Buying Peace of Mind: Everything You Need to Know About Auto Warranty in Canada
Whenever your car needs repair, the obvious thing that comes to mind is ‘a warranty’. When you have one, it becomes easy to have peace of mind since you are assured that your car will be fixed. The role of an auto warranty is basically to protect you from nasty surprises in terms of auto repair costs. It covers manufacturing defects, parts failure, and other risks associated with new and used cars.
Introduction
From a buyer’s perspective, a warranty gives them a better reason to buy a particular car since they are assured of a secured investment. Whether the warranty is limited or it covers the vehicle comprehensively, any warranty is better than no warranty at all. As for the seller, the availability of an auto warranty means that they can use it as a way to squeeze more money from the buyer.
Generally, here’s everything you need to know about auto warranty in Canada:
Types of Auto Warranties. What’s an Extended Warranty? Are Extended Warranties Worth it for New Cars?
Table of Contents
Can You Buy a Car Warranty After Purchase? How Much Does It Cost to Buy a Warranty on a Used Car? Used Car Warranty: What does it cover?
Can You Transfer Your Car Warranty? Can You Cancel an Extended Car Warranty? What’s Your Obligation?
Final Thoughts.
Generally, there are three types of auto warranties in Canada. They are:
Types of Auto Warranties
1. Standard Warranty: This warranty covers a car for a specific distance or period. It depends on what comes first. So often, it covers a car for either 60,000 km or for 3 years. This cover is usually a great option for car owners who don’t plan to travel for long distances or making frequent short travels. It’s also a great option for someone who plans to cash in on the car before the expiry of the warranty. The warranty is offered by the car manufacturer and it mostly covers mechanical defects that are a security threat to the user.
2. Comprehensive Warranty: Also known as the factory warranty or the bumper-to-bumper cover, a comprehensive warranty covers all the manufacturing defects and workmanship of a particular car. Like the standard warranty, it also covers a standard car for 60,000 km or 3 years. In the case of luxurious models, the warranty stretches to 80,000 km or 4 years. Of course, it depends on what comes first. 3. Extended Warranty: We’ll look at this warranty later but for now it’s important to know that it covers the car for a longer period (5 years or more). 4. Service Warranty: This warranty is normally reserved for brand new cars. However, there are a few CPO programs that offer it as an incentive for slightly used vehicles. The warranty covers things like oil changes and brakes.
What’s an Extended Warranty?
An extended warranty is an auto repair warranty that becomes active after the manufacture’s comprehensive cover has expired. It essentially covers major breakdowns that the car suffers. Theoretically, the warranty stabilizes the repair costs since they are known to fluctuate often. Even though this warranty kicks in immediately after the expiry of the comprehensive cover, you can purchase it before. It’s cheaper this way than waiting to buy upon the expiry of the bumper-to-bumper auto warranty.
But before you can buy the warranty, it’s necessary to know who’s backing it. There are some auto dealers who offer extended warranties through third parties. The third parties normally have different track records. Thus, it’s smart to first confirm that the warranty is supported by the car manufacturer. This is because a third-party deal can only be great at the auto dealership. If you want more provisions from an extended auto warranty, it has to be backed by the manufacturer. It’s also important to read online reviews pertaining to the cover before buying it.
The components of an extended car warranty normally depend on the tier plan and preferences. Some extended auto warranties have more provisions than others. Nonetheless, here are the common warranties that are often included in an extended cover:
1. Powertrain: The powertrain warranty covers the most expensive components of your car for 6-10 years. The commonest parts, in this case, are the engine, transmission system, and driveshaft. These parts are normally the least likely to fail.
2. Comprehensive Cover Extension: Even though the comprehensive warranty is a separate cover, it’s normally stretched upon purchase of an extended warranty by two or more years. It covers part such as tires, seatbelts, headlights, and brake pads.
3. Wrap Policy: This is an extra policy that’s meant to cover the parts that are not covered by the powertrain and the comprehensive warranty. It may include sweeteners like a rental car warranty, roadside assistance, corrosion warranty, and emission covers.
Are Extended Warranties Worth it for New Cars?
According to a 2013 survey, you pay more for an extended warranty than what you get back as direct benefits. This is not surprising considering that the warranties make more money for their providers. According to Dave Ramsey, a famous financial expert, you may pay an average of $1500 for an extended warranty when the average repair cost is just $180. Ramsey recommends setting up an emergency fund for auto repairs instead of paying for an extended warranty.
On a positive note, though, an extended warranty provides you with the following benefits:
ďƒ˜ Customization: You are allowed to tailor an extended cover to your individual needs. Considering that these warranties are from the automaker and differ depending on mileage or time, you can include policies like roadside assistance, powertrains, and wrap policy.
