What Is a Dealership Warranty? (2023 Guide)

What Is a Dealership Warranty? (2023 Guide)

When you buy a new or used car at the dealership, you’ll likely be offered an extended warranty backed by an auto manufacturer. These dealership warranties offer comparable coverage to plans from third-party providers, but they’re often more expensive. In this article, we at the Guides Auto Team will break down dealership warranties and how they compare to plans offered by independent companies.

If you opt to purchase a third-party vehicle service contract, our team can help you make a wise choice. We’ve researched and ranked the best extended car warranty companies to make it easier to find your perfect match.

What Is a Dealership Warranty?

Just about every authorized auto dealer offers manufacturer-backed extended warranty plans. For new cars, these vehicle service contracts are extensions of the factory warranty. Many automakers offer long-term protection for certified pre-owned (CPO) vehicles as well.

Either way, a dealership warranty is designed to cover damage incurred through normal use or due to workmanship flaws. Wear and tear components like brake pads and wiper blades aren’t covered, and you’ll want to look elsewhere after damages caused by theft, vandalism, severe weather or car accidents.

Dealership Warranty vs. Third-Party Warranty

third-party providers. Each type of warranty will take care of damages caused by regular use or workmanship issues. However, there are a few factors that differentiate these two warranties:

  • Coverage options: There are usually fewer coverage choices from car dealerships.
  • Pricing: Dealership warranties are typically more expensive, though promotions can lower rates. Auto dealers are also likely to roll an extended warranty into the payment on your vehicle, meaning you’ll likely pay interest on the warranty.
  • Repair shops: Most dealership warranties require you to have repairs done at their own shops. On the other hand, independent coverage providers usually let drivers take their vehicles to any certified repair facility after a mechanical breakdown.
  • Eligibility standards: It’s tough to get an extended warranty for cars with over 100,000 miles on the odometer from the dealership. That’s because they usually have much more strict eligibility requirements for the age and mileage on used cars. You may also need to purchase a dealership extended warranty during your vehicle’s factory warranty period.
  • Time frame to purchase: You’ll probably be required to add dealership extended coverage before the end of the manufacturer’s warranty on your car.

Note that most dealership warranties are typically administered by third-party warranty providers. It’s much easier for automakers to let other companies take care of vehicle protection plans, even if repairs and parts come straight from the car brand.

Are Dealership Warranties Worth It?

There’s a lot to be said for the convenience of purchasing an extended warranty directly from a dealership. For one thing, you don’t have to go through the process of evaluating various vehicle warranty providers. You also gain peace of mind knowing that your car will receive expert care from an authorized service center in the event of a covered mechanical breakdown.

To make sure that you’ll benefit from a dealership warranty, consider how much coverage you want, the average repair cost of your new car and any extra fees that might be involved. Also consider whether an independent auto warranty might be a better choice for your vehicle.

Pros and Cons of Dealership Warranties

Below, we’ve listed out a few advantages and disadvantages of buying an extended auto warranty from the dealership to help you decide whether it’s the right call for your needs.

Pros of Dealership Warranties

Weigh these strengths of dealership warranties when considering your options:

  • Quality of coverage: You’ll likely find more options for coverage that’s similar to the automaker’s bumper-to-bumper warranty if you opt for an in-house plan. Repair work will also be done by factory-trained mechanics using original equipment manufacturer (OEM) parts.
  • Convenience: Expect to save time when buying an extended warranty from the dealership. There’ll be no need to scroll through online reviews or collect quotes from third-party providers to check which are reputable. Additionally, you’ll remove the hassle of paying for services upfront and getting reimbursed later.
  • Added benefits: Roadside assistance, towing services and rental car reimbursement are typical benefits that come with dealership warranties. Note that many third-party extended car warranties also regularly include these perks, though.

Cons of Dealership Warranties

There are some drawbacks to dealership warranties that you should be aware of before making a purchase:

  • Higher interest: Dealership warranty payments are often combined with monthly car payments. That means you could end up paying interest on both the warranty plan and the auto loan, which increases your overall cost.
  • Add-ons and fees: Dealership warranties sometimes have additional fees and add-ons like paint protection and glass coverage that can’t be removed. Aftermarket warranty plans generally allow for greater customization of your coverage plan.
  • Risk of poor return on investment (ROI): Your ROI for a dealership warranty could be weak. These plans typically take effect right away, so there’s a decent chance you’ll pay for unnecessary protection by getting a new car warranty. After all, bumper-to-bumper coverage typically lasts for at least three years or 36,000 miles after your purchase.

Dealership Warranty Costs

The cost of any manufacturer-backed extended warranty depends on the type of vehicle, coverage level and additional fees. If you’re interested in a long-term vehicle service contract, research extended warranty costs and get quotes from third-party warranty providers before buying from a dealership. Remember that each shop sets its own prices for dealership warranties, so your local Honda or Toyota dealer may have different rates from Ford.

