All new cars come with a manufacturer's warranty that lasts from anywhere between three to seven years. If you're buying or own a car that's a few years old and is out of its warranty period, then an extended warranty is a great way of providing you with peace of mind.

Although it's the term you'll hear used most often, extended warranty is a little misleading since it isn't really a warranty at all. Instead, an extended warranty is an insurance policy between you and the manufacturer or warranty supplier, which covers the cost of repairing or replacing faulty components – provided those items come under the terms of the warranty.  

If you're confused about what's included in an extended warranty, we'll take a closer look at them here, detailing what they cover, the different types of warranty available to you, and more.

What are the different types of extended warranties?

There are three main types of extended car warranties:

A manufacturer's own extended warranty which you can purchase when the car is new or before the original warranty runs out

A used car warranty supplied by a car dealership

A warranty that you can purchase from an independent provider, which are sometimes known as aftermarket warranties

What do extended warranties cover?

Extended warranties are in place to protect you against the unexpected failure of important components and systems in your car, such as the engine, gearbox, electrics, steering and suspension. Items that stop working as a result of wear and tear can also be covered by certain warranties, but primarily, it's the major components you should ensure are covered when searching for the right extended warranty.

All extended warranties should show you which items are covered along with what is excluded. Should this be unclear, or the policy's terms and conditions aren't easily accessible, it's best to look for another policy.

Many of the warranties which are sold by independent companies will allow you to choose the level of cover you require and the items you want covered.

In terms of what isn't covered, some repairs fall outside most warranties, including replaceable parts such as batteries, bulbs, wheels and tyres. Cosmetic repairs to the paintwork or car's interior aren't included either, and neither are accidental damage and vandalism that requires repairs or replacement of parts.

How much do extended warranties cost?

The cost of an extended warranty depends on a number of different factors, including the vehicle itself. The following can all affect the price of a particular warranty:

• The value of the car: The more expensive your motor, the more it could cost to get it repaired
• The age of the car: The older it is, the more likely it may be to break down
• The miles on the clock and the miles you drive: The more use the car has, the more likely you are to activate the warranty
• The level of cover: Some car warranty providers offer cover for more than just the engine or mechanics

You can keep the cost of a warranty down by choosing a more basic package or a shorter warranty. But remember, the less coverage the warranty offers, the higher the chance you'll need to pay for costly repairs out of your own pocket.

Top tips for choosing the best policy

Since there are so many different warranty products out there, it can be tough to decide which one is right for you.

When weighing up your options, you should always make sure you're comparing like for like, along with whether the products you're considering are suitable for you. Being mindful of phrases like "betterment", "consequential failure" and "wear and tear" in extended warranty contracts can help make your decision a lot easier.

Betterment: This means that if your car requires a new part to function, certain warranty providers will send you a bill because the new part is better than what it's replacing, and as a result, will have increased the value of your car.

If this part is a new engine or gearbox, it might mean you face a bill that's in the thousands, so be sure you understand the warranty provider's position on betterment before you sign on the dotted line.

Consequential failure: This is when a part that is covered by your warranty fails and causes the failure of another part that isn't covered. Watch out for this: some providers will make you pay for repairing the parts which aren't explicitly covered by the warranty.

Wear and tear: It's strongly recommended that you go for a policy that includes cover for various other items that are likely to wear out or fail over time. Make sure you're aware of the level of wear and tear cover the policy offers up front.

Some policies state you must have your car inspected prior to wear and tear cover being offered. If this is the case, you'll most likely have to pay for any necessary repairs before the policy starts.

If you don't, you won't be able to take out wear and tear cover, or it might be deferred for a period of time. This means the insurer isn't liable to pay for parts that are already at or are close to the end of their working life when the policy starts.

Do I need an extended warranty?

Not at all. You don't have to take out an extended warranty when buying a car.

Things like how risk-averse you are, how much disposable income you'll have to pay for your own repairs, and how reliable your car is should all be considered before you choose not to go with an extended warranty.

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