Does the warranty impact the value of your car?

    We all want to protect our investments, especially when they’re something as sizable as a new or used car. Warranties can offer peace of mind to both buyers and sellers, acting as a safety net should certain issues arise. 

    Even better, having a warranty on your car can influence its value down the line. Extended warranties and transferable manufacturer warranties may enhance resale value by assuring potential buyers of continued coverage against unforeseen repairs. 

    Understanding the nuances of warranties and their impact on car value empowers you to make informed decisions in the automotive market, even if buying or selling your car isn’t on your immediate to-do list.

    What is a car warranty?

    Car warranties protect drivers from paying for some repairs due to parts defects.

    A warranty is a contract between a car owner and the vehicle manufacturer (or a third-party provider) that protects the owner from paying for specific repairs or maintenance. Warranties provide drivers financial coverage against defects in material and workmanship, such as unexpected mechanical failures, often within a designated period or mileage limit. 

    Should an issue arise that is covered by your warranty, your provider will pay to fix it. New cars typically come with a manufacturer’s warranty, and you can also purchase separate coverage plans to ensure that your vehicle will receive timely repairs when needed.

    Car warranties contribute to long-term ownership satisfaction and often support strong resale value. In many cases, warranties can be transferred from one car owner to another, depending on the contract conditions.  

    Importantly, warranties may not cover damage caused by accidents, normal wear-and-tear, or lack of proper maintenance. It’s important for car owners to read and understand the terms and conditions of their warranty to know what is covered and what is not.

    Types of car warranties

    There are three main types of car warranties in the UK. 

    1. Manufacturer’s warranty – Offered by your vehicle’s manufacturer, this warranty covers defects and repairs for most car components for a set time period (typically three to five years) or mileage limit, whichever comes first. This is also known as a bumper-to-bumper warranty or a new vehicle limited warranty. 

    2. Powertrain warranty –This warranty covers the engine, transmission, and other essential components that make your vehicle move. It usually lasts longer than the manufacturer’s warranty, sometimes up to 10 years or more.

    3. Extended warranty – Purchased separately, optional extended car warranties provide additional coverage beyond what your manufacturer offers. They can provide advanced protection against mechanical breakdowns and coverage for repairs. 

    What’s included in warranty coverage

    Car warranties offer peace of mind to drivers and sellers alike.

    The specifics of warranty coverage varies based on the type purchased and the wording of your contract. However, common inclusions include: 

    • Powertrain issues – Many plans cover damage to engine and transmission components, safeguarding against costly repairs.
    • Bumper-to-Bumper coverage – Aside from wear-and-tear items, warranties often have comprehensive coverage for most vehicle components, bonnet to boot.

    No matter how good your warranty is, it won’t cover every issue under the sun. Common issues excluded include: 

    • Cosmetic damage – Warranties generally do not cover appearance issues such as scratches, dents, paint chips, or internal wear. 
    • Wear-and-tear items – Routine maintenance for parts such as brake pads, tyres, and wiper blades that experience natural deterioration over time is usually not covered.
    • Accidents and collisions – Damage resulting from accidents or improper use is typically excluded from warranty coverage.
    • Aftermarket modifications – Modifications or alterations made to the vehicle after purchase may void warranty coverage for affected components.

    Benefits of extended car warranties

    Also known as a vehicle service contract, extended warranties further the duration or mileage limit of your warranty coverage beyond its original period, providing continued protection against mechanical failures and repairs. Car owners typically pay upfront for extended coverage. 

    In the event of a covered mechanical breakdown or failure, your warranty provider will pay for the cost of parts and labour according to your contract terms.

    Warranties and resale value

    Warranties can have a significant impact on car resale value. Vehicles with existing warranties, whether manufacturer or extended, often command higher prices in the resale market. 

    The assurance of warranty coverage provides potential buyers with confidence in the vehicle’s reliability and protection against unforeseen repairs. As a result, cars with warranties tend to attract more buyers and retain their value better over time as compared to those without warranty coverage.

    Even better, when selling a car with an extended warranty, the remaining coverage can be transferred to the new owner. This fact further enhances the vehicle’s appeal and perceived value on the used car market. However, be sure to check your provider’s exact terms as there may be transfer fees and additional requirements. 

    Warranty vs. insurance 

    Warranty can easily be mixed up with car insurance. Both are designed to protect your vehicle from damage, but in different situations. We break it down below:

    – Not legally mandatory in the UK

    – Focus: parts repair

    – Covers parts repair due to mechanical issues and manufacturer defects

    – In the UK, new cars typically come with manufacturer’s warranty
    Legally mandatory in the UK

    – Focus: accidents and protection

    – Covers damage from collisions for your car and (depending on your insurance) other vehicles, property, or people

    – Can also cover damage from theft, fire, or other disasters


    Is it worth taking out a car warranty?

    Taking out a car warranty is worth considering for peace of mind against unexpected repair costs, especially for older vehicles or those with limited manufacturer coverage. However, assess your financial situation to determine what’s best for you.

    Is it worth getting an extended warranty from the dealer?

    Getting an extended warranty from the dealer may be worthwhile for added protection, but compare prices and coverage to aftermarket options for the best value.

    Can I cancel my car warranty?

    Check the exact terms and conditions of your contract with your provider to see if you can cancel a warranty agreement early. 

    How do you determine the value of a warranty?

    Determine the value of a warranty by assessing coverage, cost, deductibles, and exclusions against potential repair expenses and the vehicle’s reliability and age.

    How can I track the value of my car?

    If you’re not sure what your car’s value is to begin with, it’s hard to know how much money its warranty might take off the price.

    All vehicles depreciate at varying rates, with no rule of averages accurately describing any one car’s changing value. However, with Motorway’s Car Value Tracker, you can get free, reliable monthly price alerts for up to six vehicles at once. 

    Follow changes to your car’s value to choose the best time to sell, and make informed choices about investments in your car’s maintenance.

    Ready to sell your car?

    Want to read more about owning, valuing, and selling your car? Check out more of our guides here, covering everything from depreciation to maintaining your car’s value. Understand your car’s worth in the wider market.