There are many places to buy a vehicle warranty but only a few places to buy quality coverage. You can purchase an extended warranty from the car dealer, a warranty company, a warranty agent, a broker, an insurance company, a credit union or a marketing firm.

Manufacturer and dealer warranties are notoriously expensive. You will save money by purchasing direct from the warranty company or a warranty agent. There is one catch, manufacturers and warranty companies only offer their own warranties or in the case of car dealers, brokers, or marketing companies, warranties from companies they represent. Look for an agent who handles multiple warranty products from multiple warranty companies. You will get a better selection, better coverage and a better price.

The insiders tip is most dealers try to sell you an extended warranty when you buy the car and even offer to roll it into the payments. Dealers make a handsome profit on these policies. There is no immediate need to purchase a warranty right then and there. You will still qualify for the exact same or better coverage after you drive off the lot. And you will more than likely find better coverage or a better price elsewhere.

One note is you will pay a lot more by having the dealer roll the extended warranty into your car payments. For example, a $2,000 plan will end up costing as much as $2,800 because of the interest. Most warranty companies and agents offer 0% interest financing.

Insurance companies and credit unions typically offer limited coverage plans from third parties. They will also offer to bundle them with your loan or insurance payment. Do the math and make sure they are not tacking on interest or additional fees.

To find companies offering warranties do a Google, Bing or Yahoo search for “extended auto warranty companies”. However be aware a lot of rather questionable companies will also be listed. You can also view a list of the top rated companies here:

Where Not to Buy an Extended Warranty

The number one place not to buy a warranty is from a marketing company. There are hundreds of marketing companies selling warranties. These are call centers and generally have rather questionable coverage plans. Their number one job is to sell you any plan they can and get your credit card.

There are a few red flags that will tell you you’re dealing  with a marketing company:

1) Do they ask for your phone number on their website?
No respectable warranty company will ask for your phone number online. If you give it to them you will be guaranteed to get calls at all times of the day and night for the next two or three months. The top companies will allow you to enter just your email address and send you a customized quote.

2) Are they offering a special?
The major warranty companies do not have specials.  No mother’s day specials, no 4th of July specials, no first time buyer’s specials, no specials period.

3) Do they offer a discount?
This trick is called “marking down the markup”. The way this works is they set the price really high then offer a big discount to give you the false impression of a deal. None of the top companies offers discounts.

4) Do they have TV or radio ads or “as seen on TV” or a celebrity spokesperson or sponsor NASCAR?
Absolutely none of the top warranty companies have TV ads, spokespeople or sponsorships.

5) Do you have to purchase immediately.
This is simply high pressure sales tactics. There is never a need to make an immediate decision and no respectable company will do this.

Additional Resources: Where Not to Buy a Warranty, Auto Warranty Scams

Insurance, Insurance, Insurance

Only buy a warranty that is “direct insured”. Direct insured means the warranty company has an insurance policy on your warranty from a third part independent insurance company that says if a claim is not paid, the insurance company steps in and pays it. This is the safest and most secure purchase you can make.

A big step down is a warranty company backed by an RRG (Risk Retention Group) which is typically a group of warranty companies who have gotten together to insure each other. These are much less stable and much less regulated than a direct insured company. You would want to stay away from these companies.

Never buy a warranty that is not insured or “self- insured”. These are rather questionable companies and you would be left out in the cold should the company decide to close their doors. Non-insured and self-insured companies typically don’t have the assets to afford insurance and when claims start to pick up they typically start denying claims and eventually end up shutting down leaving you out in the cold.

All of the top warranty companies are direct insured. You will pay a slightly higher premium for a direct insured warranty but safely securing your investment and getting a quality coverage plan is well worth the extra cost.

What to Pay for an Auto Warranty

There are no hard and fast rules. Reputable warranty companies and warranty agents are in business to make a profit but they wouldn’t be in business for long if people weren’t actually saving money.

Do expect to pay a fair price for a fair policy and don’t be fooled by a cheap policy. Would you buy homeowners insurance that only covered your kitchen and garage but not the rest of the house just because it’s cheaper? With warranties it really is “you get what you pay for”. After all, it’s all about protecting your investment and about saving money.

Additional Resources: Where Not to Buy a Warranty, Top Rated Auto Warranty Companies