Auto warranty statistics 2024 (2024)

Auto warranty trends

Auto warranty industry reviews decreased at a CAGR of 1% over the past five years to $20.5 billion, mostly due to the decrease in new car sales during the COVID-19 pandemic.

• In 2022, 52 million new vehicles were sold in the U.S.
• Experts attribute the decrease to ongoing supply chain disruptions seen during the pandemic, including semiconductor microchip shortages.

That said, the industry is expected to rebound. Between 2002 and 2023, new car sales increased by 12.4%.

• As people drive their cars for an extended period, experts believe that customers will look for longer-serving warranties, and as a result, the industry will rebound.

In 2023, car repair costs were up almost 20%, which is nearly six times the national inflation rate.

• In 2023, the total cost of owning and operating a vehicle is $12,182, or $1,015 a month. This is a sharp increase from 2022, when the average yearly cost was only $10,728, or $894 monthly.
• Repairs can average $600 in a single visit.
• Still, more than half of Americans (58%) say they could not afford an unexpected car repair bill, which might be reason enough to consider an auto warranty to cover repair costs.

Types of car warranties

There are 3 main types of auto warranties that vary based on need and cost.

1. Manufacturer (or Factory) Warranty: A promise from the manufacturer to repair or replace defective vehicle components at no cost to the vehicle owner for a predetermined time frame (usually three years or 36,000 miles). The warranty cost is built into the cost of the vehicle, which is only offered on new vehicles. The owner must follow the manufacturer’s scheduled maintenance and have the repair work completed at an authorized dealership.
2. Manufacturer Extended Warranty: A continuation of the manufacturer warranty coverage after it has expired. These typically come with a monthly or annual fee, and generally require a deductible before repairs can be made. The policy must be purchased before the manufacturer warranty expires.
3. Third-Party Extended Warranties (also known as vehicle service contracts): There are protection packages available for used vehicles after the manufacturer warranty has expired. Generally, they are offered as drivetrain or powertrain warranties but may also include comprehensive exclusionary plans to cover more components. They can be renewed as long as the warranty provider deems the vehicle eligible, and require a paid deductible before repairs can be made.

Electric vehicle car warranties

New EVs and hybrids usually receive the same warranties as their gas-powered counterparts. These vehicles also get a federally mandated warranty specifically for their batteries. The federal requirement for these battery warranties is for at least eight years or 100,000 miles. However, this is just the floor. The state of California extended the mandatory warranty to 10 years or 150,000 miles for partial zero emissions vehicles (PZEVs).

Battery degradation is inevitable for hybrids and EVs. Recurrent, a company that studies battery health for EVs, reported that many EV batteries shed 5%-10% of their lifespan within five years of being purchased. Another company, GeoTab, reported that most of these batteries shed about 2.3% of their performance per year.

Most manufacturer warranties cover EV battery replacement if the car battery hits a certain capacity threshold. For example, Tesla’s warranty covers replacement for batteries that degrade below 70% capacity. A Tesla battery can cost over $10,000 out-of-pocket to replace.

Who buys auto warranties?

Generally speaking, the majority of auto warranty purchasers are young, married males.

• More than half (54%) of 16- to 24-year-old car owners are covered by extended warranties, but only 25% of those 55 and older have coverage.
• Males request nearly all quotes for extended warranties (92%); 75% of owners who purchase extended warranties are married.
• Over 86% of extended warranty purchasers buy their warranty when they buy the vehicle. About 54% purchase it at the dealership, while 23% purchase from a third-party company.

Why do people get a warranty?

One of the primary reasons vehicle owners purchase extended warranties is to protect themselves from unforeseen and expensive repair costs due to mechanical breakdowns. When the repairs are covered under warranty, the vehicle owner is only responsible for the deductible, reducing out-of-pocket costs. Some car owners, particularly those with older vehicles, purchase warranties just to have peace of mind in the event of unexpected repair costs.

While 47% of vehicle owners hold an extended warranty, only one in 10 have ever used it.

Owners of luxury vehicles or sports cars may benefit more from a warranty, as the costs to repair those vehicles can be exponentially more expensive than mainstream vehicles.

