The first thing you need to know when evaluating an after-market auto warranty is who’s doing the underwriting. Is the auto manufacturer underwriting the warranty? Or is a private company doing the underwriting? What’s the reputation of this company? To find out, you can check with the trade media and the Better Business Bureau. Be aware that there are a number of large companies that are being taken to court for their unscrupulous business practices – do your due diligence so that you don’t find yourself involved with one of these.

There are also several large and well-known companies that are currently experiencing financial difficulties. Be sure to consider how this affects your warranty. GM, for example, has recently filed for bankruptcy, so upholding warranty obligations may be more difficult for them than for a company like Ford that isn’t experiencing as many problems.

The next step in evaluating a potential warranty is reading the fine print and understanding each specific term. By “terms” we mean both how words are defined – “drive train” and “power train,” for example – as well as the period of time during which the warranty is in effect. This period of time is usually expressed in either a unit of time or a number of miles.

If you have any questions about a term or policy you discover, ask away – a reputable company will be happy to make sure you have all the information you need to make an informed decision. On the other hand, a company that’s reluctant to show you the details of a warranty before your purchase should cause you to be wary. In fact, it’s probably best just to buy your warranty elsewhere in this case.

Also, ask for references from the company and follow up to find out what others’ experiences have been like. If they don’t have references, check with the Better Business Bureau and search online. There are a number of car owners’ forums where people are happy to share their experiences. Keep in mind, though, that people who have had a negative experience are much more likely to make their opinions known, so take negative reviews with a grain of salt. Do, however, consider the overall pattern of reviews. If one particular issue keeps coming up, then the issue generally has merit and can’t just be attributed to sour grapes.

Next, be sure to find out what kinds of parts are specified for repairs. Some warranties specify new, manufacturer’s parts only, while others specify used or reconditioned parts. Others specify parts certified by the manufacturer, which may be new or reconditioned. Know exactly what your warranty will pay for and what you’ll be expected to pay so that you aren’t surprised when you go to make a claim.

This brings us to our final consideration – out of pocket expenses. Just because you have a warranty, don’t expect everything to be covered. Know what you’ll be expected to pay if you file a claim, as well as what you’ll be required to do to keep your warranty in effect. The best warranty in the world will be useless if it requires documentation of oil changes every 5,000 miles and you can’t provide it when needed.