An extended auto warranty is considered to be an insurance policy made on your vehicle as a safeguard against expensive and unforeseen repairs. The warranty covers repairs and/or maintenance over an agreed length of time. Since extended auto warranties cost extra and are sold separately, they are also considered as service contracts.

Buying an extended auto warranty ensures emergency road service so that you need not dread dead batteries and blown tires. Towing services are also provided, if necessary. Some extended auto warranties also provide fuel to spark ignition engines for the needy. In the event of an accident, ambulance services are provided if the vehicle covered by the extended auto insurance is involved in the accident. So buying an extended auto warranty gives one the peace of mind of knowing that if there are any repairable malfunctions to the car, it can be taken to the repair shop of one's choice and the cost of the claim will be covered by the extended auto warranty company. There are even some companies that provide a free rental car in the event that the car needs to go to the repair shop.

When buying an extended auto warranty, make it a point to negotiate on its price with the car dealer. This is because car dealers make a great profit with extended warranties, sometimes as much as the profit they make on a car. So don't pay more than two-thirds of the car dealer's asking price. It is not necessary to buy the extended warranty immediately after buying a car, as you have twelve months' time to buy a warranty. The extended warranty can be bought not only from the car dealer, but also from a credit union or auto insurance dealer.

However, before buying, make it a point to shop around for the best price and coverage you can get. Make sure that on buying the extended auto warranty, you don't end up buying a double warranty, which is coverage for items covered by the manufacturer's warranty. Make sure that the extended auto warranty that you buy from the dealer is the car manufacturer's warranty. Remember that the warranty begins on the day the warranty was purchased and not on the date the car is purchased.