What is a powertrain warranty?

Among the critical systems in a car, the powertrain is at the top of the list. After all, it includes the parts that make the car go. When powertrain problems develop, cars don’t go as well as they should—if they go at all.

Powertrain components also top the list of the most expensive vehicle repairs. For instance, overhauling a failed transmission can cost $2,500 to $4,000. Rebuilding the engine of a diesel pickup truck can cost $15,000 or more.

Fortunately, you can protect yourself with a powertrain warranty. It’s a guarantee that the powertrain’s components will continue to operate normally for a specified period or number of kilometers driven. If a problem covered by the warranty arises, the warrantor will pay some or all the repair costs.

Although a degree of powertrain protection is built into the price of most new cars and some used ones, you can select additional coverage for an additional price, of course. But the choice is rarely straightforward.

Powertrain warranties differ greatly in price, duration, parts covered, claims process and conditions that apply. Make the wrong decision, and your powertrain warranty could fall far short of expectations—just when you need it the most.

A general understanding of how powertrain warranties work and the options available can help you avoid disappointment and even determine whether you need one at all.

What parts does a powertrain warranty cover?

Typically, powertrain warranties cover the fundamental parts of a powertrain: the vehicle’s engine or electric motor, transmission, driveshaft, axles and differential. Some cover additional components, such as turbochargers and control units. But the exact coverage varies widely by price and provider.

However, powertrain warranties don’t always cover the full cost of repairs. Some require the holder to pay a deductible, although it’s often a small amount like $100. Some impose claim limits, meaning the warrantor might pay only $1,000 or $2,500 toward a repair, regardless of the total cost.

And if you violate the terms and conditions of your powertrain warranty, it might not cover anything at all. For instance, claims could be denied for racing your vehicle, using it for commercial purposes, or simply falling behind the manufacturer’s maintenance schedule. (Keep an accurate record of your vehicle’s service history, including receipts.)

There’s only one way to know what your powertrain warranty will cover and how much it will pay out: by reading your warranty contract carefully. Don’t depend on a warranty’s marketing materials, which typically omit important details.

How long do powertrain warranties last?

It varies on new cars. Toyota Canada’s powertrain warranty backs its vehicles for five years or 100,000 km, whichever comes first. Mitsubishi Canada offers powertrain protection for 10 years or 160,000 km, which is just six months shy of the average vehicle age in Canada.

Some warranty providers offer extended powertrain warranties that can stretch the original coverage by several years or tens of thousands of kilometers, whether you buy your vehicle new or used. There’s also powertrain protection for vehicles whose warranties have expired.

Just note that your vehicle’s age and mileage at the time you get the warranty count toward its age and mileage limits. For instance, a seven-year/140,000 km warranty doesn’t provide an additional seven years or 140,000 km of protection; it simply covers your car until it’s seven years old or has traveled 140,000 km.

Where can you buy a powertrain warranty?

Just like shopping for a car, you want a powertrain warranty that suits your needs, is reasonably priced, and is backed by a provider you trust.

Manufacturer or “factory” warranties are sold exclusively by dealerships of the same manufacturer. Third-party or “aftermarket” warranties are sold primarily by independent dealerships. Generally, you must obtain these warranties when and where you buy the car.

A few aftermarket providers, such as Ensurall and Obvi, sell directly to consumers. They’re a handy alternative to dealerships and the only option for vehicles bought in private sales or that are no longer under warranty.

Related: Should you go to a bank or the dealership for your car loan?

Watch out for prices that seem too high—or too low

Expect to pay between $500 and $1,500 for a powertrain warranty. The price depends on many factors, including the vehicle’s model and year, warranty length, components covered, deductible amounts, claim limits and, most notably, the seller.

Dealerships buy warranties at wholesale prices from manufacturers or aftermarket companies. Although manufacturers limit the price markup on their factory warranties to 30%, there is no such restriction on aftermarket warranties, says George Iny, director of the Automobile Protection Association (APA), a consumer advocacy group. According to one APA review of aftermarket powertrain warranties, the average retail price was more than double the wholesale cost.

But even a low-priced warranty could still be a bad deal. “A powertrain warranty for just $300 or $400 likely has restrictions that aren’t shared in advance with the buyer,” says Iny.  “There might be a claim limit—which is typical—that doesn’t even cover the cost of one powertrain repair.”

To get a sense of what’s fair, request a quote from an online warrantor and check the websites of multiple providers for high-level plan and pricing information.

Read more: In what situations can your car warranty become void?

It's all in the details—if you can find them

Beware of dealers who pressure you to buy extended car warranties and other add-ons, such as maintenance and tire protection plans. Staff earn commissions on these sales, and the profit margins can be high.

Most dealership staff are unequipped to answer more than basic questions about powertrain warranties, and very little can be found in the brochures. In fact, most warrantors disclose a powertrain warranty’s full terms and conditions only after the deal is done and the warranty certificate is issued — sometimes days later.

“If you're buying a warranty that's offered by an automaker, the coverage is usually what it appears to be,” says Iny. “But on the aftermarket, it can be very different.”

With some warranties, you can cancel the contract and receive a full refund if you submit a written request shortly after the purchase date (typically 30 days). If you can’t confirm these details before you buy, then review the full terms and conditions as soon as you receive them.

How do you file a powertrain warranty claim?

The process for filing a powertrain repair claim depends primarily on the type of warranty you have.

Generally, a factory warranty requires repairs to be performed at an authorized dealership of the same manufacturer. Your claim will likely be accepted without hassle, which is a major advantage of factory warranties.

As for aftermarket warranties, some let you choose any licensed mechanic, but others require you to visit a pre-approved repair shop. Either way, you’ll need the warrantor to authorize any repairs before they start. You might even need to pay the full repair cost up front and wait for reimbursement.

Learn more: What is a preferred auto body shop?

Do you really need a powertrain warranty?

If you’re looking for peace of mind, all the security you need might already be built into your car. The powertrain components of some vehicle makes and models are so highly dependable that buying a powertrain warranty makes little sense at any price.

A Consumer Reports survey of extended car warranty buyers found that 55% never filed a warranty claim despite an average warranty price of US$1,200; those who did file claims spent more on their warranty than they saved on repairs.

When considering a powertrain warranty, ask yourself whether the deductible amount, claim limits, coverage exclusions and conditions justify the warranty price. Consider as well whether other parts of the car deserve the investment more.

“If you put all your money into a powertrain warranty, you might be leaving out a lot of pieces that fail more often,” says Iny. “On a modern car, electronics and other elements can be more problematic.”

Read next: Is rustproofing your car worth the added cost?