At first glance, buying an extended warranty makes as much sense as buying any other kind of insurance. But getting a good deal on these service contracts, which pick up where the original warranty leaves off, takes research -- comparison shopping, sifting through jargon-filled fine print and choosing from a complex array of coverages.

Although there's no substitute for doing your homework, this crash course can help head off a wrong turn.

1. Getting coverage you don't need. On a new car, an extended warranty can pay if you're planning to keep the car until it sputters to its demise. And it often makes sense when you're buying a used car that's out of warranty.

But you don't need one for a certified used car. They are thoroughly inspected and come with their own warranties, often for an extra year for bumper-to-bumper coverage and longer for power-train coverage. If you're the cautious type, consider a less-expensive "wrap" warranty that picks up where power-train coverage leaves off. (For more on certified used cars, see "Good as New" in the August Kiplinger's Personal Finance.)

You can probably skip one for an ultra-reliable car, such as a Lexus, Toyota or Honda. You'd pay less for a warranty on these workhorses, anyway, because companies figure a car's repair record into the price tag.

2. Committing under pressure. When you're buying a car from a dealer, you may get the hard sell on an extended warranty -- at a big markup. This typically happens in the F&I (finance and insurance) part of the car-buying process, after you've finished haggling over the price of the car and you're talking about financing and such add-ons as rustproofing and credit life insurance.

It's up to state regulators to put an end to high-pressure tactics, but some states don't do a good job of it. For example, in a survey of more than 400 complaints filed with the Texas attorney general, Consumers Union (the publisher of Consumer Reports magazine) found that half of Texas car buyers who complained purchased extended warranties. And they paid an average of $755 too much for them.

Purchase the warranty later, after you've had time to compare prices. You don't have to buy through a dealer. Credit unions and dozens of reputable online companies sell warranties.

3. Buying at the wrong time. Prices soar just before the car's original warranty has expired. Consider the Jeep Grand Cherokee Limited, which has a three-year/36,000-mile manufacturer's warranty. At one online company, a 10-year/100,000-mile, $0-deductible comprehensive warranty on a 2002 model with 15,000 miles costs $1,199. On a model one year older with 30,000 miles, you'd pay an extra $500. (Note: Warranties usually start from the original purchase date.)

4. Not understanding the lingo. Get a "wear and tear" rather than "mechanical breakdown" policy, to be sure you're covered for parts (such as piston rings) that wear out. And if you can afford it, look for "exclusionary" coverage. That means the warranty names parts that aren't covered, rather than the ones that are.

Some contracts charge a deductible "per repair" rather than "per visit," meaning you could be hit with the deductible more than once while the car is in the shop. You thwart that trick if you buy a $0 deductible warranty.

5. Not reading the contract. That's the only way to be sure you're getting what you're promised. Sometimes you're given a summary of the warranty and the contract is mailed to you later. Insist on the real thing before you sign.

What are you looking for in the fine print? You need to know where you can take your car for servicing. Some dealers require you to go back to them for service. Some contracts specify that your car is covered only in certain geographic areas. And you want a warranty company that pays the shop directly. Otherwise you could be stuck waiting for the company to reimburse you.

6. Skipping due diligence. Dealers often sell warranties from third parties rather than from the car's manufacturer. Find out who's administering the contract and check out the company with the Better Business Bureau. The longer the company has been in business, the better. A few complaints isn't necessarily bad; what you don't want is an unsatisfactory rating.

Also, it's best if the warranty company's claims reserve account is underwritten by an insurance company.

7. Not knowing the rules. With a used car, the warranty company may reject a claim if it determines the problem is pre-existing (like health insurance), so to be on the safe side, don't make any claims in the first 60 days after buying the warranty, says Jeff Ostroff, who runs CarBuyingTips.com. One way to protect yourself, says Ostroff, is to make sure the warranty company inspects the car before you buy the warranty -- and preferably before you buy the car.

You usually have to follow the manufacturer's recommendations for routine maintenance and keep receipts, or you risk voiding the contract. Also, you typically need to get authorization for repairs and towing beforehand.

Many states have laws requiring a refund, minus any claims, if you get cold feet -- often up to 30 days after purchase. For more about your rights, plus how to complain, see the Federal Trade Commission's Facts for Consumers.

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Got a question? E-mail Mark at cars@kiplinger.com

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