Some people get extended car warranties and auto insurance confused, which is understandable. After all, they both provide protection. However, these two things are quite different. The information provided will help you understand how each of these works.

Extended Car Warranties

A new vehicle automatically comes with a manufacturer’s warranty. That means that if within the designated period something goes wrong, the manufacturer pays to have it repaired or replaced. For instance, if you buy a new car with a six-year or 60,000-mile manufacturer’s warranty, but under that timeframe or mileage, the transmission acts up, you can take it to an automotive repair shop where a mechanic either fixes the transmission or replaces it at no cost to you.

Once the manufacturer’s warranty expires, all repair and replacement costs are yours unless you buy an extended warranty. With that, your vehicle’s protection is now with a third-party company that sold you the warranty. You can choose from many different plans for both timeframe and coverage.

That all sounds great, right? Well, it is, but as with every warranted item, there are pros and cons.


• The biggest advantage of an extended car warranty is that you avoid hefty costs for repairs and replacements.

• If something does go wrong with your vehicle, having an extended warranty eliminates you feeling pressured to get rid of it. According to recent reports, one out of every three car owners in the U.S. cannot afford to pay for unexpected car repairs, which average between $500 to $600.

• By choosing the best extended warranty available, you can customize what the plan covers. Not only does that include all the standard features on an automobile, but also the high-tech components that most new cars boast.

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• In some instances, buying an extended warranty does not make sense financially. Say you pay $60 per month, which comes out to $720 a year. Considering that today’s new automobiles are extremely reliable and safe, you might never need the warranty. Even if you do, the cost of a repair might come out less than the cost of this protection.

• Especially if you got an extended warranty years after buying your car, you might feel as though you need to hang onto it even if you want to sell. To remedy this, choose a company that allows you to transfer the warranty.

• While the good extended warranties cover a host of things, none of them cover everything. Depending on what goes wrong, you may or may not have to pay for a repair or replacement out of pocket, even with an extended warranty in place.

Automobile Insurance

Car insurance is something that you purchase to protect yourself, other parties, property, and of course, your vehicle. To drive in the U.S., you must have liability insurance at a minimum. Based on the type of policy you have, it would cover all parties involved in an accident or just the other driver.

You can always buy additional policies for added peace of mind. For example, if you worry that a driver will hit your car but not have insurance or the policy that they have is not adequate to take care of any damage and personal injury expenses, you can buy an Uninsured and underinsured policy. Car insurance also has a deductible, which is the amount the insurer deducts from claim money sent to you or the automobile repair shop.

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As with extended warranties, there are pros and cons of car insurance.


• If you get into an accident, whether your fault or someone else’s, you have protection. Not only can you get your vehicle repaired but the policy would also cover medical bills.

• You avoid getting sued. Driving without insurance as an at-fault driver, the other party could take you to court for the cost of their damages and win.

• You can choose from many types of coverage. The best thing you can do is compare car insurance options. With all the different possibilities, there is a perfect policy for everyone.


• The only negative aspect of car insurance is that you have to pay for it. However, having this protection is what gives you the privilege to drive.

The Bottom Line

As you can see, extended warranties and car insurance are two completely different things. However, they both provide you with protection. When buying a new car, you can purchase an extended warranty that could help if something goes wrong with your vehicle. As for car insurance, this is something required by law.