As you research your automobile extended warranty purchase, you will come across some terminology that may not be familiar. Here are some common terms you will need to know as you research automobile extended warranties.

Administrator: This is the company that is contractually obligated to perform under the extended warranty contract; they will authorize and pay the dealer or repair facility for repair work to your vehicle. The administrator works with the repair facility to make sure your claim is handled properly. As they are the company that pays your claim, their financial strength is the most important factor in choosing a warranty company.

Tip: The company selling you're the extended warranty is often not the administrator. It is important to know who is responsible to pay your claims and to check out that company's history. Warranty Direct is the Administrator of all the coverages they sell.

Auto Warranty: See Extended warranty.

Basic Warranty: The specific terms established by each manufacturer to repair vehicles through a specified mileage and/or time period. All factory installed and many dealer installed parts are covered under this warranty.

Better Business Bureau (BBB): The Better Business Bureau (BBB) has long been a means that consumers have used to research a company. In order to participate in the BBB Online Reliability Program, a company must have a satisfactory complaint handling record, agree to participate in the BBB's advertising self-regulation program, agree to abide by the BBB Code of Online Business Practices, and agree to dispute resolution with the BBB. Most of the companies who participate in this program value their standing in the BBB, and tend to do a better job at handling complaints.

Tip: You can look up a company's Better Business Bureau report by visiting http://search.bbb.org/.

Bumper-to-Bumper Warranty: In order to be called a bumper-to-bumper warranty, the coverage must be exclusionary, that is, it will only list the parts that are not covered. Bumper-to-bumper automobile warranties are the most comprehensive coverage one can buy.

Certified Car: Many cars sold used or off lease are certified by the manufacturer. This means they have undergone a quality inspection process prior to sale. Often, a limited powertrain warranty is attached to them. Most do not have extended or bumper-to-bumper warranties. There is no industry standard for certification. Dealers and/or manufacturers often add a significant cost to certified vehicles.

Claims Reserve Accounts: An insured account that the administrator will maintain to pay future claims.

Consumable Items: Parts such as tires, batteries, clutch plates and wiper blades that are generally not covered under any warranty.

Corrosion Warranty: Covers rust through perforation on sheet metal. Offered as original warranty on new vehicles. Extended warranties do not cover corrosion.

Deductible: The amount that you must pay the repair facility for work when vehicle is being repaired. Extended automobile warranties are typically offered with different deductible options ($100, $50 or zero).

Tip: Find out how the deductible is applied. Better extended warranties will apply the deductible on a per repair visit basis. Beware of those that apply the deductible on a per part basis.

Drive Train: The components that transmit the flow of power from the engine to the wheels. The components include the clutch, transmission, drive shafts (or axle shafts in front wheel drive), U-joints and differential.

Drivetrain warranty: See powertrain warranty.

Emissions Warranties: The Federal Emissions Warranty guidelines are based on federal regulations and apply to vehicles in all 50 states. Vehicles are covered by two types of emissions control system warranty, "Emission Defect Warranty" and "Emissions Performance Warranty".

Depending on the state you live in, the Performance Warranty is for 3 years/50,000 miles.

The Defect Warranty is generally consistent with the manufacturer's bumper-to-bumper warranty with certain parts (catalytic converter and electronic emissions controls (PCM) for up to 8 years/80,000 miles. Please refer to your owner's manual for your exact coverage.

Extended Warranty: A contract which protects the car owner against mechanical failures and breakdowns. Extended warranties are often referred to as Vehicle Service Contracts. The warranty will pay for covered repairs after the manufacturer's warranty has expired.

Exclusionary Policy: See bumper-to-bumper.

Gray Market Vehicle: A vehicle not manufactured for sale in the U.S. They often do not meet U.S. standards and carry no manufacturer warranty. These vehicles are typically ineligible for extended warranties.

Inclusionary Coverage: A warranty coverage plan that list the parts that are covered by the extended warranty. If the component or part is not listed, then it is not covered.

In-Service Date: The date the Vehicle was purchased by the original owner and driven off the lot or the date the Vehicle was placed in use for rental, demonstration or other purposes.

Lemon Law: The general definition of a Lemon Law vehicle: A vehicle with (a) major, repeated problem(s) that has been repurchased by, or had its purchase price renegotiated with, the manufacturer. The state then earmarks these as Lemon Law or Buyback vehicles. These vehicles are ineligible for coverage.

Maintenance Guidelines: This is the normal, routine maintenance that is recommended by the manufacturer of your vehicle to keep the vehicle in optimum condition. These include such things as oil changes, tune-ups, checking fluid levels, tire rotations, wheel alignments, belts, hoses and others as described in your owner's manual.

