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What Is a Car Warranty?
What Is a Car Warranty?
Written by
Kervin Mathew
Edited by
Ellie Garran
Reviewed by
Adrian BennettCompare car insurance policies the easy way
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Long story short
Car warranties protect you from mechanical or design defects
If your car doesn’t perform as promised, they entitle you to a repair, a replacement, or a refund.
There are four main types of car warranties
Manufacturer’s, statutory, extended, and dealer’s warranties each come with slightly different coverage and terms.
Car warranties and car insurance cover different risks
Car insurance covers incidents such as collisions, theft, and weather damage.
What’s a car warranty?
In a nutshell, a car warranty is a form of reassurance that your car will perform as expected for a fixed period. If it doesn’t, the warranty entitles you to a properly functioning car, by the dealer either repairing the one you bought, replacing it altogether, or in some cases, giving you a full refund.
Imagine you’ve just bought a car, a run-of-the-mill family sedan. But within a couple of days, you start hearing a mysterious clunk, despite driving the car only in recommended conditions.
Obviously concerned, you take the car back to the dealership you bought it from. The salesperson jokingly checks the boot and quips that no one’s been kidnapped, so that’s not the cause. Noticing your half-hearted laugh, they quickly apologise before suggesting that it might be a defect that’s covered by the car’s warranty.
The next day, you get a call: the fault is quite extensive and can’t be fixed, but under the car’s warranty, you’re entitled to a replacement or your money back – not ideal, but it’s the most that could be squeezed out of a rather sour situation.
How do car warranties work for new cars and used cars?
Car warranties can apply to both new and used cars. For both, they generally cover mechanical or design defects for a limited period. They don’t cover damage related to wear and tear, consumables like brake pads, batteries, and tyres, or cosmetic damage.
Before getting further into how they work, here are the types of car warranties you’re likely to come across:
- manufacturer’s warranty
- statutory warranty
- extended warranty
- dealer’s warranty.
Warranties are usually a given when you’re buying a new car. In fact, most manufacturers use them as a sales tool to try and sweeten the deal. On the other hand, warranties for used cars aren’t as much of a sure thing. On top of that, used cars tend to have more wear and tear, so their warranties might have slightly different terms.
How a new car warranty works
Warranties are there to make sure you get your money’s worth – and that can be lot of money when you buy a new car. So, it helps to be aware of how warranties can work for you in case things start to go pear-shaped.
Generally, new cars come with a manufacturer’s warranty – sometimes called a factory warranty. It helps ensure that the manufacturer lives up to their promise of providing you with a car without any defects.
What it might cover: Repair and replacement of defective parts and accessories installed by the manufacturer or dealer
How long it lasts: Typically, four to 10 years or 80,000–150,000 km (or sometimes unlimited kilometres), whichever comes first
What it doesn’t cover: Wear and tear (brakes, tyres, or similar), routine services and maintenance, accidental damage, damage from misuse, and some modifications
New cars below the luxury car tax threshold are legally required to have a statutory warranty to cover any defects that crop up.
What it might cover: Usually all car defects, such as oil leaks, breakdowns, or gearbox issues
How long it lasts: 12 months or 20,000 km, whichever comes first
What it doesn’t cover: Accidental damage or damage from driver misuse or negligence.
An extended warranty is an optional service you can get from a manufacturer to extend a car’s manufacturer’s warranty with similar coverage. You can also buy extended warranties from a dealership or a third-party provider.
What it might cover: Typically, mechanical defects, but coverage can vary by manufacturer. It might also come with less cover and more conditions than the original warranty.
How long it lasts: Usually an additional one to five years, depending on the level of cover and provider
What it doesn’t cover: It differs based on providers, but usually excludes items related to regular maintenance and wear and tear, accidental damage, damage caused by neglect, and modifications
Generally, new cars come with a manufacturer’s warranty – sometimes called a factory warranty. It helps ensure that the manufacturer lives up to their promise of providing you with a car without any defects.
What it might cover: Repair and replacement of defective parts and accessories installed by the manufacturer or dealer
How long it lasts: Typically, four to 10 years or 80,000–150,000 km (or sometimes unlimited kilometres), whichever comes first
What it doesn’t cover: Wear and tear (brakes, tyres, or similar), routine services and maintenance, accidental damage, damage from misuse, and some modifications
New cars below the luxury car tax threshold are legally required to have a statutory warranty to cover any defects that crop up.
What it might cover: Usually all car defects, such as oil leaks, breakdowns, or gearbox issues
How long it lasts: 12 months or 20,000 km, whichever comes first
What it doesn’t cover: Accidental damage or damage from driver misuse or negligence.
An extended warranty is an optional service you can get from a manufacturer to extend a car’s manufacturer’s warranty with similar coverage. You can also buy extended warranties from a dealership or a third-party provider.
What it might cover: Typically, mechanical defects, but coverage can vary by manufacturer. It might also come with less cover and more conditions than the original warranty.
How long it lasts: Usually an additional one to five years, depending on the level of cover and provider
What it doesn’t cover: It differs based on providers, but usually excludes items related to regular maintenance and wear and tear, accidental damage, damage caused by neglect, and modifications
How a used car warranty works
Considering that used cars might have done some extra miles, there’s a higher chance of them having mechanical faults. Though more limited in scope, a used car warranty can operate similarly to a new car warranty – after all, used cars (and their owners) need that after-sales support too!
Some used cars might still be covered under their manufacturer’s warranty when changing owners. In this case, the remainder of the warranty period can transfer to the next owner.
