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Why Factory-Backed Extended Warranties Are Best

When it comes to buying an extended warranty, it's usually best to get one that's backed by the car manufacturer.

These warranties are only available for sale through a franchised new car dealer.

They're usually more expensive than third-party warranty providers, but you won't have much hassle if you need repairs and you don't have to worry about them going out of business.

Third-party warranty providers can sometimes make it a hassle to get repairs done. They may force you to get multiple estimates, wait for approvals, and not pay the claims upfront, but rather reimburse you afterwards.

With a factory backed warranty, you simply take the car to the nearest dealership and they take care of everything.

To make matters worse, there have been several bankruptcies in the past involving third-party warranty providers. Foolishly, they had sold cheap warranties and didn't have enough revenue to cover all the repair expenses.

Unfortunately, the consumers who bought these warranties lost the service along with the money they had paid.

When buying a factory-backed warranty, make sure the dealer doesn't trick you into purchasing a third-party warranty (which can be more profitable for them). Always confirm and make sure it is factory-backed.

Finally, it's important to note that there are some exceptions when it comes to third-party warranty providers.

If you really want the best deal on an extended warranty, the best third-party providers are WarrantyDirect, CarChex, Universal Underwriters, and CNA.

Universal Underwriters and CNA are available for purchase only through dealerships, while WarrantyDirect and CarChex are the ONLY online providers I recommend.

Each has a long history of providing good quality extended warranties. Usually, they're cheaper than a factory backed warranty but do come with a slightly higher risk so you should always compare rates and decide if it's worth it.

My Recommendation for Car Shoppers

TrueCar No-Haggle and Edmunds Price Promise are the quickest way to see the lowest car prices in your area. These sites show you no-haggle prices from dealers closest to you - and the deals are usually really good. This should be the first step you take when negotiating your car price. Follow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan

Gregg Fidan

About: Gregg Fidan


Gregg Fidan + is the founder of RealCarTips. After being ripped off on his first car purchase, he devoted several years to figuring out the best ways to avoid scams and negotiate the best car deals. He has written hundreds of articles on the subject of car buying and taught thousands of car shoppers how to get the best deals.

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