Inclusionary: Powertrain Warranties
Powertrain warranties cover the engine, transmission, and other parts of the drivetrain only, which is defined as the 29 parts of the vehicle through which oil flows. These are the parts least likely to fail. The average vehicle contains over 1,300 parts. As it does not cover the majority of the components of a vehicle, the powertrain warranty provides very limited protection.

Inclusionary: Named Component or Inclusionary Contracts
Few auto service contracts cover all repairs. "Named component" or "Inclusionary" contracts typically cover the major mechanical systems of the vehicle from the mechanical breakdown and mechanical failure. These contracts typically include the engine, front and rear suspension, fuel system, some interior/exterior components, front and rear drive axles, cooling system, brakes (including ABS), transfer unit (4 X 4's), seals and gaskets, electrical system, transmission, air conditioning, turbo charger, electronic systems and steering systems.

Not surprisingly "named component", service contract sellers focus attention on the named components. Does coverage that includes the engine, transmission, suspension, steering, front- & rear-wheel drive and brekes sound comprehensive? If so, consider what would happen should you have a problem with the electrical components. If an item isn't listed, assume it's not covered. Further, watch out for absolute exclusions that deny coverage for any reason. For example: "If a covered part is damaged by a non-covered component, the claim may be denied."

Exclusionary: Bumper-to-bumper or Comprehensive Contracts
Exclusionary contracts are generally more comprehensive and take the opposite approach to coverage. That is they identify the specific components that are not covered. Take the time to review these components to ensure you are not left with undue risk of repair cost.

They cover nearly all of the mechanical systems of the vehicle, from front bumper to back bumper; except for those on the "exclusion list", listing the parts that are NOT covered by the contract. It is much easier for a consumer to see a short list of items that are not covered and know that everything else is. Consumable items, such as brake pads or windshield wipers, are usually not covered. Roadside assistance plans are typically offered as part of the warranty package, and even while the basic warranty is still in effect. Some even offer free lodging and meals if your vehicle breaks down on a trip.

Things to consider in both types of contracts
If the contract specifies that only "mechanical breakdowns" will be covered, problems caused by "normal wear and tear" may be excluded. Therefore, in the case above, should the coverage provided be only for breakage, what would happen if a seal or gasket wore out? See more on this topic in the Warranty vs. Mechanical Breakdown Insurance section.

Watch also for exemptions for damage caused by the failure of uncovered components. The downstream costs from that same gasket failure could be significant. For example, if the engine must be taken apart to diagnose a problem, and it is discovered that non-covered parts need to be repaired or replaced, you may have to pay for the labor involved in the tear-down and reassembling of the engine.

You may not have full protection even for parts that are covered in the contract. Some companies use a "depreciation factor" in calculating coverage. In other words, the company may pay only partial repair or replacement costs if they consider your car's mileage.

Key: See the Warranty Wizard for a set of questions to ask when comparing warranty providers including those outlined above.