Car Insurance vs Car Warranty: What’s the Difference?

You’re cruising down the highway and suddenly you hear a strange, expensive-sounding clunk coming from under the bonnet. Or perhaps you’ve just got back to your parked car after an outing to find a fresh dent in the passenger door. Either way, you’ll likely start wondering whether you have cover to get the problem sorted. That, and who exactly do you call?

For example, are both situations covered by your car insurance? Or is it better to lean on your car warranty, if you have one? If you do, does it make a difference whether it’s a car dealer warranty or one issued by the manufacturer? And come to think of it, is a car warranty the same as insurance? If so, perhaps it doesn’t matter one way or the other?

Knowing what to do when you experience car trouble and which policy covers what can be confusing. So, to help you understand more about how car warranty and insurance work, we’ve put together this guide to answer these questions and more, starting with what a car warranty is.

What is a car warranty?

A motor car warranty is a promise offered by the manufacturer or a car dealer about what it will do if something goes wrong with a newly purchased car for a specific period of time.¹

Car warranties typically work by covering the expenses involved in fixing certain mechanical or design faults within a period of time from when the car was purchased and can include costs for both parts and labour.¹

Are there different types of car warranty?

Yes. There are three different types of car warranty.

• Manufacturer warranty (also known as a factory warranty) – new cars typically come with this,² and it usually lasts for three, five or seven years,^1,3 or for a certain number of kilometres.¹
• Statutory warranty – also known as a dealer guarantee in some states,⁴ new and most used cars bought from a dealer will automatically be covered by this type of warranty,¹ which can be quite limited in duration and work slightly differently depending on where you ​live.^1,2
• Extended warranty – on paper, these may add some extra time, kilometres or cover to your car’s original warranty,^1,4 whether it’s the factory warranty,⁵ or the statutory warranty or dealer guarantee.⁴

What does a car warranty cover?

Generally speaking, a car warranty in Australia covers defects,¹ such as a malfunctioning engine, gearbox or electrical components.

However, what is – and isn’t – covered can depend on the type of warranty.¹

A manufacturer warranty:

• Usually covers the cost of repairing a vehicle – including the manufacturer-fitted accessories – if it’s found to have a mechanical or design defect,¹ which could be anything from a switch not working correctly to a total engine failure.⁶
• Doesn’t cover consumables such as batteries, brake pads and tyres unless they’ve “dramatically failed”.⁶

A statutory warranty:

• Usually covers mechanical defects,¹ for example if the car begins to leak oil, stops running or won’t go into gear,⁶ excluding any listed on the defect notice when you bought the car.⁷
• Doesn’t cover accessories or common service-related items, such as batteries, brake pads or tyres.^6,7

To understand what is and isn’t covered by your car’s warranty, it can be a good idea to read the terms and conditions carefully.¹

What is car insurance?

Car insurance is a type of insurance policy that you can choose to take out to help cover costs if your car is damaged, or if it damages someone else’s car or property, depending on your level of cover.^8,9

In Australia, there’s also a type of car insurance that’s mandatory for all cars. Called Compulsory Third Party (CTP) insurance, it covers injuries to people caused by car accidents, and you can’t register your vehicle without it.⁹

What does car insurance cover?

It depends on the type of car insurance policy. For example, while CTP insurance covers injuries, it doesn’t cover damage to cars – including yours – or property.⁹

That’s where additional car insurance coverage comes in and, depending on your policy, it may cover your car for theft, accidental damage and more – as well as cover for damage your car causes to other people’s property.⁹

What are the different types of car insurance?

Aside from mandatory CTP insurance, there are three levels of additional car insurance.

• Comprehensive: This covers damage to your car and other people’s cars or property, even if you caused the accident, as well as cover for other events, including if your car’s stolen or damaged by fire.⁹ At Youi, Comprehensive car insurance also covers some severe weather events, such as hail and floods,¹⁰ and Roadside Assist is included as standard.¹¹
• Third Party Fire & Theft: This covers your car if it’s stolen or damaged by fire, as well as damage to other people’s cars or property caused by an accident that’s your fault.⁹
• Third Party Property Only: This covers damage to other people’s cars or property caused by an accident that’s your fault.⁹

Car insurance vs warranty – what they do and don’t cover

Here’s a handy breakdown of how car warranties and Youi’s additional types of car insurance policies compare when it comes to covering some common car issues, so you can get a better idea of how they typically differ from each other.

FAQs about car warranty and insurance

Now that you know the basics of car warranties and car insurance and their differences, you might have some specific questions. Here are the answers to a few common queries.

Do I need car insurance if I’ve got a car warranty?

Yes. Regardless of whether or not your car is covered by a manufacturer or statutory car warranty, you’ll need CTP car insurance.⁸ That’s mandatory, wherever you live in Australia.⁹

Whether or not you decide to take out an additional car insurance policy is an individual ​​​​choice,¹⁴ but it could cover your car for events such as theft, accidental damage to your car and other people’s, and even damage caused by some weather events, depending on the level of car insurance you choose.^9,10

Do used cars come with a warranty?

