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A Brief History of Extended Car Warranties

Protecting car owners from expensive repairs down the line wasn’t always readily available or easy to understand. Vehicle service contracts, commonly called extended warranties, have come a long way. 

Though some extended car warranties today continue to be complicated, with unclear explanations of coverage and little support when something actually goes wrong, many new great options like Vehicle Repair Protection have emerged in the last few years.

For a better overall understanding of this type of protection from expensive car repairs, let’s take a look at the evolution of new cars’ manufacturer warranties and extended car warranties across the last century in the U.S.

The early car industry in Europe

The invention of the first modern car can be attributed to German car manufacturer Daimler Motoren Gesellschaft. 

The 1901 Mercedes was designed by Wilhelm Maybach. It was lightweight, had a steering wheel and a 35-horsepower engine, and it could reach 53 mph. The Daimler factory quickly became the most integrated automobile factory in Europe with their Mercedes models while making fewer than a thousand of them per year (since the price tag made it inaccessible to everyone).

The early car industry in the United States

In the early 1900s in the U.S., there were already around 30 manufacturers in the car business. At the time, the European design and quality were much more advanced but the upside was that Americans were creating cars at prices that were within reach of middle-class Americans. 

For example, Ransom E. Olds had created the Oldsmobile, a very simple motorized horse buggy with a one-cylinder, three-horsepower engine. The Olds had a price of only $650, which made it very affordable (though very susceptible to breaking down).

The car assembly line

It was here that Henry Ford, of the Ford Motor Company, and other business men like William Durant, of General Motors, saw an opportunity. They sought to reconcile the advanced design of the German cars with a system that made production easier and more efficient to keep prices low.

With its scattered settlements, the U.S. promised to have a far greater demand for cars than Europe. Manufacturers just needed to find a way to build cars quickly and cheaply. Ford’s Model T was introduced in 1908. It was finally a well-made car that was affordable to the masses thanks to innovations in its assembly line production.

The beginning of car manufacturer’s warranties

Compared to what some car manufacturer’s warranties offer today, the repair protection that was offered in the early days was less than minimal.

The first car manufacturer’s warranties generally provided protection on material for only 90 days, and very few parts were covered. Also, the cost of labor to fix any defective material was covered for only the first 30 days.

The warranties remained the same from the early 1900s up until the 1950s. With rising competition, companies began covering more parts under their car manufacturer’s warranties. Overtime, they began adding mileage limits, offering very basic protection for the engine and transmission for 4,000 miles (around 4 months).

Car warranty coverage increased in the 1960s

With the arrival of European and Japanese imports in the U.S., American manufacturers began to use their manufacturer’s warranties as persuasive marketing tools to keep their cars attractive to American consumers. 

Most automakers began increasing their bumper-to-bumper warranty coverage to one year or 12,000 miles. They also created a powertrain warranty coverage that could last up to five years or 50,000 miles.

What is a bumper-to-bumper warranty?

A bumper-to-bumper warranty is generally a warranty that covers all of the major parts and systems of a car, except for wear and tear items.

What is a powertrain warranty?

A powertrain warranty is generally a warranty that covers breakdowns on only the engine, the transmission, the driveshaft, differentials and axles.

Both types of manufacturer’s warranties cover repairs that arise due to a factory problem.

Car breakdowns and complicated repairs increased in the next few decades

Though expanding warranty coverage had a big positive effect on sales for the rest of the 20th century, many greedy car manufacturers began embracing a “planned obsolescence” strategy (which could be traced back to as early as the 1920s). 

The basic tactics of planned obsolescence still exist today and include:

These practices were (and are still) done to entice drivers who needed simple car repairs to simply get rid of their cars and trade in for a new one.

These practices were (and are still) done to entice drivers who needed simple car repairs to simply get rid of their cars and trade in for a new one.

Traditional extended car warranties introduced

Extended warranties in the U.S. became popular in the 1960s and 1970s for various products, from televisions to computers, as companies like then-new Walmart and Apple began offering them. Car dealerships were quick to pick up this new idea and began to offer them when they sold a new car.

Dealerships offered coverage that extended the scope of the original car manufacturer’s warranty to give car owners security that their car would be able to last them longer (since they’d be covered for major necessary repairs for a longer time period). 

Consumers have generally benefited from extended car warranties. They’ve helped drivers keep their cars for longer, giving them peace of mind that their older cars would get every necessary repair. 

