In business, a warranty is a promise made by a product manufacturer or service provider to the buyer. It is a promise that can be enforced by the buyer to request for mitigation of damages in case there is a breach in service or defect in quality. Such a level of assurance can be given even to a consumer with whom there is no contractual relationship. The warranty is essentially one of the terms of the contract. As in the case of all other products, automobiles have auto warranties.

What are auto warranties?
Auto warranties refer to terms in the contract between you and the car manufacturer, which ensures the manufacturer or its agent will repair any defects in your car or replace a damaged part. It is an assurance given to the customer of a car’s quality. This assurance can convince the customer of the quality of the car and its components.

The warranty assures the new owner that the car would work well and the manufacturer would take care of any problems. However, this contract lasts for a limited amount of time. New cars would have a warranty for a period of one to five years. The duration depends on the car manufacturer, model, and other factors. The warranty is also given by manufacturers/sellers for used cars. This may be for three years or maybe based on mileage.

Warranty and insurance
There is some confusion that arises between the terms warranty and insurance. Both offer protection to the car but both are completely different. A warranty is an assurance by the manufacturer/seller that any defect in the car would be replaced or rectified. Insurance is the protection offered by the insurance company against risks. These include risks like accidents, theft, damage from natural and manmade disasters, etc. These are risks not related to the manufacturer/seller.

If the car malfunctions and does not start, the car can be towed to the service center and repaired. This would be covered during the warranty period. The costs would be borne by the manufacturer. Any failure in the car due to a defect is covered under the warranty. An insurance policy covers accidents and liabilities occurring due to an accident.

The basics of auto warranties
There are certain basic concepts related to auto warranties that need to be understood, such as

• Manufacturer’s warranty
  Also referred to as the factory warranty, this is given by the manufacturer to the buyer. This warranty covers a period of around one to five years. It covers specific issues related to the car. In case of any problem in the car or defects due to these issues, the manufacturer would take the responsibility of carrying out repairs. The details of the warranty as to what is covered and not covered need to be understood. This will help the customer understand under what conditions the defects in the car are taken care of by the manufacturer.
• Express warranty
  An express warranty is also known as an explicit warranty. It is the most common kind of warranty. This is a warranty that specifically assures the buyer that the car would be repaired under certain circumstances. It is an assurance about the quality or attributes of the car and need not be written in a contract. A product brochure stating the qualities of the car can also be considered as an express warranty. They may be in writing or even stated orally.
• Implied warranty
  An implied warranty is not explicit. It may not be stated in the form of words or in the form of writing. There are two common implied warranties, they include
  • Implied warranty of merchantability
    This is an assurance that the car would work as per the expectations of the user, keeping in mind the age of the car and its present condition. However, this is not an affirmation that the car is perfect and of top quality. It is an assurance that the car is fit for use and is safe to use.
  • Implied warranty of fitness
    This is a warranty for a specific purpose. This is based on the need or requirement of the customer that is stated to the manufacturer/seller at the time of purchase. For instance, you may live on a hilltop. Your requirement may be that the car should be able to ascend and descend the hilltop safely without any problem. Once you state this, it is then the responsibility of the seller to give you a car that meets your needs. These are permanent warranties unless overridden by the terms of the contract.
• Secret warranties
  These are unstated warranties that a manufacturer would abide by. This is a warranty that is neither written, stated, or implied but are followed. The reason is certain failures in the car, if not rectified may affect the reputation of the brand. To avoid this, the manufacturer would carry out the repairs free of cost even though it is not covered under warranty. As the name suggests, this is secret and not known to the public. In some states, it is mandatory for manufacturers to inform the customer of such warranties.
• “As is” sales
  This is a sale without any warranty as the car is sold on an “as is” basis. This means there are no implied warranties applicable. Only the express warranty is applicable. No other warranty holds good. The car user needs to pay for repairs if any problem is not covered under the express warranty.
• Bumper-to-bumper warranty
  This warranty would have complete coverage of the car. Most of the items in the car would be included. However, parts like brake pads and tires that wear out with time would not be included. Most of the electronics and air-conditioning would be included.
• Specialty
  Specialty coverage ensures that the warranty covers important parts or systems in the car. For example, the airbags may have special coverage. This is common in hybrid vehicles that use both electric and fuel systems. Corrosion or rust is another example of specialty warranty coverage. Generally, only surface rust is covered and it is only for a specific time. From a customer’s viewpoint, rust protection for a longer period is needed particularly if the customer stays in humid locations.
• Extended warranty
  The car warranty lasts for a specific duration only, after which the warranty expires. Any defects or breakdown issues would then have to be taken care of by the customer. Since car repairs can be expensive, customers would be willing to get the warranty extended. This kind of warranty is known as an extended warranty. This extended warranty comes into play after the end of the original warranty. It usually does not have comprehensive coverage but has specific terms and duration. An extended warranty may be provided by the manufacturer, seller, or any other third party. These warranties are also known as service contracts. They are common when it comes to used cars.

