What Does an Extended Car Warranty Cover in Australia?

One of the most common questions we’re asked at MrWarranty is simple: what does an extended car warranty actually cover?

Unfortunately, there isn’t a one-size-fits-all answer.

Extended car warranties can differ considerably in what they cover, what they exclude, the amount that can be claimed and the conditions that need to be met. That’s why comparing warranties based purely on price — or on a brochure containing a long list of components — doesn’t necessarily tell you which product offers the better level of cover.

Understanding how the warranty defines its cover is a much better place to start.

Not All Extended Car Warranties Define Cover the Same Way

A modern vehicle contains thousands of mechanical, electrical and electronic components. Different makes and models use different engines, transmissions, electronics, safety systems and technology.

It would be virtually impossible for a warranty provider to list every individual component fitted to every vehicle that could potentially be covered.

For that reason, some higher-level extended warranties approach cover broadly and then specify the items and circumstances that are not covered.

Other warranties work differently. They specifically list the components or events that are covered. If a component isn’t included within that list, it may not be covered.

This difference is important when comparing extended warranties.

A warranty with a very long list of covered components can initially look impressive, but the length of the list doesn’t necessarily indicate the overall breadth of the cover.

Cover That Works More Like a Manufacturer’s Warranty

Some higher-level extended warranty products are designed to provide cover broadly similar to the type of mechanical and electrical protection you would normally associate with a manufacturer’s warranty, but with additional exclusions, conditions and limitations.

Rather than attempting to name every individual component that’s covered, the warranty documentation identifies what’s excluded.

Those exclusions can include items associated with routine servicing, maintenance, consumables and wear and tear, together with other specifically excluded components, circumstances or types of damage.

This makes reading the exclusions particularly important.

A page containing a number of exclusions shouldn’t necessarily be judged simply by counting how many items appear on it. What those exclusions actually are — and how relevant they are to the vehicle you’re purchasing cover for — is far more important.

What Is a Listed-Component Warranty?

Another common type of extended warranty provides cover for specifically identified components or events.

The warranty documentation might list particular parts of the engine, transmission, cooling system, electrical system, air conditioning and other areas of the vehicle.

With this type of warranty, it’s particularly important to understand exactly which components are listed, because a component that isn’t included may not be covered.

Claim limits can also apply to individual components or categories.

This is why two warranties that both advertise “engine cover” can provide very different levels of protection.

One may cover only specifically listed internal engine components and have a defined claim limit. Another product may define its cover much more broadly.

The words “engine covered” by themselves don’t tell you enough.

Are Electrical and Electronic Components Covered?

This is becoming increasingly important.

Modern vehicles rely heavily on electronics. Depending on the vehicle, this can include control modules, sensors, cameras, displays, electric motors, electronic steering and braking components, climate-control systems and numerous other electronic devices.

Extended warranty coverage for these components can vary considerably between products.

Some warranties provide extensive mechanical and electrical cover, while others cover only specifically listed electronic components. Certain systems, such as infotainment or some driver-assistance and safety technology, may also be excluded under particular products.

If you’re buying a modern vehicle with significant electronic technology, this is an area worth looking at carefully when comparing warranties.

Does an Extended Warranty Cover Wear and Tear?

Wear and tear is one of the most misunderstood areas of extended car warranties.

An extended warranty is generally intended to assist with the cost of covered mechanical or electrical failures. It isn’t intended to replace normal vehicle maintenance or pay for components simply because they’ve reached the end of their normal service life.

Items such as routine servicing components, consumables and components that deteriorate through normal use may therefore be excluded, depending on the warranty.

The distinction isn’t always as simple as it sounds, however. Mechanical components naturally accumulate wear throughout their operating life, so the circumstances and cause of a failure can be important.

This is another reason to read the actual warranty documentation rather than relying on a short sales description.

What’s Not Normally Covered by an Extended Car Warranty?

Every warranty is different, but exclusions can include areas such as:

• routine servicing and maintenance;

• consumable or serviceable items;

• normal wear and tear;

• pre-existing faults;

• accident or external damage;

• failures resulting from inadequate servicing or maintenance;

• certain modifications or failures caused by modifications; and

• other components or circumstances specifically excluded by the warranty documentation.

