Car Warranties: Ultimate Guide on Factory vs Extended Coverage

Learning the differences between the different types of car warranties, such as factory versus extended, is another layer of difficulty altogether. Despite the challenge, however, knowing these crucial differences is a must if you want to get the best coverage for your vehicle, old or new. As a result, we’ve taken a little bit of time to tease out these differences in a simple way. 

If you find yourself searching for the best warranty options or just want to know the differences for your own sake, read on.

Perhaps the first place to start in understanding the key differences between bumper-to-bumper/powertrain and extended car warranties is knowing what exactly a car warranty actually is. 

On paper, it can seem rather simple and intuitive: A warranty is just a simple agreement that repairs or services will be done by someone like the manufacturer or a repair shop if needed for extra peace of mind. 

Unfortunately, this simple concept leads to a lot of wrong and costly assumptions about what car warranties do and do not cover. For example, it can be easy to assume car warranties will cover any kind of damage done to your car during an accident. 

The truth is, however, most warranties have no effect over accident damage. Instead, this is where auto insurance and auto repair insurance come in. You may also think car warranties can cover routine maintenance costs. 

Once again, this is rarely true and highly depends on the type of warranty you have. In reality, most car warranties only kick in under certain circumstances. These can include factory defects, material issues, some mechanical breakdowns, certain types of maintenance, and restoration work. 

The real defining factor of what is and isn't covered comes down to the warranty agreement itself. In other words, unless it is strictly written out, the warranty will not cover it.

This can make it sound like warranties are extremely limited, and in fact, some of them are. There are plenty of warranty options, however, that aren't as restricted and can definitely save you some money when it comes to services and repairs. 

The trick is knowing what kind of warranty is best for your needs, your vehicle, and your budget.

The most common and typical auto warranty is the one that comes from the factory or dealership with a new car. These warranties are standard from virtually all major automotive manufacturers.

There are actually several different types of warranties that fall under the umbrella term of "factory." These include:

Manufacturer’s warranties tend to be the most limited in terms of scope. They only kick in when defects arise from manufacturing and material issues, affecting the safety and operation of the vehicle. 

In other words, if the factory is the cause of the issue, the warranty will cover it. Accidents, maintenance, upgrade issues, other component issues, and even oil changes fall outside the scope of traditional factory warranties.

In general, factory warranties have shorter coverage periods than extended warranties. Since they come straight from the factory with a new vehicle, the auto manufacturer itself is the one that determines how long the warranty will last. 

Most automotive manufacturers have a standard period (most often three years and 36,000 miles), but some can get a more competitive advantage with longer period coverages.

After a factory warranty has run its course, there are two options: either the vehicle is no longer covered or you purchase an extended warranty.

This is actually a bit misleading since you can purchase an extended warranty, either from the factory or third-party provider, even when the factory warranty is still in effect. In this case, you will likely enjoy a longer coverage period of the original warranty or have overlapping coverage plans on your vehicle.

True extended warranties from an automaker are nothing more than an extension of the original factory warranty. This means that the particular inclusions, exclusions, and extra perks (like roadside assistance) remain the same. The only thing that's different is the coverage period itself.

Extended auto warranties from third-party providers, like Endurance, are slightly different and are often more advantageous. Also known as vehicle service contracts, these warranties can have different inclusions, exclusions, extra perks, and terms, since they don't come from the factory.

Most third-party providers offer more coverage for vehicles, sometimes rivaling the bumper-to-bumper warranty from the factory with better perks like roadside and emergency assistance, and other benefits. This can make third-party extended warranty companies more attractive for vehicle protection, especially after the factory warranty has run its course. 

Some warranties will also give you an option to choose your own repair facility, reimburse you for rental car or towing costs, allow monthly payments, and cover some repair costs factory warranties don’t. 

Despite all of these differences, there are a couple of similarities with factory car warranties that you need to know about. First and foremost, just like factory warranties, extended warranties also have coverage limits. 

With factory extended warranties, the extended period is usually set ahead of time by the manufacturer. With third-party car warranty providers, on the other hand, you will likely find more coverage options and even the potential to customize the coverage terms for your vehicle.

Extended warranties also have certain eligibility requirements. This will depend on the particular plan the factory or provider has, but most options tend to favor newer vehicles. This is because older vehicles, as they age, start to require more repairs and service work, which can add up in cost. 

There are providers with high-mileage warranty plans available, so if you have an old or used vehicle, you aren't out of luck. In fact, a third-party car warranty may be your best bet for getting coverage on a vehicle that has more than 100,000 miles on the engine.

It can be tempting to think that there is a battle between factory and extended car warranties. If you're wondering which one is better, try to think about it another way: neither one is better, but both may be necessary.

This is particularly true as a vehicle ages. For new vehicles, a standard factory warranty is usually enough coverage if you don't mind paying out-of-pocket for routine maintenance. Since most extended warranties don't cover such maintenance, this is the typical setup for the majority of new vehicle owners. 

Once a used car has a few years and miles under its belt, however, an extended car warranty will become more valuable if it covers the most common types of issues or repairs the vehicle will need.

We generally recommend holding off on getting an extended warranty until the factory one has expired. Unless you have a vehicle that is particularly troublesome and requires periodic repairs, holding off until the factory warranty is close to expiring won't harm anything. 

By then, you may know more about your vehicle's needs to see what extended car warranty plans are going to be a better fit than others.

With all that said, there's also no harm in having an extended warranty plan for your vehicle even right after it's driven off the lot for the first time. Since a factory warranty is already included, you aren't paying any extra whether you include an extended warranty sooner or later.

The real important thing is doing your research ahead of time to find the right extended warranty. We're partial to third-party providers when it comes to extended car warranties because of the extra coverages and benefits you typically receive. 

Automakers, however, can be a good place to start to find what they offer to extend the factory warranty. As long as you take the time to look around, weigh your options, get some free quotes, and read the fine print, it's hard to go wrong when searching for an extended car warranty.