What Are Auto Warranties and How Have They Evolved?
Whether you’re buying a new or a used car, it’s important to make sure you have a coverage guarantee to cushion you against expensive or unexpected repairs. While some wear and tear occur with regular use, you can expect them to occur down the road rather than within the first few years of ownership. But with a good auto warranty, you can sleep well at night knowing that the issues won’t be your financial responsibility.
Despite the importance of auto warranties, many people don’t really know a lot about them. Below, we’ll help you understand what they are and how they’ve evolved over time. Also, you can sample a Car Shield review to get a feel of extended car warranties.
What Is an Auto Warranty?
Essentially, a car warranty represents the manufacturer’s guarantee that they will replace or repair defects in your car for a limited time. So if your car is not performing to the required standard, the dealership will shoulder the repairs or replacement of the components under warranty at no cost to the car owner within the stipulated time.
Auto warranties fall into two types:
- Manufacturer’s warranty
- Extended warranty
Manufacturer or Factory Warranty
This warranty comes with the purchase of a new car. It covers the cost of repairs and component replacement if your car breaks down because of shortcomings in the manufacturer’s design or installation. But it will not cover any repairs resulting from accidents or typical wear and tear.
The two main manufacturer’s warranties are:
- Powertrain warranty: It covers the propulsion system, including the driveshaft, engine, and transmission. These components are highly costly to repair or replace, proving the importance of powertrain coverage.
- Bumper-to-bumper warranty: As the name implies, this warranty covers problems with your vehicle from the front to the back. It covers many car components except parts that are prone to constant wear and tear, like tires, glass, and seat covers.
Once the manufacturer’s service contract runs out, the extended warranty comes into effect and covers similar parts as the factory coverage did. The good news with extended warranties is that you enjoy a wider choice in the particulars of the coverage.
The Evolution of Car Warranties
Auto warranties have come a long way since the start of the automobile era. In those early days, buyer-beware was the rule, as cars were assembled from unreliable materials and craftsmanship.
Ransom E. Olds started selling the Curved Dash Oldsmobile for $650 in 1901. It was the first mass-produced motor vehicle manufactured on the first assembly line. It is rumored that the only guarantee he provided buyers was the transfer of car ownership once money changed hands.
Henry Ford was responsible for perfecting the car assembly line approach and distribution chains. Thus, consistent production quality could be guaranteed and backed by a clear-cut warranty.
In 1925, Ford offered the first warranty that stated: “90 days on material; 30 days on production.” There was, however, no guarantee on car parts like wiring, glass, fan belts, transmission bands, rollers, hose connections, gaskets, or spark plugs. The 90-day warranty would become the industry benchmark right across the 1950s.
By the 1960s, warranties became a decisive factor in auto sales. Automakers sought to increase their warranty coverage to instill confidence in their automobiles. For example, Chrysler extended its warranty to one year/12,000 miles. A fierce competition involving the Big Three carmakers also saw their powertrain warranty increased up to five years/50,000 miles.
However, longer warranties turned out to be costly on the part of automakers, especially those producing poor-quality cars. Despite the short-lived sales boost, the claims were many and too expensive.
By the early 1970s, auto warranties regressed to one year. But it only took a short time before automakers reverted to generous warranties. In the mid-1970s, American Motors increased its bumper-to-bumper coverage momentarily to two years for every new 1975 Gremlin, Hornet, or Matador. Its improved Buyer Protection Plan offered to fix or replace any component for free for two years or 24,000 miles except the tires. This was regardless of whether the part was defective or deteriorated from normal wear and tear.
Growing Consumer Complaints
Extended auto warranties coincided with increasingly poor automobile quality. This prompted the U.S Federal Trade to step in and investigate the growing number of consumer complaints. The commission showed that automobiles did not match the acceptable production quality standard. Moreover, carmakers and dealerships did not honor the promised repairs. At the same time, automobiles required more routine preventative service than usual.
The Magnuson-Moss Warranty Act
The Magnuson-Moss Warranty Act of 1975 was in response to the growing consumer complaints about the quality of automobiles at the time. The Act compelled automakers to disclose and describe the terms of their car warranties. This was so that consumers could read them before making a purchase. It reinforced the right of buyers to expect a reliable product life devoid of defects.
Warranties reverted to lengthy coverage in the 1980s. Chrysler launched its five-year/80,000 km powertrain warranty. Japanese carmakers also joined the fray and offered comprehensive protection of three years or 60,000 km and powertrain coverage of five years or 100,000 km.
Today’s auto warranty products help distinguish carmakers and dealerships in the cutthroat car marketplace. The typical warranty offered by many automakers is three years or 36,000 miles. This means that the coverage protects your car within the first three years of owning it—or up to 36,000 miles of driving it.
Some automakers have gone even further than the typical warranty industry standard. For example, Mitsubishi offers a basic limited warranty for five years/60,000 miles. They also have a powertrain limited warranty for up to 10 years/100,000 miles.
The Bottom Line
Auto warranties are a key selling point in auto sales. They are important because they help with mechanical repairs due to car defects. Still, they do not cover accidents or normal wear and tear. While shopping for an auto warranty, note that they differ from one manufacturer to another. So you need to look closely at the fine print to ensure that you’re getting the best deal.