When you buy a new car, it most often comes with a manufacturer's warranty. This warranty more or less covers anything that can go wrong with the car, but for a limited time only. The dealer will also give you an opportunity to buy an extended warranty. Since the basic warranty that comes with the car expires after only a few years, purchasing an extended warranty may a good way to save money down the line when parts break down, as long as you know what it covers.

Time Frame

According to Edmunds.com, all warranties are different. All warranties, however, come with a limited lifetime. For example, your warranty may expire after three years or 36,000 miles--whichever comes first.

Types

A "breakdown" warranty will cover only parts that break. This type of warranty provides limited coverage but will cover such things such as the drive train and the power train.

Significance

A "wear and tear" warranty covers parts that have worn down after time. These warranties cover most parts that a basic or breakdown warranty doesn't cover, like electric windows or other parts with a motor that can wear out. If you drive a manual car, clutches are not usually covered.

Warning

According to Edmunds.com, certain parts are generally not covered under many warranties. Most often more expensive parts like Anti-Lock Brakes are not covered. Most warranties often don't cover overheating, so if your radiator is causing you problems, it is likely not covered and can cost you a lot of money.

Prevention/Solution

According to Edmunds.com, it is important to recognize and understand everything your warranty covers--and doesn't cover--before committing to it. Also, make sure you read the fine print because some warranties require the repairs to be done at the dealer if you want coverage.

Source:

Edmunds.com: Understanding Extended Warranties

Autos.aol.com: Extended Auto Warranty