Rateworks auto loan refinance
September 21, 2022

Car Refinance Warranty: Understanding the Impact on Your Coverage

You may be wondering what will happen to your car's warranty after refinancing... get all the info you need about warranties and more here!

Written by

Sarah T.

Generally speaking, most people choose auto loan refinancing for lower interest rates and lower monthly payments, but is your warranty affected by refinancing? Before diving in, let's look at what a warranty is and what types are available to you.

What is a car warranty?

A warranty is a guarantee from the car's manufacturer that they will pay for any repairs and replace any defective parts of your car for a certain amount of time. New cars commonly come with a manufacturer warranty of 3 years or up to 36,000 miles. However, coverage terms can vary depending on the manufacturer. There are three main types of manufacturer warranties available.

New Vehicle Limited Warranty: This type of warranty covers most car parts and pieces. It excludes certain repairs and routine maintenance such as brake pads, tires, and windshield wipers. New vehicle limited warranties typically last up to 3 years or 36,000 miles. These types of warranties are also referred to as bumper-to-bumper warranties.

Powertrain Warranty: This type of warranty covers the engine, transmission, and drivetrain-related issues. The manufacturer determines the exact length and coverage of this warranty, but they are usually longer than a bumper-to-bumper warranty. Some power train warranties last for up to 5 years or 60,000 miles.

Corrosion/Rust Warranty: This type of warranty protects against the rusting of your car's sheet metal. Some manufacturers even offer lifetime protection, but that will depend on your vehicle's brand.

With any of these warranties, the type of coverage you receive depends on the brand of your car, the type of plan, and the level of coverage you choose. But what happens if you want extra coverage after the manufacturer's warranty expires? You can choose to purchase an extended warranty.

There are three main types of manufacturer warranties available.

What is an extended warranty?

An extended warranty is an insurance policy on your vehicle, safeguarding you against costly unanticipated repairs. It usually kicks in after your manufacturer's guarantee expires; this can be after a certain amount of miles or timeframe, whichever happens first.

All about extended warranties

Many car owners are unaware the dealer can offer an extended warranty on their car. An extended warranty can be an extra feature that needs investigation so that the negotiations can take place. If you get an extended warranty from another company, you can check the validity of that warranty. Sometimes the warranty is provided solely through an authorized dealer.

There are two main types of extended warranties available: car manufacturer or third-party warranties.

Car-manufacturer extended warranty:

When you buy a new car, they may give you the option to purchase an extended warranty from the manufacturer. Most manufacturers will replicate the terms of your original warranty but make sure you read the fine print before you agree to the extended warranty. There is no need to pay extra for existing coverage. Depending on the manufacturer, some terms may change, and check when the extended warranty begins.

Third-party warranties:

The dealership or third-party companies usually offer these types of warranties. If you want to buy a used car with an expired manufacturer's warranty, this may be an option. It is important to shop around and do your research before picking a third-party warranty. Some warranties have requirements, exclusions, and rules that manufacturer warranties do not.

Can an available car extended warranty be refunded?

If you have canceled an extended warranty policy, you will receive a prorated refund of the remaining portion. If your warranty includes the loan, the cost of the car will be no less, but you can repay it sooner unless you pay back your money.

How long does it take to get money back from an extended warranty?

You can contact your manufacturer's warranty company for updates if you do not receive one in 2 weeks. You may have to wait four weeks before getting the money back if there are refunds.

Vehicle service agreements or SSCs are additional products a vehicle purchaser can acquire for protection against specific repairs.

What are vehicle service contracts?

Vehicle service agreements or SSCs are additional products a vehicle purchaser can acquire for protection against specific repairs. Although contract-specific, it can vary widely and cover everything from engine repair to water pump repair. For an accurate warranty, the product must come from the vehicle manufacturer. VSCs are considered an extra because the warranty is not included in a car purchase. How much money you can spend on a vehicle service contract depends on other factors such as contract lengths, mileage limits, and deductibles.

What are other protections available for your car?

Guaranteed Asset Protection or GAP Insurance is designed to protect car owners if the car is irreparably damaged and considered an entire loss. Because vehicles typically deteriorate throughout their lifetime, GAP coverage may not always result in a refund. For example, if your damaged car has depreciated and your actual car value is lower than your current loan amount you would have to pay the difference in what you owe on your current car loan.

GAP waivers have similarities to GAP Insurance, but they are, in fact, different. The significant difference is that GAP waivers are not a standalone insurance product — the waivers may be offered when purchasing a car loan or during an auto loan refinance. Typically Gap Waivers are paid as one upfront cost instead of monthly payments.

What happens to my warranty when I refinance?

If you refinance your current auto loan, you will not lose your warranty. The United States federal laws require the car to pass on the warranty to successive customers until the warranty expires. Even when you refinance your car payment to another person's name, your warranty coverage remains.

If you refinance your current auto loan, you will not lose your warranty.

So if you are at a stage where you think it is a good time to refinance your auto loan, you don't have much to worry about when it comes to your warranty. It's still important to do your research and read the fine print to make sure you understand all that comes with refinancing an auto loan.