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How extended car warranties work

Find out what you’re covered for with an extended warranty and learn how you can file a claim.

An extended warranty is a vehicle service contract that replaces your factory warranty for new vehicles or gives you coverage for repairs on used vehicles. Find out more about how much extended warranties cost, what type of coverage you’ll get and how you can file a claim.

What is an extended warranty on a car?

An extended car warranty is a type of coverage you can buy for new or used vehicles to replace your old policy or get new coverage. These warranties cover repairs to your engine and other vehicle systems over a specific timeframe or for a predetermined number of kilometres.

The parts and repairs that an extended warranty covers are usually the same as those covered by a factory warranty. You can specify in your policy what parts of your vehicle you want protected and what your deductible will be to file a claim.

Is an extended warranty worth it?

Think about whether an extended warranty is worth it based on your unique personal situation and preferences:

When to purchase an extended warranty

You might find an extended car warranty is worth it in the following situations:

  • You don’t mind paying an upfront cost of hundreds or thousands of dollars.
  • You want to cover yourself against the cost of unexpected car repairs
  • You don’t mind that you may never use the money you pay into your coverage

When to not purchase an extended warranty

An extended car warranty is probably not worth it in the following situations:

  • You don’t want to pay hundreds or thousands of dollars in premiums over time
  • Your vehicle is brand new and unlikely to break down or malfunction
  • Your car repairs will likely be less than a few thousand dollars

Pros and cons of extended warranties

Pros

  • Added guarantee. An extended warranty can safeguard you against unexpected or large expenses related to vehicle repairs.
  • Covers major vehicle components. Most warranties cover components such as your engine, transmission and heating/cooling/electrical systems.
  • Available for used vehicles. You can get a used car extended warranty as long as your vehicle fits age, condition and mileage requirements.

Cons

  • Not everything is covered. Not all parts of your car will be covered by your extended car warranty in Canada.
  • Expensive. You may put more money into your extended warranty than you would pay to simply get repairs done to your vehicle.
  • Deductible. You may have to pay hundreds of dollars to file a claim depending on what your deductible is.

What is the average price of an extended car warranty in Canada?

The average price of an extended car warranty in Canada is usually between $1,000 and $2,000. The price you pay will depend on a number of factors such as what type of car you have, the age of the car, the mileage already on the vehicle, where you get your policy (manufacturer or third-party), the amount of coverage you want and how long you intend to keep the policy for.

How can I pay for an extended car warranty?

You have 3 options for purchasing an extended car warranty in Canada:

  1. Roll it into your car loan. You won’t need to pay for the extended car warranty upfront with this option, but you’ll pay more in interest over time.
  2. Pay for it upfront. If you have the money saved up, you can pay for the extended warranty out of pocket to save on interest.
  3. Buy it later. You can buy an extended warranty at a later date in some cases if you’re unable to come up with the cash when you buy your car.

Types of extended car warranties in Canada

There are 2 types of extended warranties: those sold by manufacturers and those sold by third-party providers.

1. Manufacturer warranties

Manufacturer warranties come directly from the company that made the vehicle. They are often seen as more legitimate since you’ll get genuine parts for repairs and many customers presume that a car company will pay out a claim more readily. That said, these policies may be more expensive than third-party warranties.

2. Third-party warranties

Third-party warranties can be purchased online and are often less expensive than manufacturer warranties. You just need to make sure you sign up with a reputable company to avoid online scams. You should also read the fine print of your contract so that you know exactly what you’re covered for and how much your deductible will be.

Watch out for extended warranty scams

There are a few extended warranty scams in Canada to watch out for. The most common involves someone from a dealership calling you to collect or verify your personal information – which they then steal. You may also be sold a fake policy or renewal that isn’t backed by a real company and offers you little to no coverage for your vehicle in the event that it breaks down.

What’s covered under an extended car warranty in Canada?

You’ll get emergency repairs for a number of vehicle components included with your extended car warranty coverage. The exact components that will be covered will depend on which provider and plan you go with. Some common warranties are outlined in the table below:

Extended warrantyWhat’s covered
Bumper to bumper
  • All major vehicle systems
  • Air conditioning and heating components
  • Electrical elements (including alternator)
  • Steering system parts
  • Select emissions components
  • Safety features and tech systems
  • Hybrid vehicle parts
Powertrain
  • Engine
  • Transmission
  • Axles
  • Drive shafts
  • Seals
  • Gaskets
Corrosion
  • Rust and corrosion on vehicle exterior

Common exclusions with extended car warranties

You won’t usually get coverage for the following repairs or maintenance requirements with an extended warranty in Canada:

Routine maintenanceOil changes, air filter changes and tire rotations
Regular wear and tearBrakes, clutches, windshield wipers and other consumables.
Exterior damageDings, scratches, bumper damage and broken glass
Interior damageRips in upholstery and broken plastic
Damage not due to a car malfunction or defectDamage that can be linked back to a collision, installing aftermarket parts, environmental factors or the failure to maintain your vehicle properly

    How to get a used car extended warranty in 5 steps

    Follow these steps to sign up with an extended warranty provider that meets your needs:

    1. Research the provider. Compare car manufacturers and third-party providers to find the best rates and terms for an extended warranty in Canada.
    2. Apply online or in person. Fill out your personal information and provide details about your vehicle to sign up for an extended warranty.
    3. Negotiate your terms. Negotiate what type of coverage you want and how much it will cost. Set your deductible and make sure you know what’s excluded from your policy.
    4. Pay for your extended warranty. Pay for your warranty upfront with savings or work the cost into your car loan so you can pay it back over time.
    5. Know the process to file a claim. Keep your extended warranty information on file and make sure you know the process for how to file a claim if the need arises.

    How to make a claim

    You’ll usually follow some version of the steps below to file a claim with most companies:

    1. Confirm coverage. Make sure that the repairs you want to claim are eligible for coverage under your policy.
    2. File a claim. Contact your extended warranty company by phone or email, or fill out claim paperwork online using your company’s website.
    3. Use the right repair facility. Find out which repair facilities you’re allowed to use with your extended warranty provider.
    4. Confirm your repairs. Get your repair facility to contact your extended warranty company before you have any work done to make sure your claim will go through.
    5. Pay for repairs. Some extended warranty companies will require you to pay for repairs upfront and wait for reimbursement, while others will pay the garage directly.

    Can I get a used car extended warranty?

    You may be able to get a used car extended warranty on select used vehicles. Just be aware that you may be required to show proof that the vehicle meets age and mileage requirements. For example, some providers might only give you a used car extended warranty if your car is less than 10 years old and has clocked less than 120,000 km.

    Bottom line

    An extended car warranty in Canada may be a good investment if you don’t have an emergency fund and you anticipate your car could need significant repairs in the near future. Just be aware that extended warranties are expensive and may not cover the repairs you need. Compare policies to find the best rates and don’t forget to read the fine print before you sign.

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