Auto warranty costs

After sourcing more than 500 quotes, ConsumerAffairs found that auto warranty owners will pay about $1,000 per year of bumper-to-bumper coverage. However, costs will vary based on the vehicle. On average, vehicle owners can expect to pay $2,000 to $5,000 for an extended warranty over the three-to-six-year life of their plan.

Extended warranties include three types of costs:

• Down payment: The initial payment to begin the contract ($0 to $350)
• Monthly payments: The monthly cost to maintain the coverage ($30 to $150)
• Deductible: The cost for each car repair, paid for by the vehicle owner ($75 to $250)

Auto warranty cost factors

The level of coverage, vehicle make, model and vehicle age are the most significant auto warranty cost factors. Providers will also consider the owner’s driving history and location when determining the contract's pricing structure.

Other cost factors to consider:

• Down payment: Initial payment required by some warranty providers to begin the policy. This will be an up-front, out-of-pocket cost.
• Monthly payments: If you do not pay the total policy cost in full up-front or roll it into your vehicle financing, you will need to pay monthly payments to maintain the coverage throughout the life of the policy.
• Deductible: Similar to health insurance, this is the vehicle owner’s out-of-pocket cost of the repair. Under the warranty, a deductible must be paid for each separate instance that the vehicle is repaired under.
• Maximum payout: Over the life of the policy, some warranties will include a maximum amount that the provider will pay for repairs. Beyond this limit, repairs will not be covered under the warranty and result in out-of-pocket costs for the owner. This is an important consideration if it is an older or less reliable vehicle, with a projected large annual repair bill.
• Mileage requirements: Vehicles are considered high mileage if they have more than 100,000 miles on the odometer. Warranties for high-mileage vehicles tend to cost more.
• Length of warranty: Most warranties are time or mileage-limited, such as three years or 36,000 miles. If the owner does not plan to keep the vehicle for the life of the warranty, upon sale make sure that it is transferable to the new owner.

Insurance claims and repair costs

When their vehicle requires any type of repairs, 20.9% of people say they always take the vehicle to a professional to fix, according to a recent ConsumerAffairs survey. However, should an unexpected vehicle repair cost of $1,000 or more pop up, 36.5% of respondents wouldn’t be able to cover it.

BLS data states that vehicle parts and equipment costs jumped 11% from 2019 to 2022. This shows that vehicle repair costs may continue to rise, making unexpected costs unaffordable for many.

The table below, based on actual Kelley Blue Book repair data, reports U.S. vehicle repair cost estimates.

Claims and repair costs cont

For those who report being unable to cover unexpected repair costs, an extended warranty may be a good option, as smaller, consistent monthly payments with low deductibles could be easier to manage. This is especially true for luxury cars and electric vehicles, whose repair costs are notoriously higher. For example, the cost to replace the traction battery in an electric vehicle runs from nearly $4,500 to over $15,000. For these vehicle owners, this type of warranty would be extremely valuable.

The number one most common claim filed under extended warranties is engine management faults.

1. Engine management faults
2. Air conditioning systems
3. Oxygen sensors
4. Battery charging circuits
5. Water pumps

In the event of a mechanical breakdown, the vehicle warranty should provide instructions on how to make a claim, a list of covered repairs, the deductible cost, and how long the process should take. Processes vary across companies. Some will pay directly for services, and others require that the vehicle owner pay for the service and file for reimbursem*nt. Various warranties allow the owner to choose from a list of authorized repair centers, while others require the repairs be completed at a dealership or specified service provider.

Prior approval may be required before the owner can initiate repairs. The warranty should also specify any other requirements, such as if original parts must be used.

The average time for a warranty repair is 12 days.

• Generally, a repair covered under warranty should take less than 30 days from the time the vehicle is dropped off at the repair facility until the day the vehicle is picked up. Some companies set a required timeframe, such as 15 to 20 days.
• Repairs could be slowed down by delays in approval from the warranty company, additional damage identified during the repair process, or waiting time for parts delivery.

What do auto warranties cover?

Coverage depends upon the type of warranty purchased and can range from bumper-to-bumper to external environmental impacts. Normal wear and tear, abnormal use, and regularly scheduled maintenance are not covered under vehicle warranties.