Most second hand cars purchased from a licensed dealer in Australia will be covered by a statutory warranty.² How these warranties work can differ in each state or territory² – and they don’t apply to used cars bought and sold privately.¹⁵

A used car may also be covered by a manufacturer warranty. In some cases, this warranty can be transferred to a new owner if it hasn’t expired when the car is sold second hand.²

How can I check if my car is still under warranty?

Whether your vehicle is still under warranty can depend on the type of car warranty, as well as on whether you purchased a new or used car.

For new cars:

• Look at the warranty and service handbooks that came with the car to check how long the manufacturer warranty lasts for.¹⁶
• Alternatively, try calling the dealer you bought the car from or the manufacturer’s Australian call centre and ask them to check using your car’s registration number or Vehicle Identification Number (VIN).¹⁷

For second hand cars:

• In some cases, a manufacturer warranty can be transferred to a new owner when the car’s sold² so, if your used car was relatively new when you bought it, you could try checking using the methods outlined for new cars.
• If you purchased a used car from a dealer, you could also try contacting them if you want to check how long the car’s statutory warranty lasts for.

What can void a car warranty?

Arranging repairs on a used car before contacting the dealer you bought it from might void your car’s statutory warranty.¹⁸

As for the manufacturer or factory warranty, things that could invalidate your cover could include:¹

• Failing to service the vehicle on time
• Getting the car repaired with non-genuine parts
• Adding prohibited modifications to the car.¹

Can I service my own car and keep my warranty?

It depends on the warranty’s terms and conditions, but deciding to service the car yourself is something else that may impact your car warranty.¹⁹

Most warranties require services to be done by a licensed mechanic using approved parts according to the manufacturer’s specifications to maintain cover.¹⁹

Is it worth extending my car warranty?

​Whether an extended car warranty is worth investing in is ultimately up to you to assess, based on your individual circumstances.

However, it’s important to note that – for example – even after your new car’s manufacturer warranty expires, you still have protection under Australian Consumer Law,²⁰ and would be entitled to a repair, replacement or refund if you’ve bought a faulty car.²¹

Plus, while extended car warranties are technically required to offer something above and beyond the protection you’re legally entitled to under that ​​​​law,^4,22 the Australian Competition & Consumer Commission warns that extended warranties may or may not do this.²

As a result, the details contained in the fine print may help you determine whether an extended warranty has real value.³

Hopefully, understanding more about the key differences between a car warranty and insurance has left you feeling prepared to deal with any type of car trouble that might come your way in the future.

And, if reading this guide has got you thinking about your car insurance or you’re keen to review your level of cover, why not consider starting a quote online or by giving us a call on 13 9684.

¹ Source: Canstar – What is a Car Warranty and What Does it Cover in Australia?, April 2025
² Source: Australian Competition & Consumer Commission – New and second-hand cars
³ Source: CHOICE – New car? The extras that are worth getting, March 2024
⁴ Source: NSW Government – Dealer guarantees and warranties, 2026
⁵ Source: Australian Competition & Consumer Commission – Just bought a new car?, ​ ​2018
⁶ Source: Drive  – What is covered under a used car warranty?, May 2024
⁷ Source: Consumer Affairs Victoria – Motor car trader obligations – used car sales, October 2023
⁸ Source: Canstar – Car insurance explained, October 2024
⁹ Source: Moneysmart – Choosing car insurance
¹⁰ Exclusions and limits may apply. Where you have increased your cover or reduced your excess within 72 hours of a flood, storm, hail or bushfire occurring, cover will be limited to the amount that was effective prior to the change. Loss, damage or legal liability caused by, resulting or arising from flood, storm, hail or bushfire during the first 72 hours of your policy first being purchased is excluded unless certain conditions apply. For full details, see the PDS, TMD and your policy schedule.
¹¹ Youi Roadside Assist available with Comprehensive policies only. Exclusions, limits, waiting periods and additional fees may apply. Cover not available within 24 hours of taking out or upgrading to Comprehensive cover. Product issued by Youi Pty Ltd. Consider our PDS when deciding if the product is right for you. PDS, T&Cs & TMD available at youi.com.au.
¹² Exclusions, limits and additional fees may apply. For full details, see the Car Insurance PDS.
¹³ Source: CHOICE – How to get the best roadside assistance plan for you, May 2022
¹⁴ Source: CHOICE – How to find the best car insurance policy
¹⁵ Source: Australian Competition & Consumer Commission – Consumer issues in the sale of second-hand cars, December 2025
¹⁶ Source: Toyota Australia – Toyota Warranty Advantage, 2026
¹⁷ Source: Ford Australia – What warranty remains on my Ford vehicle?, 2026
¹⁸ Source: Consumer Affairs Victoria – Warranties on used cars, June 2025
¹⁹ Source: Canstar – How to service your own car: pros and cons, October 2024
²⁰ Source: Consumer Affairs Victoria – Warranties on new cars, October 2023
²¹ Source: CHOICE – Do you need an extended warranty?, June 2024
²² Source: Commonwealth of Australia – Motor vehicle sales and repairs – An industry guide to the Australian Consumer Law, ​2018