Auto Warranty

You know "the cringe." It's an involuntary reaction experienced when your mechanic tells you how much it will cost to fix your car. To avoid such lump sum expenses, many drivers turn to auto warranties.

Warranty Options

Most people stick with the manufacturer's warranty, which is included with the price of their new car. But there are also various types of extended warranties, which generally cover cars up to 150,000 miles. Often pushed by auto dealers, they can also be purchased through private companies. Here are some of the big ones:

Exclusionary warranties: Provides bumper-to-bumper coverage, with exclusions on certain parts.

Named Component Warranties: Covers specific auto parts like ABS brakes.

Luxury Coverage Warranties: Picks up the tab on popular luxury features like emissions systems, DVD/stereo systems, etc.

Big-ticket items: On used cars, covers expensive repairs like brakes and radiators, but generally excludes for wear and tear.

Consumer Caution

Treat the fine print on an extended warranty like a yellow light: Be careful! Here are some things to look out for:

Wear and tear vs. mechanical breakdowns. Warranties attribute the cause of a broken part to two factors: wear and tear or mechanical breakdown. To avoid paying claims, many extended contracts exclude wear and tear on repairs. That's not good, considering wear and tear is the main cause for breakdowns.

Check your exclusions carefully. Most auto warranties are designed to pay the minimal number of claims. Often they'll exclude certain parts from coverage. Be sure to check the exclusions to see if you've got coverage on parts that have a higher chance of breaking down. Consider consulting a mechanic to learn which parts carry the highest risk.