Car Warranty – Extended Warranties and Companies

Whenever you go for a new car you also purchase a car warranty, mostly a power train warranty or a bumper-to-bumper warranty. At the most, one-third of all cars experience failure once in a given year. If your car fails after the auto warranty expires, you have nothing to cling to and protect you from repair costs. The repair costs can run into thousands of dollars. More importantly, owners frequently put off much-needed repairs until the last moment and when they can afford the cost of the repair.

This kind of delay often results in additional damage to the car and creates unsafe conditions. There is always a risk of component failure and associated repair costs increase with the vehicle's age and mileage.

Companies like WarrantyDirect.com, Autobytel.com, Autoweb.com, CarSmart.com, Edmunds.com, Autos.yahoo.com and eBay.com would give you a variety of low cost, feature-packed extended warranties that protect your budget against unexpected repair charges.

You might even think of an extended auto warranty as a risk management tool that totally ensures that the repairs to the vehicle are done as and when they are needed, perfectly. The extended warranty is an insurance policy that safeguards your car against expensive unforeseen repairs, etc. The term extended warranty is actually a misnomer and it should be strictly called a service contract. Like warranties, the extended warranty covers repairs and/or regular maintenance for an agreed-upon period of time. True warranties, though, are included in the price of the product. Extended warranties are really service contracts, as they cost extra and are sold separately.

It is always best to know who is underwriting your extended warranty policy, which can give you insight into the strengths and weaknesses of the contract you are currently considering. Some car warranties backed by manufacturers score very high when it comes to the ease of use. But aftermarket warranties are often cheaper. But in any case, do go to websites like A.M. Best and find out the ratings given to these companies. You would need to find out the financial strength of the company as rated by A.M. Best and/or Standard & Poors, etc. A peek into the websites would provide a good idea about the financial viability of the car warranty providers.

Any company you consider should have a good rating, which would give you a good idea about its ability to pay your auto warranty claim. Your best bet would be to choose a company that has a minimum "A" rating with Standard & Poors and a minimum "A" or "A-" rating with A.M. Best.

Generally, looking up the ratings is a formality as the well-known extended warranty companies are a safe bet. The A.M. Best rating is expressed as a letter grade from A++ to D. Some companies may be assigned ratings of E (this indicates regulatory actions pending against them!), F (liquidation) and S (suspended). In any case, you should only work with companies that have at least a B+ rating. Standard & Poor's ratings, on the other hand, range from AAA to C. Some companies receive ratings of R (regulatory supervision) and NR (not rated). Consider only those companies that have at least a BBB rating.