which enhances your car’s resale value. It acts like an asset when selling your car. 

More Warranty Coverage

Some extended warranties go beyond the scope of standard warranties not just in terms of coverage. In some cases, they also provide protection for certain components that a standard warranty does not cover. 

Add on Benefits

Some extended warranty policies also cover services like Roadside Assistance, Towing Service and accidental damage. Both are quite useful if you travel a lot with your car. 

Things to Look Out For When Buying Extended Warranty

It is always a good idea to closely inspect the warranty coverage detail. Here are some points you should keep a lookout for:

• Check if the extended warranty is Bumper to Bumper or Limited coverage. The former will be more expensive but will ensure peace of mind in the long run. 
• Check the coverage duration. Extended warranty generally covers 6 years / 1,50,000km for new cars and 1 year / 15,000km for pre owned cars. 
• Check for the scope of coverage, the parts that are covered and more importantly, the parts that the warranty does not cover. 
• Check whether the warranty cover includes electrical repairs along with mechanical parts. 
• Check for claim limits and deductibles. There are set limits for the maximum amount per repair as well as deductibles where you have to bear in order to make a claim. 
• Keep an eye out for add ons. Some manufacturers offer roadside assistance while some cover labour costs as well. 
• Check if the warranty is transferable. It is useful especially in case you plan to sell your car in the future as this enhances your car’s resale value. 

Why get Extended Warranty On Used Cars?

The biggest reason to go for extended warranty is peace of mind. Here’s a list of other factors why an extended warranty makes sense:

• A used car has undergone more wear and tear than a new car and therefore is more prone to mechanical issues. So preparing for those costs makes sense. 
• An extended warranty ensures you spend less for repairs which reduces running costs. That’s more savings in the long run. 
• Having a transferable extended warranty improves your used car’s resale value, in case you plan to sell it in the future. 

Common Misconceptions about Extended Warranty

Here are some common misconceptions about extended warranty:

Extended Warranty is a Waste of Money

It is not if you end up driving a lot. The more kilometres you rack up, the more you recover the upfront costs for extended warranty. 

In fact, if you own a car known for higher repair costs, you end up saving a lot in terms of repairs with an extended warranty. 

Extended Warranty Covers Everything

It is important to understand the scope of the extended warranty, what is covered and what is not. While extended warranties cover bodywork and powertrain wear, the scope of coverage is not as comprehensive as a manufacturer warranty. 

Extended Warranty is Expensive

Prices for extended warranty can range from ₹10,000 to ₹50,000 depending on the car model and the coverage duration. While it might feel expensive in some cases, extended warranties justify their price in the long run. 

Extended Warranty is Barely Used

The benefits of an extended warranty extend beyond saving on repair costs. Besides peace of mind and convenience of Roadside Assistance and free towing, extended warranty enhances your car’s resale value as well. 

Conclusion

Extended warranty is as important as insurance when buying a car. While insurance covers external damage, warranty covers internal damage. Warranty covers a lot more than money, it offers convenience and enhances resale value. Extended warranty is as important for used cars as it is for new cars. 

A used car has covered more kilometres and undergone more wear and tear so it has a higher probability of mechanical breakdowns. Extended warranty is a smart investment that ensures that you don’t pay a lot for repairs in case of an unexpected breakdown. An extended warranty serves a purpose similar to insurance, offering protection against unexpected repair costs. While you cannot predict an accident, you’re glad to have insurance when you get into one.