What it might cover: Repair and replacement of defective parts and accessories installed by the manufacturer or dealer
How long it lasts: Typically, four to 10 years or 80,000–150,000 km (or sometimes unlimited kilometres), whichever comes first
What it doesn’t cover: Wear and tear (brakes, tyres, or similar), routine services and maintenance, accidental damage, damage from misuse, and some modifications
A used car statutory warranty, also known as a dealer’s guarantee in NSW, is mandatory for used cars sold by licensed dealers if the vehicle is under 10 years old and has less than 160,000 km under its belt.
What it might cover: Most defects related to the car’s safety, reliability, or roadworthiness.
How long it lasts: Three months or 5,000 km from the date of purchase, whichever comes first
What it doesn’t cover: Anything that was listed on a defect notice when you bought the car and included a reasonable estimated repair cost, plus accidental damage and damage from driver misuse or negligence.
An extended warranty is an optional service that can extend a used car’s manufacturer’s or dealer’s warranty with similar cover. You can also buy extended warranties for used cars from third-party providers.
What it might cover: Typically, mechanical defects, but this can vary by manufacturer, dealer, or third-party provider, and might come with less cover and more conditions than the original warranty.
How long it lasts: Usually one to five years depending on the level of cover and provider; can sometimes be transferred to the next owner
What it doesn’t cover: It differs based on providers, but usually excludes items related to regular maintenance and wear and tear, accidental damage, damage caused by neglect, and specific modifications
A dealer’s warranty is an optional warranty provided by dealers, outside of statutory and manufacturer warranties.
What it might cover: It varies widely, from basic protection to comprehensive plans that include extras like roadside assistance.
How long it lasts: It varies by dealer, so it’s best to check with the dealership
What it doesn’t cover: Typically, wear and tear items, damage from neglect, accidents, or misuse, and regular maintenance
Some used cars might still be covered under their manufacturer’s warranty when changing owners. In this case, the remainder of the warranty period can transfer to the next owner.
What it might cover: Repair and replacement of defective parts and accessories installed by the manufacturer or dealer
How long it lasts: Typically, four to 10 years or 80,000–150,000 km (or sometimes unlimited kilometres), whichever comes first
What it doesn’t cover: Wear and tear (brakes, tyres, or similar), routine services and maintenance, accidental damage, damage from misuse, and some modifications
A used car statutory warranty, also known as a dealer’s guarantee in NSW, is mandatory for used cars sold by licensed dealers if the vehicle is under 10 years old and has less than 160,000 km under its belt.
What it might cover: Most defects related to the car’s safety, reliability, or roadworthiness.
How long it lasts: Three months or 5,000 km from the date of purchase, whichever comes first
What it doesn’t cover: Anything that was listed on a defect notice when you bought the car and included a reasonable estimated repair cost, plus accidental damage and damage from driver misuse or negligence.
An extended warranty is an optional service that can extend a used car’s manufacturer’s or dealer’s warranty with similar cover. You can also buy extended warranties for used cars from third-party providers.
What it might cover: Typically, mechanical defects, but this can vary by manufacturer, dealer, or third-party provider, and might come with less cover and more conditions than the original warranty.
How long it lasts: Usually one to five years depending on the level of cover and provider; can sometimes be transferred to the next owner
What it doesn’t cover: It differs based on providers, but usually excludes items related to regular maintenance and wear and tear, accidental damage, damage caused by neglect, and specific modifications
A dealer’s warranty is an optional warranty provided by dealers, outside of statutory and manufacturer warranties.
What it might cover: It varies widely, from basic protection to comprehensive plans that include extras like roadside assistance.
How long it lasts: It varies by dealer, so it’s best to check with the dealership
What it doesn’t cover: Typically, wear and tear items, damage from neglect, accidents, or misuse, and regular maintenance
Helpful tip
Buying a car is generally a huge financial event. If you’re looking to protect your investment, you might want the peace of mind that only comprehensive car insurance can provide. Unlike third-party car insurance, a comprehensive policy can cover your car for accidents, weather damage, vandalism, and much more, saving you from going out-of-pocket for what could be a massive repair bill.
Adrian Bennett
General Manager for General Insurance
How much does a car warranty cost?
Car warranties can come with a price tag, depending on the type of warranty.
- Manufacturer’s warranties don’t cost extra; they’re usually included in the purchase price.
- Statutory warranties also don’t cost extra.
- Extended warranties typically range from a few hundred to more than a thousand dollars per year, depending on the vehicle, the provider, what’s covered, and for how long.
- Dealer’s warranties are priced depending on the dealer and what’s covered.
What’s the difference between car warranties and Australian Consumer Law (ACL) consumer guarantees?
Both car warranties and ACL consumer guarantees help ensure that cars are of acceptable quality, fit for purpose, accurately described, and have available spare parts. However, there are some differences in how they work.
Car warranties
- Car warranties are voluntary and provided at the discretion of the manufacturer.
- They might apply only for fixed terms and come with several conditions.
- You might need to pay for some types of car warranties (extended or third-party warranties).
Consumer guarantees
- Consumer guarantees under ACL automatically apply to all car purchases from licensed dealers.
- ACL consumer guarantees are legal rights and come at no extra cost.
- They can extend beyond typical car warranty timeframes and can’t be waived.
How is a car warranty different from car insurance?
Put simply, a car warranty covers manufacturing defects like a malfunctioning gearbox, engine, or electrical components – in other words, things a manufacturer is responsible for. On the other hand, car insurance covers things that are out of a manufacturer’s scope, such as accidental or weather-related damage, theft, and write-offs.
So, in many ways, one covers what the other doesn’t. That’s why it’s a good idea to get car insurance even if you have a car warranty.
How can I get car insurance?
You can buy car insurance from an insurance provider. And because car insurance comes with a premium, it’s worth shopping around so you get your money’s worth.
Using a comparison tool like iSelect’s allows you to look at multiple policies from our range of providers side by side to help ensure that you’re getting one that offers you good value for money.
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