Most extended car warranties come in two varieties: those issued through a dealer and those backed by a third-party provider.

Each type has its strengths and weaknesses; which choice is better for you depends on your preferences.

Dealer Warranties

These service contracts generally offer superior stability. While some dealerships do go out of business, as a whole they offer greater longevity than most third-party providers. And, if your service contract provider closes, your warranty is often useless.

Dealer warranties offer convenience, too, in that you can purchase a warranty while in the showroom. And, you can talk to people face-to-face about your service contract.

Some dealer warranties are actually backed by the vehicle manufacturer, instead of the dealership. Many industry experts feel these are the best type of service contracts.

Dealer warranties offer greater consistency of quality than third-party warranties, although some third-party contracts provide outstanding coverage. Most legitimate claims get approved immediately.

Shop around between dealers to try to lower the cost of this warranty, and remember that service contract prices are usually negotiable.

Third-Party Warranties

These warranties usually offer a much better price for consumers, and some provide coverage that's on a par with the best dealer policies. But, it's up to you to do the research to find the warranty with the best value.

Third-party warranties have a much wider range of repair shop choices. With a dealer warranty, the vehicle usually has to be repaired at the dealership. If the shop isn’t nearby or it’s tough to get an appointment quickly, this can be an issue. Also, if you’re out of town and experience a breakdown, you can often find a repair shop within a reasonable distance that will honor your warranty.

It's smart to try to find out about a provider's claims history; some third-party providers are notorious for fighting claims.

Some dealers do sell third-party warranties. So, if you purchase a warranty while at the dealership, be sure you know who is backing the contract.

Additional Information

Want to learn more about extended warranties? See our article on the subject.

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