Glossary of Car Warranty Terms

- by

Find automotive terms and understand them better

Terminology – Encyclopedia – Glossary

Administrator – the company responsible for handling the details of a vehicle service contract, including providing service when any claims are made under the policy provisions.

A.M. Best & Company – a leading, global company that publishes analyses and ratings for more than 7,000 insurance providers. Founded in 1899, A.M. Best is the best known rater of insurance companies’ financial standings, officially recognized by the U.S. Securities and Exchange Commission and the National Association of Insurance Commissioners. Ratings and criteria can be found here.

Car Warranty – insurance that covers a motor vehicle against mechanical breakdown or failure. Also known as a vehicle service contract or mechanical breakdown insurance.

Basic Warranty – usually referred to as a manufacturer’s coverage, this typically covers all parts on an automobile except consumable items (see below) and maintenance.

Better Business Bureau (BBB) – for a long time the Better Business Bureau has been a useful and reputable resource of companies’ standings/ratings throughout the nation. Their ratings are based on the number of customer complaints and how companies handle them. Simply because many consumers refer to BBB ratings when making their purchase decisions, companies value their standing in BBB.

Breakdown or Mechanical Failure – when a part or parts do not perform as they were designed to do.

Bumper-to-Bumper – also called “exclusionary” coverage, this is the most comprehensive plan available, covering all items on a vehicle except those specifically listed as “exclusions.”

Certified Car – Some used vehicles may be certified by the manufacturer. This means that they have undergone the proper inspection before the sale. In some cases a limited powertrain protection comes with a used certified car.

Consumable Items – items on an automobile, such as tires, brake pads and windshield wipers, that typically require regular replacement. These items are not covered under most (if any) auto warranties.

Deductible – the amount of money stated in a policy that the policyholder is required to pay for each covered repair. The balance of the repair charges are paid by the policy provider. Typical deductible amounts range from $0-$500.

Drive Train – also called the power train, is the set of components that produce power and send it to the wheels. Drive train parts include the engine, transmission, drive shaft, differential and drive axle.

Extended Warranty – also called a vehicle service contract or aftermarket warranty, this is coverage against mechanical breakdown or failure after the basic manufacturer’s protection has expired. This policy/plan may be sold by the manufacturer, an auto dealer, an administrator or a third-party coverage provider.

Inclusionary Policy – also called a stated component policy or itemized component coverage. This type of policy will contain a list of all parts that are covered for repair. Any part not included on the list is not covered.

Lemon Law – a law that protects buyers of recently purchased vehicles against being stuck with an automobile experiencing recurring problems that have caused “more than normal” mechanical failure or breakdown. Typically, this vehicle may be returned to the seller for a full or a partial refund. These vehicles don’t quality for extended coverage.

Maintenance Guidelines – this includes maintenance recommended by a manufacturer to keep it in proper operating order. May include oil change intervals and other fluid maintenance, tire rotations, wheel alignments and replacement of hoses and belts. Failure to follow these guidelines may void a contract/policy in the event of a claim.

Roadside Assistance – an additional benefit of many service contracts providing emergency plan on a 24/7/365 basis. Emergencies typically include breakdown (towing), dead battery jump, delivery of fuel or water, tire repair and opening a locked vehicle.

Salvage Title – a title issued to the owner of a vehicle that’s been damaged to the extent that it’s written off as a total loss, usually suffering market-value loss of 75 percent or more. These vehicles are not eligible for extended automobile coverage.

Transferability – any owner of a vehicle that has an extended coverage can transfer the coverage to any car. This comes in handy when drivers want to transfer the coverage to the newly purchased vehicle and sell the old one.

Vehicle Identification Number (VIN)  is a 17 digit series that is unique for each vehicle. This set of letters and numbers describes the characteristics of the vehicle it is assigned to.

Vehicle Service Contract – also called an extended warranty, this is insurance coverage that provides repair for covered parts responsible for mechanical breakdown or failure. These policies are typically put in place after expiration of the original factory protection.

We are constantly trying to add more terms to our list to make sure consumers understand not only the definitions but the terms listed in their contract/policy. Many companies use these terms without explaining them to consumers who don’t always understand the terminology. Our team is here to help you be on top of automotive industry news and terms. Feel free to email us if you have any suggestions or feedback about this page. We would love to hear your opinion!