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Understanding car warranties is one of the most important aspects of buying a car. However, some buyers go through third-party car warranty companies once their standard one has expired. While these companies have much to offer the market, drivers should be aware that there’s a lot that can go wrong with getting coverage through a third party. 

Going through third party car warranty companies can be costly

Getting an extended car warranty is expensive regardless of whether you use third-party companies or if you use the dealership option. Typically, both require a downpayment. The difference is that the down payment for extended dealership car warranties may be reduced if you purchase it when buying the car. However, nondealership coverage has extra fees that drivers should know about. 

Even the best cars need a car warranty and there are also many car warranty companies
Are you covered? | Ildo Frazao via iStock

For starters, there’s usually a deductible with third-party companies. The problem is that there are two types of deductible charges. One is “per visit,” and the other is “per repair.” If a driver has to have a deductible, they’d want the per visit as the other charges the fee for each part of the vehicle that needs to be repaired during the visit. According to USA Today, they typically range from $0 to $250. 

Car warranties from companies can have other restrictions

People considering car warranties from third-party companies should know they may have to pay out of pocket for repairs. While there might be exceptions, most nondealership coverage requires this. The way it works is that the car owner will need to file a claim with the company for reimbursement. Unfortunately, the wait time for reimbursement can take months. 

Additionally, many have reported that the amount they receive from the company is much less than what they paid out of pocket. This is often the case because of the deductible and any other fees that may be a part of your contract. 

People looking for coverage for their vehicle should know that car warranties from third-party companies often have a waiting period before coverage begins. This is usually 30 days or 1,000 miles traveled. The other big problem is that third-party car warranty companies don’t have the best reputations. This is because they word their contacts so that they sometimes don’t have to pay for repairs, which makes nondealership extended warranties much less stable for the driver. 

Still, having extended coverage provides a great deal of peace of mind for some drivers. However, people should also be aware that Consumer Affairs reports that only about 6.3 percent of drivers bought extended warranties.