Warranty limitations
The manufacturer’s warranty is not unlimited. It has certain limitations. The manufacturer would undertake to make repairs or provide replacement only if the defect is because of the manufacturer. The limitations would be included so that the manufacturer does not have to bear the cost for a mistake not done by them. Some aspects of the warranty limitation include:

• Length of the warranty
  All warranties last only for a specific duration. The limitation here is for a particular period of time, in terms of years or months. For example, the car may have a warranty of 2 years or 24 months. There is another way in which a warranty may be expressed. This is usually followed for used cars. This is expressed in terms of mileage. The warranty may be limited to a certain number of miles. For example, the warranty limit could be 24,000 miles. Once this number of miles is crossed, the warranty ends.
• Scope
  The scope of the warranty includes the areas covered by the warranty. It may list out the parts covered or systems covered. Only the parts included in the scope are covered. It is important to know what is included by going through the warranty terms.
• Causes
  The causes of a problem may also be included under limitations. All types of causes may not be covered. For example, normal wear and tear may be excluded. This can be specifically listed out in the warranty.

Understanding extended warranties
Extended warranties are provided once the factory warranty expires. This is not a mandatory warranty required. The customer decides if he or she would like to avail of this warranty. An extended warranty ensures that even after the factory warranty expires, the car can still be repaired in case of issues. The extended warranty usually is not as comprehensive as the original warranty. This is because the car would have become older and many parts would be subject to wear and tear.

Extended warranties are usually important when you buy a used car. Since the car is older and would be past the factory warranty date, it is advisable to get an extended warranty. If you are a new car owner and are concerned about the costs of repair post-warranty, then you can get an extended warranty. Again, you need to understand the limitations of the warranty. It is important to know the scope of the warranty, the duration in terms of years or mileage, and the inclusions and exclusions.

While the factory warranty is always offered by the manufacturer, extended warranties can be offered by others. Dealers or sellers can offer extended warranties that can be availed of at their service center. The manufacturer would also offer an extended warranty. There are many third-party organizations that offer extended warranties. You need to compare them in terms of scope and price before deciding.

Real extended warranties are the ones offered by the manufacturer. This usually acts as an extension of the factory warranty. For instance, the original warranty could be for three years and 36,000 miles. When you buy the extended warranty, it is extended for 5 years and 60,000 miles. You can buy the extended warranty right at the time of purchase of the car. You can also buy it from the manufacturer later.

Third-party extended warranties are commonly referred to as vehicle service contracts. Here, a contract is drawn up by the third party. It explains the scope of the contract and lists out which repairs and replacements are included and excluded. This is not offered by the manufacturer but by a third party. Third-party service contracts are also usually less expensive.

How to select an extended warranty?
To better understand how to select an extended warranty for your car, you can keep the following tips in mind:

• Check the credibility of the agency offering the warranty. Check their ratings and reviews from other customers (you can easily find reviews online).
• Go through the contract completely to understand what is included and what is not. Ensure you understand the scope and duration of the contract before signing.
• Compare the terms offered by different agencies before deciding. Do not go only by price but look at both scope and price before making the decision.
• Don’t be pressurized by salesmen to sign a contract without understanding how it works.
• Another important criterion is to find out which repair shops are included in the extended warranty. A fairly comprehensive network of repair shops must be available, including good repair shops near to your place.

Auto warranties are useful to help you get your car repaired in case of any defects. Once the factory warranty expires, you can consider an extended warranty. This will help you save costs in case of any defect or problem.