Tip: All extended warranty contracts require that you properly maintain your vehicle.

Manufacturer's Warranty: This is the standard warranty that every new vehicle sold comes with. All factory-installed parts are covered against defects. Typical manufacturer warranties are 3 years or 36,000 miles or 4 years or 50,000 miles. Check your manufacturer's warranty manual for warranty information or visit our Manufacturer's Warranty page.

Mechanical Breakdown Insurance (MBI): A policy, contract, or agreement that undertakes to perform or provide repair or replacement service, or indemnification for that service, for the operational failure of a motor vehicle due to a defect in materials or skill of work or normal wear and tear, and that is issued by an insurance company authorized to do business in California.

Named Component Coverage: See Inclusionary coverage.

Power Train Warranty: A limited warranty from the manufacturer that covers certain parts of your vehicle's engine, transmission and drive train assembly. If any of these components fail while the vehicle is covered under the powertrain warranty, the manufacturer is responsible for the repair. These warranties cover only about 25% of the vehicle.

Rebuilt Title: See Salvage Title.

Recall: When a manufacturer recalls vehicles it has manufactured back to the dealership for specific repairs related to unplanned mechanical problems and/or safety issues. Recalls are usually voluntary and are made in conjunction with regulatory control of the National Highway Traffic Safety Agency (NHTSA). They can originate with the manufacturer or with the NHTSA. Repairs performed under a recall are usually free to the consumer.

Tip: Click here to search the NHTSA database.

Repair Facility: A licensed repair facility located in the United States or Canada. This includes your dealership, local mechanic or national repair facilities.

Rental Benefit: The amount you will be reimbursed for actual expenses incurred for substitute transportation while your vehicle is being repaired.

Roadside Assistance: A program that provides you with a toll-free telephone number to call 24 hours a day 365 days a year. This is for assistance when your vehicle breaks down or when there is a vehicle emergency (towing, battery assistance, flat tire assistance, emergency lock out, or fuel, oil, fluid and water delivery)

Salvage Title: A title issued on a vehicle where an insurance company has declared the vehicle a total loss. These vehicles were typically involved in a flood or severe accident. These vehicles are not eligible for extended warranties.

Technical Service Bulletin (TSB): This bulletin is produced by the vehicle manufacturer and alerts automotive technicians about specific service problem areas, repair procedures, and new service techniques for a vehicle. Thousands of these are issued each year.

Tip: Click here to search the NHTSA database of Technical Service Bulletins.

Transferability: A vehicle having an extended warranty can have the warranty transferred to the new owner of the vehicle if the vehicle is sold privately for a modest fee. An extended warranty can not be transferred to a dealer.

Travel Interruption Benefit: In the event of your vehicle not being operable and caused a delay en route and you are more than 100 miles from your home, this is the amount you will be reimbursed per day for restaurants and lodging.

Vehicle Identification Number (VIN): Your VIN is located in several areas and is a unique 17-digit identifier of your vehicle. The most common are:

  • On the driver's side dashboard of your car

  • On your insurance card

  • On the title to your vehicle

  • On the vehicle's registration card

  • On a sticker inside the driver's side door

Wear-and-tear: Wear and tear protection is the highest level of coverage one can purchase. It is a much broader level of coverage than the mechanical breakdown only plans offered elsewhere.

Most extended warranties define "mechanical breakdown" as a defect in parts and workmanship as supplied by the manufacturer, or a defect that makes the part unable to perform the function for which it was designed. Often, they will state that the gradual reduction in operating performance (wear-and-tear) is not covered. Service contracts that exclude wear and tear will not cover repairs needed because a part’s performance has gradually deteriorated because of normal wear and tear, unless a mechanical breakdown has occurred.

The more miles on a car when a repair becomes necessary, the more likely it is that the repair will be needed because a part wore out, rather than because the part broke due to poor manufacturing. Again, many extended warranties do not cover parts that wear out.

Before buying an extended warranty, you should carefully review what is covered and not covered to see whether wear and tear claims are excluded from coverage. Burned or worn out pistons, valves, and rings are classic examples of wear and tear failures that normally occur after long periods of vehicle use. Extended warranties that exclude wear and tear coverage typically end up costing consumers thousands more in repair costs over time.

The information above was provided by WarrantyDirect.com.

Warranty Direct is the consumer division of one of the oldest and largest independent automobile warranty providers in the US. Our expertise in car warranties is unmatched with almost 30 years of experience, nearly 2 million car warranty contracts sold and over $500,000,000.00 in paid claims. In addition to offering our car warranties direct to consumers, over 2,200 manufacturers, dealers, banks and credit unions choose to market our coverage. Why pay the dealer's markup when you can buy similar coverage direct from the source?