What Happens to My Extended Warranty if I Refinance My Car?

Most folks refinance their car loans to snag lower interest rates and make their monthly payments more manageable. But here's a question that might be bugging you: Does refinancing affect your car's warranty? First things first, let's break down what a car warranty is and the different kinds you might have.

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A car warranty is like a promise from the manufacturer or a warranty company. It says if something goes wrong with your car within a certain period, they'll fix it without charging you. There are mainly two kinds of warranties: one for new cars and another for used ones. New car warranties usually cover most parts of the car for a set time or miles. Used car warranties might be a bit different, offering less coverage.

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Now, you might be worried about losing your warranty coverage if you refinance, especially if you rely on it for peace of mind against accidents or breakdowns. The big question on your mind might be: What happens to my extended warranty if I refinance my car? The short answer is that refinancing your car loan usually doesn't affect your warranty. 

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What is a car warranty?

A car warranty is like a safety net for your vehicle. It's a promise from the car maker that they'll fix your car if parts break down or go kaput within a specific timeframe. Think of it as the manufacturer having your back, ensuring you don't get stuck with a big bill for repairs or replacement parts. New cars often come with a manufacturer warranty for about three years or up to 36,000 miles, but the details can change depending on who made your car.

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Let's break down the different types of car warranties to help you understand what's covered:

New vehicle limited warranty

• What's covered: Almost everything from the front bumper to the back. This includes most parts of your car but leaves out things you use up or replace over time, like brake pads, tires, and windshield wipers.
• Duration: Usually lasts up to three years or 36,000 miles.
• Also known as: Bumper-to-bumper warranty because it covers nearly everything between your car's bumpers.

Powertrain warranty

• What's covered: The big stuff that makes your car go – the engine, transmission, and anything else that's part of the drivetrain.
• Duration: Often longer than the bumper-to-bumper warranty, sometimes up to five years or 60,000 miles.
• Good to know: This warranty sticks around for a while because it covers the parts that are crucial to your car's operation.

Corrosion/Rust warranty

• What's covered: Protection against your car's body rusting through.
• Duration: Varies a lot. Some brands even offer lifetime protection against rust.
• Why it's good: It keeps your car looking fresh and protects against rust damage that can hurt your car's integrity.

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When you apply for a car warranty, the specific coverage you get depends on your car's brand, the warranty plan, and the level of coverage you pick. But what if you want more peace of mind after your manufacturer's warranty says "bye-bye"? That's when you can apply for a car warranty extension, known as an extended warranty. This extra coverage steps in after the original warranty ends, helping you keep your car covered for longer.

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What is an extended warranty?

An extended warranty acts like an extra layer of protection for your car, stepping in to cover the cost of unexpected repairs once the original warranty from the manufacturer runs out. This could be after a set number of miles or years, depending on which limit you hit first. It's a safety net for when the initial guarantee no longer covers you.

Understanding extended warranties

Extended warranties are not always front and center when you buy a car, but they're worth looking into. You can get these warranties from the car's maker or independent companies. Here's a closer look at what they offer:

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• Car manufacturer extended warranty: When you buy a new car, the dealership might offer you an extended warranty directly from the car maker. This warranty often mirrors the original warranty's coverage, but always read the details carefully. Not all the coverage you pay extra for is new; some of it is an extension of existing coverage. The start date and specific terms can vary by manufacturer, so it's crucial to understand exactly what you're getting.
• Third-party warranties: These are offered by external companies, including dealerships, and can be an option for both new and used cars, especially if the manufacturer's warranty has expired. It's important to shop around, as third-party warranties can differ significantly in terms of coverage, exclusions, and requirements compared to those offered by manufacturers.

Refunds and extended warranties

If you decide to cancel your extended car warranty, you're often entitled to a refund for the unused portion. The refund amount is prorated, meaning it's calculated based on how much of the warranty is left. If the warranty was included in your car loan, the principal amount wouldn't decrease, but you could potentially pay off the loan faster with the refund.

