Learn the differences between these two types of coverage and decide which is right for you.
Car repairs can be very expensive for U.S. citizens – according to RepairPal, a common catalytic converter replacement costs between $2,174 and $2,213. But if you have insurance for car repairs or an extended warranty, it can help offset these costs.
In order to get peace of mind, many car owners pursue long-term coverage before the factory warranty on their vehicle expires. According to IBIS World, almost $18 billion was spent on extended car warranties in the U.S. last year. Alternatively, many owners purchase insurance for car repairs to protect their vehicles.
In this article, our review team discusses the difference between extended car warranties and insurance for car repairs, also known as mechanical breakdown insurance. In addition, we help you decide which type of coverage is right for you and share our recommended providers.
In this article:
- What Is A Factory Warranty?
- What Is Car Repair Insurance?
- What Is An Extended Warranty?
- Advantages And Disadvantages of Insurance For Car Repairs
- Which Type Of Coverage Is Right For You?
- Our Recommended Providers
What Is A Factory Warranty?
Before considering extended car warranties and insurance for car repairs, it is important to know what a factory warranty is. A factory warranty protects a new vehicle from costly repairs for a certain number of years or miles, depending on its particular brand. It's the manufacturer's way of guaranteeing that your vehicle is in proper working condition when it's sold to you, and if it's not, the manufacturer will make it right.
For example, the best SUV warranty comes from Hyundai, which includes 5 years/60,000 miles of bumper-to-bumper coverage with new vehicles. This means that for the first 5 years or 60,000 miles of your ownership (whichever comes first), nearly all breakdowns are covered by the Hyundai warranty.
While such a warranty is helpful in case of costly repairs in the short term, it does not protect a vehicle when it is older and has more mileage. Unfortunately, a vehicle is much more likely to require expensive repairs when it is beyond its factory warranty expiration.
What Is Car Repair Insurance?
Insurance for car repairs, also known as mechanical breakdown insurance (MBI), covers repair costs due to mechanical failures after your factory warranty expires. As opposed to standard auto insurance, insurance for car repairs does not cover the costs of damage related to accidents or natural disasters. It only covers you after a part failure due to normal use.
Insurance for car repairs may be offered as an add-on coverage option by your auto insurance provider. However, not all insurers offer MBI, and some only offer it if you also purchase a comprehensive insurance policy.
If you add MBI to your existing policy, you'll pay for it as part of your insurance premium and all repairs will be handled through your insurer.
What Is An Extended Auto Warranty?
Like insurance for car repairs, an extended car warranty, also called a vehicle service contract, is also designed to protect your vehicle in the event you need costly auto repairs. You make a small monthly payment toward your contract and then pay a deductible if and when you need covered services from a mechanic.
Extended warranties are not tied into your auto insurance policy like MBI plans are, so they can be purchased from any extended warranty company or a dealership.
Advantages And Disadvantages of Insurance For Car Repairs
To help you compare insurance for car repairs and extended warranties, we've listed three advantages and disadvantages of choosing MBI over a vehicle service contract.
- Rates decided by state governments: Insurance for car repairs is regulated by state governments. This means MBI policy rates may be cheaper than extended auto warranty rates in some cases.
- No down payment: Unlike an extended auto warranty, purchasing insurance for car repairs does not usually require a down payment. However, some top-rated warranty providers, like CARCHEX, may be willing to waive a down payment, which will help with your extended car warranty cost.
- Easy to add to an existing policy: Your current auto insurer can easily add mechanical breakdown coverage to your policy, so long as it is offered by the provider. Rather than researching extended auto warranty companies, you can manage your existing coverage with a company you already know.
- Strict eligibility requirements: Insurance for car repairs typically has strict eligibility requirements regarding mileage and age restrictions for vehicles. On the other hand, extended warranty providers can provide coverage to older and higher-mileage vehicles.
- Few providers available: Currently, there are few auto insurers that offer insurance for car repairs, making your choices limited.
- Costly deductibles: With an MBI plan, you will likely pay more for a deductible compared to an extended car warranty. There is greater competition between extended car warranty companies for customers’ business, reducing coverage prices overall.
Which Type Of Coverage Is Right For You?
Based on our research, extended warranties are often the better choice for drivers. They offer more flexibility, lower deductibles, and additional coverage options.
However, if you like your auto insurer and it offers a car repair insurance policy at a reasonable cost, then an MBI plan may be an excellent choice for you.
If you cannot decide which type of coverage is better for you, getting a quote for an MBI plan with your auto insurance provider and then comparing it to quotes from the best extended car warranty companies is a great option.
Our Recommended Providers
To jump-start your research, we've narrowed down the best extended car warranty providers in the industry. You can click below to start getting free, no-obligation quotes, or read on for more information about two of our top recommended providers for warranties and insurance for car repairs below.
If you decide to purchase insurance for car repairs, we recommend that you get a quote from Geico, USAA, AAA, or Mercury. These companies have the most inclusive MBI policies for high mileage and old vehicles. You can read up on these providers in our Geico auto insurance review, USAA auto insurance review, AAA insurance review, and Mercury insurance review.
Endurance: Best Coverage
Our review team named Endurance the Best Coverage car warranty provider. Here are a few reasons we recommend this company:
- Covers high-mileage vehicles: Endurance offers extended warranties to automobiles with 200,000+ miles, which is much higher than other companies.
- Direct-to-consumer business model: Rather than work through an administrator or other company, Endurance works with customers directly. This saves you time when you need to file a claim on a covered repair.
- Choose between several coverage plans: The provider offers six coverage plans to drivers, ranging from basic powertrain coverage to comprehensive bumper-to-bumper protection and maintenance plans.
CARCHEX: Best For Used Cars
CARCHEX is our top choice for high-mileage vehicles, and it also gives drivers some of the best service in the industry. We like it for these reasons:
- Industry partnerships: CARCHEX works with industry leaders such as Edmunds.com, Kelley Blue Book, and CARFAX. These partnerships indicate that CARCHEX is a leading extended warranty provider.
- Strong reputation: CARCHEX is an eight-time Inc. 5000 Hall of Fame honoree and was named a Top Workplace by the Baltimore Sun for seven consecutive years. The company also boasts an A+ BBB rating.
- Affordable coverage: Based on our review team's sample quotes, CARCHEX was among the most affordable extended warranty providers.
In an effort to provide accurate and unbiased information to consumers, our expert review team collects data from dozens of extended auto warranty companies to formulate rankings of the best providers. Companies receive a score in each of the following categories, as well as an overall weighted score out of 5.0 stars.
- Industry Standing: Warranty providers with a history of strong business practices and endorsements from experts receive the highest scores in this category.
- Coverage: This rating is based on types of extended warranty plans available, coverage terms, and added benefits like roadside assistance.
- Cost: Our research team reviews sample quotes for a variety of plans and vehicles. Companies with lower prices per year of coverage receive the best scores.
- Transparency: This score takes into account contract transparency and the availability of a money-back guarantee.
- Customer Service: We comb through customer reviews and perform our own shopper analysis to get a sense of the responsiveness and helpfulness of each warranty company.
Read our other articles:
- Insurance For Car Repairs
- Autoassure Warranty Review
- Best New Car Warranty
- Best Used Car Warranty Companies
- Toyota Extended Warranty Review
- Subaru Extended Warranty Review
- Infiniti Extended Warranty Review
- Ram Extended Warranty: What's Covered?
- GMC Extended Warranty Review
- Dodge Extended Warranty Review
- A Closer Look At Nissan Factory Warranty
- Lexus Extended Warranty Coverage