"I think you have to automatically assume a 100 percent markup," Phil Reed, consumer advice editor at "Edmunds", said about car dealerships offering warranty plans. The misconception about shopping around for an extended warranty quote online is that all the companies operate solely on the internet, with no formal establishment.

However, car dealerships spend a good deal of time "shopping around" online as well. One of the most lucrative aspects of the car sales industry is the extended auto warranty. Many consumers are shocked to learn that car dealerships function like any other retail outlet, marking up not just the cars but all of the finer details as well. It makes sense, then, to do a little homework online and figure out what a reasonable price should be, prior to hunting for cars.

One common problem people run into is to fail to read and understand the agreement before they get work done. Knowing the right questions to ask your warranty company is crucial, experts say. For instance, ask if you can get the work done at any shop, or do you have to look for a certain certification, or in some cases return to the dealer? Additionally, is your car covered for "wear and tear" damage or just mechanical failure? You should have a comprehensive list of all the parts that are/aren't covered!

Sometimes you'll get a "bumper to bumper" warranty that covers everything except for the wear items, like brakes and tires, while other times you'll get a "power train" warranty, which covers the engine and transmission. While it's rare to find a company that offers coverage for everything, you should ensure that some of the most expensive repairs will be taken care of.

Secondly, you should find out if there are certain stipulations that would make you ineligible for utilizing purchased warranty plans. In some cases, consumers have had their claims denied because they continued driving after their engines overheated or they attached unauthorized tow hitches to their cars. Sometimes, if you don't get regular oil changes or fluid top-ups, then you could be at risk for vetoing your right to coverage as well. Know the rules and stick to them!

Warranty plans can be intimidating at first, especially because there are so many companies to choose from. You may want to try "Auto Warranty Reviews" or another comparison site. Look at how long the warranty company has been in business and how many claims they've addressed, their BBB rating, if they have clients like car dealerships and banks, if they fully explain their plans with details, if they offer written terms and conditions, if they cover all 50 states (in case you're traveling and have a problem) and if there is some sort of money back guarantee.