Dealership Warranty: What Is It?
Dealership warranties, backed by the vehicle manufacturer, offer extended coverage and guarantee repairs are made with genuine manufacturer parts.
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Many car buyers assume a dealership warranty provides the best extended car warranty coverage available, but is that true? This guide takes an in-depth look at what dealership warranties are and how the coverage compares to a third-party extended warranty.
The Gist:
- Dealership warranties may pay for vehicle parts and repairs not covered by third-party policies.
- Extended warranties from a car dealership are typically more expensive than third-party warranties because the policies cover genuine manufacturer parts and in-house repair services.
- Compare dealership warranty pricing with quotes from third-party warranty providers to ensure you get the best extended coverage for your budget.
An extended car warranty refers to mechanical breakdown coverage offered by a vehicle manufacturer. However, this term is often mistakenly used to describe coverage from third-party companies. Independent providers offer similar protection through vehicle service contracts, but we’ve used the terms interchangeably in this article for convenience.
What Is A Dealership Warranty?
A dealership warranty is a type of aftermarket coverage offered to buyers when buying a new or used vehicle directly from a dealer. After the original factory warranty expires, these plans (also called “extended manufacturer warranties”) replace what that factory warranty used to do by covering select vehicle repairs and other services.
All car warranties–factory or extended, from dealership to third-party companies–all expire after a set time limit or maximum mileage.
Dealership Warranty Vs. Third-Party Warranty
If you’re looking to protect your new or used car, you’ve probably heard about dealership and third-party warranties. Both help cover repairs, but there are some key differences to be aware of.
Source
While a dealership or factory extended warranty is sold directly by the automaker or franchise dealership, third-party warranties are offered by independent companies.
Coverage
Both dealerships and third-party companies typically offer bumper-to-bumper warranties that cover most systems. They also both offer powertrain warranties that cover the engine, transmission, and driveshaft.
Both dealerships and third-party companies will cover things that the other won’t with these warranties. For dealerships, their warranties are more tailored to your specific vehicle model and may cover select repair costs for factory-made parts that a third-party company wouldn’t. The catch is that dealership warranties typically have shorter terms and tighter mileage limits than third-party extended warranties.
Unless specifically stated otherwise, neither a dealer warranty nor a third-party extended warranty will cover routine maintenance like oil changes, brake pads, or tire rotations.
Cost
Warranties offered by car dealerships often cost more than third-party extended warranties, with some exceptions for promotional deals and discounts. If you use dealership financing, the salesperson may include the price of warranty coverage in your vehicle purchase amount, meaning you’ll pay interest on the warranty.
Our team recommends you carefully consider dealer and third-party warranties on a case-by-case basis. Always carefully review the terms, conditions, and coverage exclusions before making a decision.
Term Length
A dealership’s extended warranty typically provides core coverage for around three years. A third-party extended vehicle warranty can last between five to eight years.
Are Dealership Warranties Worth It?
Depending on your vehicle, whether you’re willing to shop around and other factors, dealership warranties can be a solid purchase. In the event of a major repair, an extended warranty helps protect your vehicle and your wallet. However, not every car owner will see value in the added coverage from these service contracts. Further, third-party warranties may offer more flexibility in how you pay for them and when you can buy them.
Pros And Cons Of Dealership Warranties
If you’re considering buying a dealership’s extended warranty with a new vehicle purchase, consider the pros and cons outlined below:
Pros Of Dealership Warranties
- Genuine manufacturer parts: Repairs performed by factory-trained technicians using genuine manufacturer parts help maintain the quality of your vehicle.
- Vetted mechanics: Dealership warranties pay for in-house or contracted mechanics that have been thoroughly trained or vetted by the car manufacturer or dealership.
- Tailored service and parts: The coverage you buy is designed specifically for your vehicle’s make and model, ensuring that repairs and parts fit your needs.
- Resale value: With some limitations, many dealership warranties are transferable if you sell your car, which can increase your vehicle’s resale value.
- Saves time: Choosing a dealership warranty can save you time and effort when researching extended warranty coverage.
Cons Of Dealership Warranties
- Cost: Dealership warranties typically cost more than warranties from independent providers, and adding the coverage may increase the cost of your financing package.
- Limited options: A manufacturer’s warranty requires repairs to be made at the dealership or a pre-selected repair shop, limiting your choice of mechanic.
- May be unnecessary: If you’re buying a new car or a used car that’s still under factory warranty, an extended warranty may be duplicative. Buying a dealership warranty with a new car may mean paying for coverage you don’t need or won’t need for years.
- Sparse customization: Many dealership warranties have features like paint coverage that can’t be removed from your policy, so you may pay for services you don’t want.