However, extended car warranties quickly became a big business, greedier and greedier each year, replete with marked up prices and unclear coverage. Many bad extended car warranties were sold to people that offered very little in terms of repair protection or help when their cars were broken down on the side of the road. 

Also, extended car warranties became a preferred choice for scam artists looking to cheat misinformed consumers out of their hard-earned money. The Better Business Bureau receives thousands of complaints each year from companies that never paid out benefits to its customers.

How extended car warranties have traditionally worked

  • For decades, the extended car warranty industry has operated under a system in which many middlemen make money off the sale of an extended warranty.

The middlemen include dealers, agents and managers and they’re all interested in maximizing a profit. For this to happen, dealership salespeople use pressure tactics, either in person or using robocalls (recorded messages that reach your phone), to sell extended car warranties as soon as they’ve sold a new car. 

Greedy practices have traditionally included:

  • Not having transparent prices The prices of traditional extended warranties overtime can cost upwards of $3,000 and can end up costing you more than if you had paid for repairs out of pocket. But when the price is included in the monthly car payment, car owners don’t notice the high cost.
  • No option for month-to-month contracts Customers have had to sign up for long-term contracts because salespeople have convinced them the price would be much lower. If a customer found a better option along the way, they’d still be forced to pay fees to cancel the contract or continue paying a service they no longer wanted due to the long commitment they originally signed.
  • Not being clear about what they actually cover What many contracts have typically shown are the “exclusions” without being explicit on what’s truly included in the plan. Without a clear list of every car component covered, people have often been surprised when they’ve been told their extended car warranty wouldn’t cover a repair. 
  • Not paying up in the end Fine print loopholes in contracts have made it legal for bad extended warranties to not honor the coverage after a breakdown. For example, missing your last regular maintenance appointment at the dealership would let them reject your claim. With so much legalese, the contracts were made to keep you in the dark about those special conditions that would void coverage immediately.

How new technology has changed the extended car warranty experience

The digital age demands that businesses provide transparency, simplicity and immediate access to information about a product or service. Over the last few years, third-party vehicle service contract providers have been building new kinds of extended car warranties to meet these demands. Unlike how it’s been in the past, buying car repair protection today can be a thousand times easier and more affordable because:

  • Shopping around for the best option is quick and painless. You don’t have to buy a vehicle service plan through a dealership as you had to in the past. You can find more attractive prices and rates online than you could ever find through a dealership.
  • There are fewer middlemen (or in some cases, none).Providers who are 100% online use technology to handle the entire process thereby reducing the need for so many humans to manage sales, contracts, claims, etc. This means no huge markups and high interests.
  • Claims are much more simple and straightforward. Traditional extended car warranties made you take your car to the dealership or to specific repair shops. They also made you have to stay on the phone for hours to figure out a claim. Now you can have complete choice over the repair shop you take your car to for repairs, and you can begin the claim process at a click of a button through an app.

Is buying an extended car warranty today worth it?

Most car manufacturer’s warranties today are offering bumper-to-bumper coverage for about three years or 36,000 miles. By design, three years is usually the time when cars begin having mechanical problems.

Depending on your car’s make, you may have a powertrain warranty that covers you for two more years or 24,000 more miles after bumper-to-bumper. Still, a car manufacturer’s powertrain warranty only covers parts that are malfunctioning due to factory defects. Normal wear and tear aren’t covered.

Buying an extended warranty or vehicle service contract with the right price and conditions can ensure that you’ll be able to keep your car for a longer time without having to trade in for a new one. The savings are huge in the long run. Most repairs total $500 to $600 and in the case of a major repair, like a transmission replacement, they can cost thousands of dollars at once. The option of paying a low monthly subscription and being covered at all times make necessary repairs affordable for anyone.

What is Vehicle Repair Protection Coverage?

Like a bumper-to-bumper warranty that covers all repairs big or small, Vehicle Repair Protection provides comprehensive coverage for your car. 

There are no long-term contracts, just a small month-to-month subscription. There are plenty of options for the type of coverage you want so that you choose the number of components covered (if you’ve already been driving your car for a while, you probably know your car well enough to tell what repairs you will eventually need). You can also choose extras such as Key & Fob and Tire & Wheel Protection.

Why you should consider’s Vehicle Repair Protection for a new kind of extended car warranty coverage

There are various kinds of car repair protection providers, but not many offer the benefits of’s Vehicle Repair Protection:

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