Receiving your refund

Should you cancel your warranty, getting your money back can take some time. Initially, reach out to the warranty provider for an update. If you haven't received your refund within a couple of weeks, be prepared to wait up to a month. Patience is key, as processing times can vary.

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When considering an extended warranty, weighing the costs against the potential benefits is essential. And if you're looking to apply for a car warranty, whether it's an extension from the manufacturer or a third-party provider, doing your homework will ensure you get the best deal for your needs. Different types of car warranties offer varying levels of coverage, so choose wisely based on your car's age, driving habits, and financial situation.

What causes a car warranty to be cancelled?

Understanding what might lead to the cancellation or voiding of your car's warranty is integral for maintaining its protection. Here’s a breakdown of how these terms differ and what actions or circumstances can impact your warranty:

Canceling a car warranty

This refers to when you, as the car owner, choose to cancel your extended car warranty. You might do this with an extended warranty if you no longer see its value or if you’re selling the car and the warranty isn’t transferable. When you cancel an extended warranty, you might be eligible for a prorated refund, depending on the terms of the agreement.

Voiding a car warranty

On the other hand, voiding a warranty happens when the manufacturer or warranty provider determines that certain actions or circumstances have compromised the vehicle's integrity or performance. This means the warranty can no longer be claimed. Here are some common reasons warranties are voided:

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• Off-road driving: Using a vehicle not designed for off-road conditions in such a manner can void the warranty, especially if the vehicle sustains damage from this activity.
• Racing or reckless driving: Participating in racing or engaging in reckless driving that leads to vehicle damage can void the warranty.
• Overloading: Overloading your vehicle beyond its weight capacity can stress the vehicle's structure and mechanical components, potentially voiding the warranty.
• Natural disasters: Damage from flooding, fire, earthquakes, and other natural disasters can void a warranty since these are beyond control and can severely impact the vehicle's condition.
• Poor car maintenance: Failing to maintain your car according to the manufacturer's guidelines, including regular service checks, can void the warranty.
• Using improper fluids: Filling your car with the wrong type of fuel, oil, or other fluids not approved by the manufacturer can lead to significant damage and void the warranty.
• Some aftermarket parts or modifications: While not all aftermarket parts or modifications will void your warranty, those that affect the car's performance or safety can. It’s essential to check what modifications or parts might impact your warranty before installation.

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In summary, while you have the option to cancel your car warranty or extend the warranty, certain actions or neglect can lead to the warranty being voided. Understanding these distinctions is important to ensure your vehicle remains covered under its warranty for as long as possible.

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What happens to my warranty if I refinance my car?

Breathe easy—if you're considering refinancing your car, you'll be glad to know that most manufacturer warranties will remain in effect. Refinancing your auto loan can be a smart move to lower your interest rate and monthly payments, and it shouldn't interfere with your car's existing warranty. This means you can pursue better loan terms without worrying about losing your warranty's protection.

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Being fully informed about your warranty's terms and conditions is always a good idea. When purchasing a car or considering refinancing, take a moment to talk with your dealer or the seller. They can help clarify the specifics of your warranty, ensuring you understand what is covered and for how long. This step is crucial to avoid any surprises, especially if you rely on your warranty to safeguard against potential repairs and maintenance issues.

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Understanding your warranty can also help you avoid actions that might void it, ensuring your vehicle remains protected against various potential problems. So, before you make any decisions about refinancing or modifying your car, check in with your dealer or read through your warranty documents to stay informed.

Want to save money on your car loan?

If you're looking to save money on your car loan or just want to explore better financing options, now is a great time to consider auto refinancing. RateWorks specializes in helping drivers like you find refinancing options that fit your needs, potentially lowering your payments and saving you money over the life of your loan. Apply for auto refinancing with RateWorks today and see how much you could save while keeping your car's warranty protection intact. Get your refinancing quote today.