The actual exclusions applicable to a warranty should always be checked before purchasing.

Claim Limits Are Just as Important as What’s Covered

Knowing that a component is covered is only part of the story.

You also need to know how much the warranty can contribute if that component fails.

Some warranties apply a specific dollar limit to individual components or categories. For example, different limits might apply to an engine, transmission, air-conditioning system or electrical component.

Other products can provide substantially higher limits or may have no specified dollar limit per individual claim, subject to the overall terms and limits of the warranty.

That’s an important distinction when comparing products.

A warranty that covers a long list of components but provides relatively low claim limits may ultimately provide less assistance with a major repair than a product offering broader cover and higher limits.

Does “No Limit Per Claim” Mean Unlimited Cover?

No.

If a warranty states that there is no limit per claim, that shouldn’t automatically be interpreted as meaning there is no upper limit whatsoever.

An overall maximum liability or benefit limit can still apply under the warranty terms.

Depending on the particular product, this may include an overall limit linked to the market value of the vehicle at the time of the claim.

Always check the applicable warranty documentation to understand both the individual claim limits and any overall maximum that applies.

Conditions of Cover Matter Too

Even when a component is covered, there will normally be conditions that need to be satisfied.

Servicing requirements are particularly important.

The vehicle needs to be maintained in accordance with the applicable warranty requirements, and evidence of servicing may be required when making a claim.

Other conditions can relate to matters such as notifying the warranty provider when a problem occurs and obtaining authorisation before repairs commence.

Understanding these requirements before you need to make a claim can prevent problems later.

Is an Extended Car Warranty an Insurance Policy?

Not necessarily.

Some extended warranty products are not insurance policies and can instead be offered as discretionary risk products.

For example, Integrity Car Care’s warranty documentation explains that its warranty is offered as a discretionary risk product and that Integrity is the product issuer. Integrity holds an Australian Financial Services Licence authorising it to provide specified financial services in relation to discretionary risk products.

This is different from an insurance policy and there are important differences in how claims are considered.

We’ll cover discretionary risk warranties in more detail in a separate article, because the term can understandably cause some confusion and deserves a proper explanation of its own.

As with any warranty, customers should read the applicable product documentation to understand the nature of the product and how claims are considered.

Don’t Compare Warranties on Price Alone

It’s tempting to compare two extended warranties by simply looking at their price.

But a cheaper warranty isn’t necessarily better value — and the most expensive warranty isn’t automatically the best choice either.

Look at:

• how the warranty defines what’s covered;

• what’s excluded;

• whether electrical and electronic components are included;

• the applicable claim limits;

• any overall maximum benefit;

• servicing and maintenance requirements;

• the length of cover; and

• the other terms and conditions applying to the warranty.

Most importantly, compare the actual warranty documentation, not simply the marketing brochure.

If you're comparing different warranty options, our guide to how to choose the best extended car warranty in Australia explains the key things to consider before making a decision.

How MrWarranty Helps You Compare Your Options

At MrWarranty, we don’t believe choosing an extended warranty should simply be about finding a product and saying yes.

The vehicle itself matters.

Its age, kilometres, make, model, technology and how long you intend to keep it can all influence which available warranty may be more appropriate.

With more than 25 years’ experience in the insurance and automotive warranty industries, we can help explain the available options and the differences between the levels of cover in plain English.

And if we don’t believe a particular warranty represents an appropriate option for your circumstances, we’ll tell you.

The objective isn’t simply to purchase an extended warranty.

It’s to understand what you’re buying before you need to use it.

Thinking About an Extended Warranty?

Whether you’ve just purchased a vehicle, are considering buying one, or already own your car, you may still have extended warranty options available.

Get a quote from MrWarranty and we’ll help you understand the available levels of cover for your vehicle.

Always read the applicable warranty documentation before purchasing. Cover, exclusions, claim limits, eligibility requirements and other terms and conditions vary between products.