How Car Warranties Differ from Car Insurance

How Car Warranties Differ from Car Insurance

When it comes to paying for a visit to the doctor, you will usually use your health insurance to pay for all or part of the expense. However, car insurance works differently as it will not use this to pay your local mechanic to fix an issue with your car.

As the economic slowdown has more Americans considering the purchase of a used car, this is probably a good time to look at the differences between car warranties and car insurance. This information will help you to make better decisions on what car to buy and how to shop for the right coverage down the road.


The biggest difference between the two is that a car warranty will help to cover the cost of mechanical issues with your car. While this does not include things like tire and brake pad changes, a warranty can be used to pay for significant engine or transmission repairs.

On the other hand, car insurance will only pay to repair or replace your vehicle if it is damaged in an accident or some other incident such as theft, a natural disaster, or fire, among other things.

Add to this the fact that auto insurance is required in almost every state for you to operate your car on public roads. You can get ticketed, or even worse if you are caught driving your car without insurance.

What is a Warranty?

For starters, there are two types of warranties. If you buy a new car, it will most likely come with a manufacturer’s warranty. According to research from Edmunds, a new car warranty usually runs from three years or 36,000 miles to as long as ten years and 100,000 miles.

While a manufacturer’s, or factory, the warranty comes with your new or slightly used car, it is not free as automakers roll the cost of this coverage into the price you pay for the vehicle. The coverage is meant to give owners peace of mind as they drive off the lot, knowing the automaker will take care of most repairs without any additional cost.

If you are buying a new car, then you will want to check the fine print as the warranty will probably come in two parts. The first is the “bumper-to-bumper” coverage, which will not only include the engine but also things like your car’s air conditioning and electronics systems. Also, they will offer what is called a “power train” warranty, and this will cover any issues with your car’s engine or transmission.

Where it can get tricky is that the coverage periods for the two types of warranties often differ. This means that you need to understand the full details of your warranty to make sure you will be able to use it when you need it. If you are not sure, then ask the dealer to review the terms and conditions with you.

Keep in mind that factory warranties can sometimes apply to used cars – especially certified used cars regardless if it a Bugatti Chiron Pur or a Buick. However, the terms of this coverage will probably differ from new car warranties. As such, you will want to find out from the dealer the exact details of the warranty.

Besides the factory warranty, you can also purchase extended coverage from either the manufacturer (though they usually limit the age or mileage) or a third-party. The latter can also be known as mechanical breakdown insurance. A growing number of companies are offering this sort of coverage specially tailored for the owners of older vehicles.

Depending on your needs, these warranties can extend coverage for your powertrain, or even consumables such as tires, brake pads, and wiper blades. Also, some warranties might require you to pay a deductible. On the plus side, this means that you can tailor the coverage based on your needs, and for those seeking third-party warranties, you might want to check out some of the olive insurance solutions to explore what might work for them.

Regardless of the terms of your warranty, this does not mean that you can ignore the condition of your car. As such, you will want to continue to bring your vehicle in for regular oil changes, and inspections and the Federal Trade Commission (FTC) recommends that you continue to follow the recommended maintenance schedule or risk voiding your warranty altogether.

What is Car Insurance?

As mentioned, car insurance might be used to help pay for damage to your car resulting from an accident or other causes. However, this form of coverage does not work in the same way as your car’s warranty.

Car insurance is more akin to liability insurance, in that its role is to help to cover the car owner and driver from financial risk if they are in an accident while operating their vehicle. As such, car insurance can be used to pay medical bills and property damage if you are found to be at fault in an accident.

Car insurance can also include collision, comprehensive, uninsured motorist, medical payments, and personal injury coverage. However, the level of coverage will depend on the cost and your choice when you sign up for your insurance policy.

Like some third-party warranties, your car insurance will usually have a deductible. Though one way to save money on your auto insurance is to choose a higher deductible as this will make it less expensive to afford expanded coverage.

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