Minimal paperwork: Normally, it’s the dealer who takes up the paperwork responsibility as well as the payments. This applies to warranties offered through a dealership route. You are guaranteed repairs at any dealership that’s a partner of the car brand.
Costly repairs: An extended warranty protects you against very costly repairs. Knowing that the modern vehicles feature computerized equipment and complex electrical wiring, they are often expensive to repair. With an extended warranty, such costs are easily met.
Extensive cover: Most extensive warranties provide you auto protection for 10 or more years. So, if you are looking to drive a new car for long, buying an extensive cover is a great idea.
Improved resale value: Considering that you can transfer an extended warranty, it becomes easy to ask a higher amount from the buyer. Generally, a car with an extended warranty is likely to attract more willing buyers. The more they are, the higher the chances of finding someone who’s willing to pay extra.
Peace of mind: Lastly, an extended warranty gives you absolute mental peace. Though you may not use it just like health insurance, you don’t have to live each day worrying about what will happen when your car breaks down and you are not able to meet the repair costs. Though a Consumer Report finding shows that 55% of car owners never get the chance to use their warranties before their expiry, you can argue that an extended car warranty is worth buying if you consider the above benefits. This is despite the fact that you may pay more than you’ll ever enjoy as direct financial benefits.
Can You Buy a Car Warranty After Purchase?
Yes, you can buy a car warranty after purchasing a car that has none. It depends on the cover itself. If the car is a used one with an expired comprehensive warranty, you can buy an extended warranty after obtaining ownership of the car. It’s also essentially meant to extend the coverage of the bumper-to-bumper warranty by at least two more years.
How Much Does It Cost to Buy a Warranty on a Used Car?
The cost of buying an extended auto cover for a used car depends on factors like the type of tier, the coverage period, and the condition of the car. Most tiers start at $2000. However, the more the provisions, the more expensive the warranty is. The good news is, some extended car warranties feature deductibles which lower the total amount that you are expected to pay. For instance, if you are required to pay $700 and your deductible amount is $300, you’ll only pay $400 for the warranty. Normally, you are allowed to pick your deductibles when negotiating the terms of the warranty. Of course, the lower the deductibles, the costly the extended warranty.
Ordinarily, a used extended auto warranty covers the following:
Used Car Warranty: What does it cover?
Repair of expensive car components.
Some offer roadside assistance Extend the coverage of the comprehensive warranty to at least 2 more years. This includes cover for manufacturing defects.
Repair of lubricated interior parts (those of the transmission system and engine).
Though an extended auto warranty is a great idea for a used car, it doesn’t cover everything. For example, it doesn’t encompass simple wear-and-tear of external components. This is not the only concern.
The warranty comes in different tiers such as gold, platinum, and silver. Each of these tiers has its specific coverage and price. So, it’s important to first read about what’s covered by the tier that you subscribe to and its exclusion list instead of assuming that all extended warranties are the same. Things you have to fully understand are:
What repairs are covered? Are you expected to pay some deductible? Do you have to pay an upfront fee for the repairs? Will you be reimbursed later after making an advanced payment for the repairs?
Can You Transfer Your Car Warranty?
Yes, you can. You can transfer the rights of an auto warranty to the future owner of the car. However, you are expected to pay a certain fee before this can go through. From a seller’s perspective, this is an advantage since you have the security to use to convince the buyer to pay more. In this case, the extensive the coverage, the higher the resale value of the car.
Can You Cancel an Extended Car Warranty?
Though extended warranties are a good thing, they can become expensive to service. At such a point, you may find it necessary to cancel the warranty. So, yes you can cancel the warranty anytime. However, you may not get the full refund if you do. You’ll need to reach out to your car dealership to inform them about your decision and to fill out the cancellation form.
What’s Your Obligation?
Having an auto warranty doesn’t mean that you can do whatever you feel like. There are specific obligations that you need to observe to keep a warranty intact and active. For instance, some auto warranties require the maintenance and repairs to be done by a certified mechanic. This means that you can’t take your car to just any repair shop. In addition, even though most warranties are transferable, there are strict restrictions that apply. So, it’s important to first understand the warranty policy before transferring or receiving the rights of a specific auto warranty. Lastly, you should consider the specifications of the warranty before modifying your car. Sometimes, a modification may mean forfeiting your auto warranty. You wouldn’t want this to happen to you if you really value your car.
Final Thoughts
The bottom line is that warranties are an important part of the Canadian auto industry. Whether you are looking to purchase a new car or to sell an existing one, understanding the warranty specifications may help you a great deal. You can use the above guide for starters as you look forward to leveraging the power of an auto warranty.
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The End
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