Angie's List: Extended auto warranties

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Commonly called an "extended auto warranty," it's a prepaid service contract or vehicle service plan. A service plan is separate from the original manufacturer's warranty, which is included in the price of a new car.

Service plans pay for specified repairs over a defined number of years or miles, after the factory warranty expires. Vehicle manufacturers, auto dealers, or independent third-party providers offer the plans. 

According to a nationwide Angie's List poll:

  • More than half of the respondents have purchased an extended auto warranty – also known as an auto service contract.
  • 83 percent say they know what their warranty covers.
  • 43 percent paid more than $1,000 for the warranty.
  • Of those that purchased a warranty, 66 percent did not shop around for the best deal.
  • 44 percent have not used their warranty.
  • 43 percent believe the warranty provides enough value to be worth the cost.

Angie's List Tips: Extended auto warranties

  • Do you need one? An extended auto warranty isn't for everyone. If you change cars every three years, an extended warranty makes no sense, because the manufacturer's warranty is likely still in effect. But if you drive a car for several years, it may be something to consider.
  • Buyer beware: Be wary of phone and mail solicitations from third-party companies to renew your original factory warranty. Avoid high pressure tactics used by some telemarketers; ask for details in writing. Don't provide personal financial information such as your bank account, driver's license number, credit card number or vehicle identification number to third-party companies before thoroughly vetting them. Indiana law also requires these companies to insure their contracts. The insurance policy protects consumers if the company defaults on claims or goes out of business.
  • Do your homework: Research the company. Check with your state's attorney general office for any complaints. Shop around for the best price: Don't be afraid to negotiate and make sure you understand what's covered in the contract. Ask about the cancelation policy: Most contracts can be canceled in 30 or 60 days for a full refund.
  • How does it work? Before you sign anything, understand details/costs of the coverage, deductibles, etc. Ask if the repairs can be done by any auto repair company or if you are restricted to specific ones. And keep detailed maintenance records since many warranty plans may void coverage if you fail to do specific maintenance.