Mechanical Breakdown Insurance vs. Extended Warranty Coverage

The differences between mechanical breakdown insurance and other protection plans like extended warranties are small but important.

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Owning and maintaining a car can eat up a large chunk of your annual budget. The average adult (25 to 55 years old) spends roughly $1,206 a year on car insurance and another $745 on maintenance and repairs. In addition to hundreds or thousands of dollars for gas, accessories, and financing charges, there is little room in any budget for mechanical breakdowns. 

Mechanical breakdown insurance (MBI) covers repairs or replacement parts in the event of an unforeseen breakdown, not including accidents or routine maintenance. An insurance company, rather than the dealership, provides an MBI plan. This is a key difference between mechanical breakdown insurance and extended warranties, though the coverage isn’t so different.

As a third-party provider, extended warranties by CARCHEX offer additional benefits that may be lacking under mechanical breakdown insurance. To learn more about CARCHEX extended warranties and get a free, customized quote, call (877) 225-7247 or fill out the form online.

What Is Mechanical Breakdown Insurance and What Is It Not? 

As an insurance policy, mechanical breakdown insurance is paid for through an annual payment and a deductible or co-pay for repairs. 

Mechanical breakdown insurance is not the same as the following coverage:

  • Car insurance—This type of insurance covers automobile accidents, including vehicle damage and bodily harm caused by collision. Auto insurance is legally required for all drivers. 
  • Manufacturer warranty—This is a true warranty that’s included with the price of the vehicle. The manufacturer covers repair or replacement of a range of auto parts for a specific number of years or miles. 
  • Extended warranty—Considered a service contract, this warranty can be granted by the manufacturer or a third-party vendor like CARCHEX. An extended warranty covers certain parts after the manufacturer’s warranty expires. These contracts have year and mileage limits as well. 

What Does Mechanical Breakdown Insurance Cover?

Your mechanical breakdown insurance won’t cover accidents or maintenance, so what exactly does it cover? Coverage varies by insurance provider, as well as the age and model of the car. Some cars, unfortunately, are just more expensive to insure and repair. 

Typically, mechanical breakdown insurance covers the more important parts of the vehicle, such as the powertrain:

  • Engine components
  • Drive axle
  • Transmission
  • Electrical components

In premium plans, mechanical insurance may also cover brake systems, steering, suspension, air conditioning, and some digital components. These “bumper-to-bumper” plans, however, will cost more money. 

You should not expect mechanical breakdown insurance to cover basic repairs and maintenance, such as tire changes, oil changes, brake pads, and windshield wipers. These are considered routine or preventative maintenance and therefore aren’t covered. The same goes for corrosion and everyday wear and tear. 

When Should I Get Mechanical Breakdown Insurance?

You can purchase mechanical breakdown insurance after buying a new car, but eligibility usually ends after a certain number of miles. Mechanical breakdown insurance can be a supplement to your required auto insurance. 

Before purchasing mechanical breakdown insurance, however, you should ask if it’s right for you. Is coverage minimal or extensive? Is your vehicle eligible? Is it more expensive than an extended warranty from the dealer? Are you a high-mileage driver, and if so, do you expect that you may have expensive repairs or breakdowns in your future? These are all questions that should be answered before you sign a contract. 

Where Can I Get MBI Coverage? 

Mechanical breakdown insurance is provided by car insurance companies, and sometimes banks and credit unions. It can be available for new and used vehicles. 

Sometimes an MBI plan isn’t true mechanical breakdown insurance. This is often the case with insurance providers that use third-party underwriters to provide customers with vehicle protection plans. These companies sometimes refer to what would actually be an extended warranty as mechanical breakdown insurance. The plans are still backed by insurance companies and the regulations that govern them, so they’re often considered trustworthy coverage options. In fact, the state of California requires that all vehicle service contract providers be backed by an insurance provider, unless they maintain a certain quantity in assets. 

Insurance companies that muddy the waters between mechanical breakdown insurance and extended warranties include Allstate, Progressive, and Mercury.

How Are Extended Warranties Different?

An extended warranty isn’t an insurance policy. Rather, it’s a service contract usually provided by a dealer or third-party company that covers the costs of mechanical breakdowns. These contracts are available for new or used cars, but they only cover repairs once the manufacturer’s warranty (implied warranty) is expired. Regular wear and tear isn’t covered, nor is damage caused by neglect or poor maintenance. 