Coverage Types

Common auto warranties offer comprehensive bumper-to-bumper coverage, powertrain protection for the engine and transmission, emissions system coverage, corrosion/rust prevention, and electrical battery warranties for hybrid and electric vehicles.

Bumper-to-bumper

This is the most comprehensive warranty. It covers all damage and defects in components not related to normal wear and tear. Length varies by vehicle manufacturer, but is at least three years or 36,000 miles, whichever comes first. The ratio could be up to four years or 50,000 miles for luxury vehicles.

Powertrain

This policy covers extended protection for powertrain parts, including engines, transmissions, drivetrains, fuel pumps, and electric vehicle motors. The typical length is four years or 60,000 miles or five years or 70,000 miles. Some vehicle manufacturers (e.g., Kia, Hyundai, Genesis, and Mitsubishi) offer powertrain warranties for 10 years or 100,000 miles.

Emissions

Emissions warranties cover any defective or damaged components that would cause the vehicle to fail a government emissions test. Vehicle manufacturers are required to provide a guarantee on the emissions system of new vehicles for two years or 24,000 miles. The catalytic converter, electronic emissions control unit, and onboard emissions diagnostic computer must be covered for eight years or 80,000 miles.

Corrosion

This policy covers any damage from naturally occurring rust (corrosion) on factory components. Rust caused by environmental factors is not covered. Coverage term lengths vary by manufacturer.

There are generally two types of corrosion:

• Perforating: holes that run all the way through the chassis
• Non-perforating: surface-level rust on paint or other surfaces

Electric Vehicle Battery

EV battery policies cover the traction battery that powers the electric motor in hybrids, plug-in hybrids and electric vehicles (EVs). Coverage term lengths vary by manufacturer, but generally run eight years or 100,000, or if the battery falls below 70% charging capacity.

References

1. American Community Survey 2017-2021 5-Year Data Release. U.S. Census Bureau. Evaluated October 2, 2023.Link Here
2. IBIS World. Auto Extended Warranty Providers in the US – Market Size 2004 – 2029. IBIS World. Evaluated on September 20, 2023.Link Here
3. Hardesty, C. Car Warranty Guide: Everything you need to know. Kelley Blue Book. Evaluated on September 20, 2022.Link Here
4. US Inflation Calculator. Current US Inflation Rates: 2000–2024. Evaluated on March 8, 2024.Link Here
5. California Air Resources Board. California Vehicle and Emissions Warranty Periods. Evaluated March 8, 2024.Link Here
6. U.S. Bureau of Labor Statistics. Import/Export Indexes - Recent Price Trends in the Motor Vehicle Parts Industry. Evaluated March 8, 2024.Link Here
7. United States Environmental Protection Agency. Frequent Questions Related to Transportation, Air Pollution, and Climate Change. Evaluated March 8, 2024.Link Here
8. S&P Global Mobility. Average Age of Light Vehicles in the US Hits Record High 12.5 years, According to S&P Global Mobility.Link Here
9. CitaHuetter, J. Pegasystems: Majority of drivers lack extended warranty, but that’s reversed for younger owners. Repairer Driven News. Evaluated September 20, 2023.tionLink Here
10. Recent Price Trends in the Motor Vehicle Parts Industry U.S. Bureau of Labor and Statistics. Evaluated on September 26, 2023.Link Here
11. Wakefield, C. Here’s how much the average car repair now costs. Kelly Blue Book. Evaluated September 25, 2023.Link Here
12. Holroyde, N. Engine management faults head up list of used car warranty claims. Evaluated September 24, 2023.Link Here
13. Federal Trade Commission. Auto Warranties and Auto Service Contracts. Federal Trade Commission Consumer Advice. Evaluated September 20, 2023.Link Here
14. News Release: Consumer Price Index 2023. U.S. Bureau of Labor and Statistics. Evaluated September 26, 2023.Link Here
15. The True Cost of Car Care. AAA. Evaluated September 26, 2023.Link Here
16. Annual New Car Ownership Costs Boil Over $12K. AAA. Evaluated October 2, 2023.Link Here
17. NADA Issues Analysis of 2022 Auto Sales and 2023 Sales Forecast. National Automobile Dealers Association. Evaluated September 26, 2023.Link Here