Used Car Warranties
- Last Updated: Wednesday, 17 February 2021
Not every used car comes with a standard warranty, even if purchased at a dealership. There are "as is," implied, extended, manufacturer's and even warranties of merchantability in the used car marketplace; it's important to understand the difference.
In this article, we're going to first talk about buying used cars, and what to expect when buying a car from a dealership or an individual owner. Next, we'll get into the details of car warranties, including a discussion of those provided by manufacturers. Finally, we'll discuss a topic that should be of interest to anyone buying a used car: implied and extended warranties.
Buying a Used Car
In the article on Buying Used Cars, we talked about researching the purchase. This included a discussion of where to find information on quality ratings, safety, as well as how to figure out the value of a used car. Once the decision has been narrowed down to several makes and models, it's time to figure out where to buy one.
In that article, we also talked about Kelley Blue Book values, and how these vary depending on where the car was bought or sold. This variability occurs because there is an assumed safety factor when purchasing a car from a dealership. In other words, dealerships can demand a slightly higher price, or premium, from a buyer because there is an assumed level of recourse with a dealership if the car does not perform as expected.
When purchasing a car from an individual, the buyer assumes virtually all of the risk if the car does not meet expectations. It is more difficult to get a warranty, or guarantee, from an individual. This is true regardless of what the individual may have promised when they sold the car.
The Federal Trade Commission agrees that most customers think they're getting a warranty when they buy a used car from a dealership. In fact, there are certain requirements, or consumer protections, the FTC has put forth concerning the sales of used cars and the warranties they need to carry.
There is also a misconception that dealers are required to provide buyers the right to cancel the purchase and return the car. There is no law that requires a dealer to take a car back once it is sold. Reputable dealerships, those that will stand behind the cars they sell, often grant buyers the right to return one within a few days, and for specific reasons. Before purchasing a used car from a dealership, ask them about their return policy, and make sure to get the policy in writing.
Used Car Buying Guides
Any dealership that sells more than six used cars annually is required by law to post their Buyers Guide in every car offered for sale. The Buyers Guide is required to clarify the following items:
- If the car is being sold "as is," or the car is covered by a warranty.
- The amount the dealership will pay for repairs covered by warranties.
- The guide will tell the buyer that spoken promises are difficult to enforce, and that all negotiated items should be in writing.
- It will remind the buyer they have the right to have the automobile inspected by an independent mechanic before the vehicle is purchased.
- The buyer of the car is entitled to, and should, take the buyers guide as a reference document after the car is purchased.
- Warn the buyer about major mechanical failures that can happen when purchasing a used car.
Buyers that negotiate different terms than those posted in the car's original guide need to obtain a copy of the Buyers Guide that reflects the changes that were agreed to during those negotiations.
Warranties Offered on Used Cars
At this point, we're going to discuss the types of used car warranties that might be encountered in the marketplace. This includes some special types such as "as is," implied, and extended warranties. The important point to remember here is that even if a used car does not carry a warranty, the buyer might still be protected.
An "as is" warranty is essentially no warranty on the car. If a dealer is offering a used car with this type of arrangement, then the check box on the Buyers Guide will indicate this understanding. If a buyer negotiates a different arrangement, or a promise is made beyond "as is," then it's important to get the offer in writing.Even if a car is purchased "as is" from a dealer, buyers still have some protections under the law.
All dealerships selling used cars are expected to sell vehicles that have met reasonable quality standards. This is sometimes referred to as an implied warranty. However, in certain states, the "as is" language can be used to eliminate an implied warranty. On the other hand, Kansas, Maine, Maryland, Massachusetts, Mississippi, Vermont, West Virginia, and the District of Columbia, do not permit "as is" sales.
The most common form of an implied warranty is that of merchantability. Essentially, this means if the buyer purchases a car to drive, then it should be able to provide this function. For example, if Lindsey buys a used car, then she should be able to drive it home and to work the next day.
The difficult part with implied warranties is the buyer might have to prove the defect existed in the automobile before it was purchased. Certainly if the car experiences a serious mechanical failure at a much later date, an implied warranty will not apply. Basically, this kind of warranty states: "You are buying a used car, and this car is in good running condition today."
If the car is still covered under the original manufacturer's warranty, this should be indicated on the Buyers Guide along with the expected date of expiration. When buying a used car with a manufacturer's warranty, make sure a copy of the documents is obtained and the parts covered is understood.
Extended Warranties or Service Contracts
If the dealership offers a service contract on the vehicle, the buyer is really purchasing an extended warranty. The service contract should detail exactly what is covered and for how long the coverage will be in effect. Once again, the Buyers Guide will indicate if a service contract is being offered on the car, and the terms and conditions of the contract.
Extended warranties are frequently found on used luxury cars, which are often sold as certified pre-owned vehicles. These certified pre-owned programs gained popularity as "gently-used" leased cars became available as used cars. Since these vehicles are returned to the dealership and sold as pre-owned, the automobile manufacturers will often extend the car's warranty past the original expiration date. This is done to build confidence in buyers.
Some of the better pre-owned warranties include those of Acura, Honda, Nissan, Infinity, Ford, Dodge, and Jeep. These manufacturers extend the original warranties for up to seven years and 100,000 miles. Less generous are those from Buick, Chevrolet, GMC, Land Rover, and Mazda. The cars in this last group typically provide coverage for 12 months or 12,000 miles. All of the car manufacturers mentioned above will provide roadside assistance on their certified pre-owned vehicles as long as the extended warranty is in-effect.
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