This sounds pretty similar to mechanical breakdown insurance, so how is it different? The devil is in the details, but here are some differences:

  • Some extended warranties may be sourced by brokers who find competitive rates across different provider plans. 
  • Extended warranties may provide extra coverage for towing, trip interruption, fuel delivery, and roadside assistance.
  • Some extended warranty providers pay the repair shop up front, while others reimburse you after the fact. 
  • There may be limitations on where you can get repair services, but the best providers offer flexibility. 
  • Extended warranties are good options for high mileage cars, older cars, and used cars, and can be purchased at any time. Some MBI plans must be purchased before a car is 15 months old (e.g. Geico MBI plans). 

There are many reputable extended warranty providers. Let’s look at a breakdown of one of the top extended warranty providers, CARCHEX. 

CARCHEX Extended Vehicle Protection Plans

CARCHEX offers five levels of coverage with several plans under each tier, all backed by industry leaders:


  • Terms up to five or six years
  • Pre-owned vehicles eligible
  • Covers engine, drive axle, and transmission components
  • Low deductibles/most affordable


  • Terms up to six or seven years
  • Covers powertrain plus fuel delivery components, electrical components, and air conditioning components
  • New and pre-owned vehicles eligible


  • Terms up to five to 10 years
  • Covers components from Silver plan plus braking and steering components
  • New and pre-owned cars eligible
  • Best for cars with more than 60,000 miles


  • Terms up to five to 10 years
  • Covers components from gold plan plus components of suspension, heating, cooling, and enhanced electrical components
  • New and pre-owned cars eligible
  • Comprehensive coverage for shorter terms


  • Terms up to seven to 10 years
  • Bumper-to-bumper coverage
  • New and pre-owned vehicles eligible (only new vehicles eligible for Titanium Wrap plans)

Overall, CARCHEX offers coverage to cars under 150,000 miles. Considering that some mechanical breakdown insurance providers limit terms to under 100,000 miles, an extended warranty could be an alternative to this type of insurance. 

To learn more about these plans, call (877) 225-7247 or get a free CARCHEX quote online.

Additional Benefits and Optional Coverage

In addition to mechanical repairs, CARCHEX plans offer roadside assistance and reimbursements and optional coverages. They include:

  • Rental car reimbursements ($40 per day or up to $320 per claim)
  • Trip interruption reimbursement up to $100 per day 
  • Tow coverage up to $100
  • Emergency gas delivery
  • Battery jump services
  • Key lockout services
  • Optional navigation system coverage
  • Optional windshield protection
  • Optional hi-tech coverage

Though many mechanical breakdown insurance providers include roadside assistance in their coverage plans, you’ll get more of these added benefits from extended warranty companies. 

Should I Choose an Extended Warranty Over Mechanical Breakdown Insurance?

Even though mechanical breakdown insurance and extended warranties are similar, choosing one over the other comes down to pricing, your vehicle, and your personal preferences. 

Mechanical breakdown insurance is an option for new vehicles with less mileage, but older or more expensive cars may not be eligible. With this type of policy, it can be easier for customers to pay the monthly payments rather than a large repair cost up front, but extended warranty providers often offer similar payment options. Also, mechanical breakdown insurance doesn’t normally cover wear and tear items or offer extra perks like rental car reimbursement.

Extended warranties can provide the same level of bumper-to-bumper coverage with extra reimbursements. Your extended warranty may also provide longer coverage for high-mileage vehicles and used cars, which are more likely to have mechanical breakdowns. With thousands of certified repair shops, CARCHEX even makes finding a trusted mechanic easy, so you don’t have to rely on your insurance plan for flexible options. 

Finding a Reputable Extended Car Warranty Provider

What makes a warranty company reputable and trustworthy? After all, insurance providers already have a trustworthy reputation due to their adherence to regulations. 

One of the main factors is a warranty company’s ability to pay for the repairs it promises. Companies backed by insurers are guaranteed to have the capacity to pay up. In addition, top companies will pay the repair facility directly so that you don’t have to come up with the cash up front. 

Why a CARCHEX Extended Warranty Is a Reliable Option

Not all extended warranty companies are made the same, but CARCHEX can provide the same level of trust and quality service as many mechanical breakdown insurance providers. CARCHEX has a strong history in the warranty industry, and reviews are positive overall. 

The company is also endorsed by Kelley Blue Book, CARCHEX, and—all respected companies that have chosen to recommend or partner with CARCHEX. 

Let CARCHEX Help You Make Your Decision

To get a free quote and a better understanding of what you might pay with CARCHEX coverage, call (877) 225-7247 or fill out the form online. An agent can discuss the type of plan that is right for your car, as well as optional add-ons that can provide even better coverage.