Chapter 5. What are warranties and extended warranties?

Any time you make a major purchase (including buying a new or used car), you need to question what type of warranties and extended warranties the item offers.

 

How to

To help you out, here is a list of different types of warranties:

 

Screen Shot 2023-02-17 at 6.03.33 PM.png

 

As is

    • It means no expressed or implied warranty
    • Some states do not permit dealers to sell used cars with no warranty
    • Always check your state regulations and your dealer's compliance with regulations
    • If you decide to buy an item as-is, know that you are taking the responsibility for any needed related repairs

Implied warranties

    • It means that the product will do what it is designed to do and what the seller promises it will do
    • It is stating that the item is fit for an intended particular purpose

Dealer warranties

    • It offers can be different depending on the dealer, and terms and conditions can vary greatly, but it can be used for comparison on similar cars or open the door for negotiation for better warranty terms

Manufacturer's warranties

    • If it is not expired, it might be transferred to the new buyer with a fee payment to process the transfer

Extended warranties

    • It also refers to as service contracts and can be purchased in addition to warranties. 

 

Before you sink more money into such services, you need to decide if the additional cost is worth the additional benefits by answering these questions:

  • How much is the additional cost?
  • What does it cover?
  • Does the initial warranty cover such repairs?
  • Do you have to use the dealer for such repairs?
  • Can you use your preferred mechanic?
  • Can you cancel and get refunded a portion at a later date?
  • Does it require a deductible?
  • Does it save you money if such a repair is needed?

 

Think of warranties and extended warranties as buying additional insurance for maintaining your car in good driving conditions. Make your decision based on factual data in regards to your car model and age. Do not be afraid to ask around and establish good relations with a few repair shops that can advise you and help you maintain your car without spending a fortune.

 

Practice

Now that you know what warranties and service contracts can do to help you in maintaining your car and keeping it in good driving condition, think of paying it forward and discuss your experience with a friend or a family member.

 

Congratulations! Now Test your knowledge about Car shopping!

Would you like to review again? You can start over at Introduction.

To review the full module on Car shopping, click here.

 

The Penn State Sokolov-Miller Family Financial and Life Skills Center hopes you have enjoyed this module in the MoneyCounts: A Penn State Financial Literacy Series. Please tell us how we can serve you better, leave us a feedback, ask a question, or request additional information at: finlit@psu.edu