Dealership Extended Warranty Cost
Monthly payment rates for dealership extended warranties vary based on the level of coverage chosen, vehicle type, fees, and other factors. Compare extended warranty costs by getting quotes from third-party providers before signing a warranty contract.
Extended Warranty Cost Survey Data
We conducted a survey in March 2022 asking 1,000 vehicle owners about their experience with extended warranties. Most respondents bought their plan directly from a car manufacturer or dealership. Half of those surveyed said they paid between $1,615 and $3,208 for an extended warranty. Expect prices in this range when you begin looking for the best warranty provider.
Comparing Dealership Extended Warranty Cost Vs. Third-Party
Cost plays a significant role in the value of an extended warranty. Below, we discuss key differences between dealership and third-party warranty pricing.
Dealership Extended Warranty Costs
In many cases, a dealership’s extended warranty carries a premium price tag due to brand-specific systems coverage and the use of genuine manufacturer parts. The requirement to use in-house mechanic services increases the cost of warranty coverage.
Third-Party Extended Warranty Costs
Third-party warranties are typically more affordable than extended warranties sold by a manufacturer or dealership. A policy from a reputable third-party provider may leave out unnecessary add-ons, leading to more flexible coverage and competitive pricing.
Never believe an offer that seems too good to be true. Thoroughly research a warranty provider before committing to or paying for its products.
Dealership Warranty: Our Take
When considering an extended warranty for your vehicle, weigh the pros and cons of manufacturer coverage versus a third-party plan. Compare quotes from multiple providers and analyze the policy exclusions before buying coverage.
Recommended Extended Warranty Providers
If you’re interested in your options for a third-party extended warranty, our team has put in extensive research and recommends starting with Endurance and Carchex.
Endurance: Best Plan Offerings
Endurance has almost 18 years of experience in the automotive warranty industry and is available in all 50 states (sold as mechanical breakdown insurance in California). Customers can choose from six coverage levels that last up to 8 years/200,000 miles. Available deductibles range from $0 to $200, and Endurance extended warranty plans feature interest-free payment options with flexible terms.
Read more: Endurance Warranty review
Carchex: High Mileage Limits
Carchex ranks among our top-recommended extended warranty providers and is a great choice for owners needing coverage for older vehicles. Warranty plans by Carchex can offer coverage up to 250,000 miles, which makes it a good option for buying an extended warranty for cars over 100,000 miles. Its plans are endorsed by industry leaders like Kelley Blue Book and Carfax.
Read more: Carchex warranty review
Compare: Carchex vs. Endurance
Dealership Extended Warranty: FAQ
Here are some frequently asked questions about dealership extended warranties:
Can I cancel a dealership warranty?
Most dealership warranties offer cancellation, but terms and conditions vary by policy. You can typically get a full refund if you cancel within 30 days of getting warranty coverage, or a prorated refund after 30 days. Review your service contract before initiating cancellation to avoid unexpected fees or other issues.
Do dealership warranties include roadside assistance?
Some dealership warranties include roadside assistance but this feature is more common in third-party or independent warranties. Common roadside assistance services include towing service, fuel delivery, spare tire installation, and vehicle lockout help.
What does a car dealer warranty cover?
Covered parts and services vary depending on coverage level. Many factory extended warranties cover repairs due to manufacturer defects. Dealership warranties typically don’t cover wear and tear damage or routine maintenance. Warranties exclude damage caused by car accidents which is typically handled under car insurance.
How We Rate Warranty Providers
Our review process aims to deliver consistent and unbiased assessments of providers selling extended auto warranties. While many factors determine value, our review team focuses on those we believe are the most important for consumers including:
- Reputation: An extended car warranty company must be able to meet its claims obligations. Companies with a strong rating from the Better Business Bureau (BBB) score well in this category. Established providers with a long history of reliable service also receive positive marks.
- Coverage: Our team of experts looks at the number of extended warranty plans available, as well as term limits, exclusions, and added benefits like roadside assistance. Ratings take into account the availability of maintenance coverage.
- Cost: Pricing can be difficult to compare among providers because so many factors affect the cost of coverage. To determine our cost score, we perform a secret shopper analysis for a variety of vehicles and plans and consider available deductibles and down payments.
- Transparency: Our team evaluates the availability and transparency of each company’s contracts, as well as whether the provider offers a money-back guarantee.
- Customer experience: We listen to real customer sales calls and comb through reviews on sites like the BBB to learn about customer experiences. Warranty companies with a low volume of complaints score well in this area. We also consider the availability of mobile apps and live customer service chat features.
*Data accurate at time of publication.