Warranty Cost Survey Data

In March 2022, we surveyed 1,000 car owners who had purchased extended car warranties. About 54{49e09b23eae7466ccc7574c19ebb3019301c9a11d2999feff81a3526451546a5} of respondents bought their plan from a car manufacturer while just over 23{49e09b23eae7466ccc7574c19ebb3019301c9a11d2999feff81a3526451546a5} got their warranty from a third party. Nearly 70{49e09b23eae7466ccc7574c19ebb3019301c9a11d2999feff81a3526451546a5} of those surveyed said they bought their warranty when they purchased their vehicle or soon after.

As for price, about half of the 1,000 respondents reported paying a total of between $1,600 and $3,200 for their extended warranties. It’s helpful to keep the midpoint of this range, or about $2,400, in mind as you explore a potential extended auto warranty purchase.

What Is a Dealership Warranty?: Conclusion

Dealership warranties are convenient and offer solid coverage for your automotive investment. However, they can also be more expensive than warranty plans from third-party providers. Before you purchase a dealer warranty, we suggest exploring costs and coverage options from independent warranty companies.

Recommended Extended Warranty Providers

#1 Endurance: Most Comprehensive Coverage

Endurance is our top-ranked warranty provider due to its wide variety of coverage plans, with terms of up to eight years or over 200,000 miles. We also like that the company is a direct provider, meaning that there are no middlemen for contracts or warranty claims. Another bonus is that every Endurance warranty plan comes with a free year of Endurance Elite Benefits, which include key fob replacements, tire repairs and limited total loss replacement.

Endurance Warranty Coverage Plans

Here are the warranty options available from Endurance:

  • Supreme: An exclusionary warranty plan that protects almost all car parts
  • Superior: The most comprehensive stated-component plan from Endurance
  • Secure Plus: An expanded powertrain warranty that covers most parts of your vehicle’s engine and transmission along with its brakes, air conditioning, steering and electrical
  • Secure: A budget-friendly plan that covers the engine, transmission and water pump
  • Select Premier: Designed for high-mileage used vehicles with over 100,000 miles
  • EnduranceAdvantage™: Stated-component coverage combined with prepaid car maintenance

Read more: Endurance warranty review

#2 ForeverCar: Most Affordable

ForeverCar stands out among reputable extended car warranty companies by offering coverage plans with unlimited mileage. We name it as the Most Affordable warranty company as well, with prices typically starting around $1,200 total depending on your coverage level and vehicle type. ForeverCar has relatively strong customer service, as reflected by the company’s accreditation and A+ rating from the Better Business Bureau (BBB).

ForeverCar Warranty Coverage Plans

Here are the coverage levels offered by ForeverCar:

  • Platinum Plus: Similar to a new vehicle’s factory warranty but with additional coverage for certain wear and tear parts
  • Platinum: A significant step above the Gold plan that covers virtually all major vehicle components
  • Gold: All coverage from the Silver plan plus protection for parts like power windows, sensors, the radiator and the anti-lock brake system
  • Silver: A basic plan that protects the engine, transmission, steering system, front suspension, brakes, electrical components and air conditioning

#3 Olive: Convenient Online Process

Along with a price-lock guarantee, Olive also makes it easy to buy coverage plans and manage claims entirely online. There are no yearly mileage limits for any of Olive’s three coverage options. There’s also no waiting period for your Olive extended warranty, meaning that coverage takes effect immediately rather than after a 30-day period of time.

Olive Warranty Coverage Plans

These are the three extended warranty options provided by Olive:

  • Complete Care: A long list of covered components with only a few exclusions
  • Powertrain Plus: Covers major engine and transmission parts along with power steering, front suspension, brakes and air conditioning
  • Powertrain: This basic car warranty covers lubricated engine and transmission parts along with the water pump, oil pump and thermostat

Our Methodology

Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best extended car warranty companies. We collected data on dozens of auto warranty providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the companies that scored the most points topping the list.

Here are the factors our ratings take into account:

  • Reputation: Our research team considers availability, ratings from industry experts and years in business when conferring this score.
  • Coverage: Companies that offer a variety of choices for warranty coverage, long contract terms and added benefits are more likely to meet consumer needs.
  • Cost: Auto warranty companies with affordable rates and multiple deductibles scored highest in this category.
  • Transparency: This score is based on contract transparency and the availability of a money-back guarantee.
  • Customer experience: Based on customer satisfaction ratings and our extensive shopper analysis, we consider the responsiveness, friendliness and helpfulness of each warranty company’s customer service team.

Our credentials:

  • 500+ hours researched
  • 50 companies reviewed
  • 2,000+ consumers surveyed


*Data accurate at time of publication.