Warranties and service contracts
By Paige Kroger and Jasmine Miller • Bankrate.com

A warranty is an important part of what you are about to buy, a significant factor in assessing the total value and total price of the deal.

A new-car warranty is included in your price, so be sure you understand the entire manufacturer's new-vehicle warranty terms before signing.

All new cars today come with a manufacturer's warranty. Commonly, that coverage will last three years from the day you buy. Some may cover you for just one year; some will last much longer (especially for very expensive models). Many warranties will be of the "either/or" type: for example, "five years or 50,000 miles, whichever comes first."

Extra warranties or service contracts on new or used vehicles will cost you. Be sure to include a judgment value about the worth of this extra coverage in your assessment of a potential purchase.

Never assume anything
Don't guess or assume what is covered and what is not. Read the fine print, and then read it again. Whatever sort of warranty it is, the law says you must be able to read it before you decide to buy!

Ask the dealer exactly what the warranty will pay for if you need work done on the car. If something is covered, ask whether it is 100 percent covered for every problem or if you will (or could) be liable for some of the cost.

For example, the engine is covered, but just which parts? All of them? No. Spark plugs or hoses, for example, won't be covered. In some cases covered parts that are damaged by non-covered parts are no longer covered (say, a broken radiator hose ruins the engine). So be clear before you decide on the car.

A basic warranty covers most parts of the vehicle, but not items that are subject to everyday wear and tear. An oil filter, for example, is expected to wear out and be replaced, as are light bulbs, engine belts and wiper blades -- and so they are rarely covered.

If the car was used as a demonstrator, does the warranty begin when you buy, or did it begin when the dealer first used it as a demo? The answer will vary depending on dealers -- so ask!

Checking with the manufacturer
Most new-vehicle warranties are standard, but visiting a manufacturer's Web site -- or Web sites dedicated to new auto research and purchases -- can tell you what your vehicle offers in the way of warranties.

Make sure you know just what you must do to keep the warranty valid. For example, if you use a non-authorized mechanic to do work on the car, or you install or work on something yourself, and it isn't an acceptable part, will that void the warranty for all or some of its coverage?

Minding the manual
Details of the warranty will be in your owner's manual.

Find out what hidden fees come with the warranty. Some may have a deductible, much like your insurance coverage. Some may require fees if you wish to cancel it (say you sell the car), and others may have limits (they say they'll pay for towing or a rental car, but will they pay the total cost or just part of it?).

If other items are covered -- for example, rust -- be sure you know to what extent they are covered. Is a rust spot covered? Or must you have major rust damage for the warranty to kick in? And how much?

Spare parts?
Check out the free "extras" that come with some new car warranties. Some makers will help you if you break down or unlock your car if you've locked the keys inside. You may consider these kinds of warranty extras -- like roadside service -- worth a lot to you.

Your car's tires will come with a warranty from their manufacturers, and so will the battery. Be sure you have them before you sign any deal.

There is no federal Canadian law requiring coverage for emissions equipment -- unlike in the U.S. -- and coverage for emissions equipment varies. On GM cars sold in Canada there is GM coverage for a defect in materials or workmanship for 3 years/60,000 km and for converters and power train control modules 8 years/130,000 km, according to the company's Web site.

When you buy a used vehicle, check to see if any of the original new-car warranty is still in effect. If the vehicle has not reached the limit of miles or years, you may be covered by what is left. But don't assume -- check with the manufacturer.

Used cars may also come with warranties developed by a dealer or manufacturer. Check them thoroughly. There is no single model for a used-car warranty -- read it fully and understand it.

Extending your protection
Be alert on the lot. Extended warranties and service contracts (which are sometimes the same thing) are profitable for dealerships in most cases. Read all the fine print.

Some lenders require an extended warranty. Make sure you know if this is the case in a vehicle you are considering. If it is not, the choice is yours. If it is, find out exactly what sort of extended warranty is required so that you are not sold more than you need.

These coverages work like insurance: You're buying something you may never need. But if you feel the need, make sure they offer what you really want before signing on. They can vary widely, so don't assume standard terms. Read an extended warranty or service contract very thoroughly.

For example, ask when they apply, what is covered and how the coverage is applied. If the original factory warranty is in effect, does the extended warranty come into play at all? Are there limitations, exclusions, exceptions or restrictions? Keep in mind, extended warranties don't just come from dealers or manufacturers. You can shop around and find an independent one that gives you what you want for less. A good place to start is with the Web sites that offer auto sales information.

Does the warranty work automatically, or must you get an authorization? If it's the latter, find out exactly how much red tape and paperwork are required to get something fairly simple fixed.

And if something is replaced, will it be replaced by factory original parts or rebuilt parts?

If you decide to buy a service contract when you buy, ask for written confirmation that your payment for it has been forwarded to whoever administers that contract. If it is not, you may not be covered.

Implied warranties
When shopping for a used car, it is up to you to ask whether a service contract is available and whether the vehicle is being sold with a warranty, with implied warranties, or "as is." According to the Ontario Motor Vehicle Industry Commission, you should be told the car you are considering is used, or you'll know because you were at a used-car dealership, but the only place that information is written is in the contract.

To boost your peace of mind, remember that "implied warranties" come with everything you buy. In simple terms this means if someone sells you a car, it must work (not perfectly, but it must do what a car should do). If it doesn't -- let's say the engine blows up on the way home from the lot -- you have legal recourse even without a written warranty. These "implied warranties" are valid for varying amounts of time, depending on your province.

But there are exceptions: when a used car is marked with a sign that says "as is," or some other written sign stating there is no warranty, or when the seller otherwise indicates in writing that no warranty is given.

Of course, be very sure you really want the deal if the vehicle comes "as is."

Jasmine Miller is a freelance journalist based in Toronto Canada. She writes for a variety of magazines covering issues from parenting to business and everything in between.