Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Benjamin Carr was a licensed insurance agent in Georgia and has experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. Benji is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.

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Former Licensed Life Insurance Agent Benji Carr

UPDATED: Mar 14, 2022

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To Sum It Up

  • Car warranty helps reduce financial risk by covering the costs of repairs and replacements for defective parts
  • When shopping for a used car from a dealer, read the Buyers Guide to check the warranty details
  • If a used car doesn’t have warranty, you can buy a service contract or get mechanical breakdown insurance on top of your auto insurance

Used cars have long been a popular market due to their affordability. However, demand for these vehicles has skyrocketed in the past two years as people wanted to avoid public transportation without breaking the bank during the pandemic. If you’re planning to buy a used car yourself, one of the most important things to check for will be the used car warranty.

New cars often come with warranties, but the same can’t be said for used cars. Unfortunately, not all secondhand models have warranties included, so it’s important to check the details before buying any vehicle. After all, buying a car — new or used — is a big financial investment.

Types of Used Car Warranties

If you plan to buy a used car from a dealership, the Buyer’s Guide should contain the vehicle’s warranty details. As per the Federal Trade Commission guidelines, here’s an overview of what different types cover to help you decide what model to get.

As-Is (No Warranty)

If a used car is sold as-is, this means it comes with no warranty, and you’ll need to shoulder the cost of potential problems.

Some states have different rules on as-is sales, so make sure to check with your state attorney general for more information. For example, New Hampshire, Louisiana, and Washington require other disclosures.

A dealer may sometimes agree to provide some repairs if problems arise with the used car. In these cases, make sure you tell the dealer to write it out in the Buyer’s Guide. Whatever is written here will be upheld in the end. Thus, if they don’t write out their verbal promises, it might be hard to get the dealer to follow through with their word later on.

Many other details are involved with a used car warranty, so we’re here to help you out. In this guide, you’ll learn more about the types of warranties you may encounter for used cars.

Implied Warranties

State laws require dealers to provide implied warranties if their used cars don’t meet certain standards to protect buyers. These are essentially unwritten and unspoken promises that dealers make to their buyers.

Generally, even if a used car doesn’t have a written warranty, it’s still covered by an implied warranty. The only exemption will be if the dealer explicitly states that the sale is “as is” or “with all faults.” To better understand how it works, here are the two common types of implied warranties:

  • Warranty of Merchantability. This warranty asserts that the used car will run as expected. Of course, it doesn’t mean that you’ll get a perfect car, but it does promise that the car will work as intended, given its condition and age.
  • Warranty of Fitness for a Particular Purpose. This warranty applies in cases where a dealer recommends a used car and promises that it’ll work for your intended purpose.

Unexpired Manufacturer’s Warranties

Sometimes, the original manufacturer’s warranty may still be in effect when you buy a used car. It should be indicated in the “systems covered/duration” part of the Buyers Guide. If you see it, ask the dealer for the warranty documents to verify if it’s transferable and check for details like coverage, locations included, and others.

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Service Contracts: Extended Warranty for Used Cars

Whenever you buy a vehicle, you have the option of getting a service contract from car dealers or manufacturers. It is especially popular among used-car buyers since the contract stipulates that the seller will cover the cost of specific repairs or services.

While service contracts are often called extended warranties, they aren’t warranties since you need to pay extra to get them. Similar to auto insurance rates, their costs can vary based on the car’s make, model, and condition. Some may charge an upfront fee ranging from $1,000 to $3,000, while others may charge monthly payments.

Likewise, coverage levels can differ per contract and provider, so it’s important to compare rates across providers before deciding on anything.

Factors to Consider in Purchasing Extended Warranty

If you’re not sure about getting an extended warranty for your used car, here are some key factors to consider in your decision:

  • Coverage and time left in the existing warranty (if applicable)
  • Vehicle condition, reliability, and mileage
  • Service contract costs compared to common repair costs
  • Length and coverage of the service contract
  • How often do you plan to keep the car
  • Reputation of dealer or company offering the service contract

Overall, service contracts are a great option if you buy a used car with no warranty since they can mitigate financial risks on your end. However, it’s important to weigh the situation carefully to see if you get more benefits in the long run. For example, if you don’t plan to keep your car for long or it is still in good condition, you might not need to spend on this optional plan.

Alternatives to Service Contracts

If you decide not to get a service contract, you can still explore alternatives to protect your vehicle from potential concerns. Check them out below to determine what the best option will be.

Get Mechanical Breakdown Insurance

One popular alternative to a service contract is mechanical breakdown insurance (MBI). You can get this optional plan on top of your basic auto insurance to cover major malfunctions. These include critical parts like the engine, brakes, drive axle, transmission, exhaust, and electrical components.

Unlike service contracts or extended warranties, MBI plans are regulated by the state government, giving you more peace of mind with claims. Most plans are also eligible for six to seven years of coverage, which is longer than the typical length of a full-coverage extended warranty.

That said, MBI doesn’t cover routine maintenance or regular wear and tear, so consider your car’s condition to determine how likely these major failures will be. Likewise, not all insurance companies provide MBI for used cars, and some only offer it for newer cars. For example, GEICO’s MBI is only applicable for cars up to 15 months old and with 15,000 miles.

If your used car is much older than that or has higher mileage, you can check with Mercury or USAA auto insurance. The former allows cars of at most seven years and 100,000 miles, while the latter provides at most 10 years and 115,000 miles for their MBI plans.

Set Aside an Emergency Fund for Repairs

If you feel like your car is in good condition or don’t have the financial capacity to pay for a service contract or MBI, you can set up an emergency fund for repairs instead. Apply for a new savings account and deposit money monthly — or whenever possible. This way, you have dedicated funds ready if your car needs emergency repairs.

If you end up not repairing your car, you can continue saving the money for your next car or other purposes. However, if the opposite happens and your car runs into major problems, there’s also the chance that you’ll spend more than you expected. Thus, you should carefully assess your car’s condition to determine what alternative will best suit your situation.

The Bottom Line on Used Car Warranties

Purchasing a used car is a great option to invest in a vehicle without putting too much burden on your finances. However, just like how you’d inspect the condition more thoroughly, you should also verify the manufacturer’s warranty details before purchasing.

That said, there’s always the chance that you find a used car that no longer has its original warranty. In such cases, you can consider alternatives like a service contract (extended warranty), mechanical breakdown insurance, or saving up cash.