Are Extended Car Warranties Worth It?
You’ve done the work of finding the right car, but learn when you should, and shouldn’t, get that warranty.
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You've probably received spam calls and flyers in the mail warning you that your car's warranty is about to expire. These are different from real extended warranties that automakers or third-party companies offer in that they generally contain many loopholes designed to prevent the provider from paying out. But are extended car warranties worth it for you? Not necessarily, unless you plan to keep your car for a long time or your model is known for costly repairs.
Extending coverage has some definite upsides, though. Let's take a look to help you decide what works best for you.
What Do Extended Car Warranties Cost, and What Do They Cover?
The cost of extending a warranty is based on multiple factors, including the vehicle's reputation for reliability and the cost of replacement parts. Models with great scores for reliability and inexpensive parts will likely be available with relatively inexpensive extended coverage, while high-end, high-performance models without a solid track record may be expensive to cover.
Extended warranties aren't quite a full extension of a new car bumper-to-bumper warranty. While they do list out what parts are covered, they usually have more exclusions, especially for parts that are more prone to breaking over time.
How Do Extended Car Warranties Work?
You can usually purchase an extended warranty from an automaker, or from a third-party aftermarket company. Automakers' extended warranties typically cost more, but they also usually cover more—and they place the burden of filing a claim on the dealer that performs the service.
Aftermarket warranties can be cheaper but often include limitations on where a vehicle can be repaired. For instance, some warranties require work to be performed at specific shops or dealers, which may not be convenient for you.
Extended car warranties often include a deductible you'll have to pay with every claim. These can add up quickly for a car with various nagging problems, but they can also be less expensive compared to the cost of replacing major items.
When Are Extended Car Warranties Worth It?
There's no right answer to whether you should buy an extended warranty. By their very nature, warranties can be something of a gamble. Still, you may find comfort in knowing that repairs will only cost you your deductible.
Extended Warranties for New Cars
On a new car, it's often less expensive to extend warranty coverage upfront. This can make a lot of sense if you plan to keep the car for at least the duration of the warranty. If not, you can ask your company if they would allow you to cancel and refund your extended warranty, and if so, you may receive a prorated amount in return. Additionally, some extended warranties are transferable via private party transactions. That kind of coverage can help out with resale value if you plan to eventually sell your car privately rather than trade it to a dealer.
Extended Warranties for Used Cars
Used cars are a bit different. Nearly all automakers offer a Certified Pre-Owned program that includes a hassle-free extended warranty on relatively recent vehicles. Like mentioned above, these warranties place the burden of filing a claim on the dealer. However, they typically only apply to used cars sold by dealers that offer the same brand in their new-car showroom. For other used cars sold by dealers, extended warranties can be a major profit-maker. You'll want to read the terms of the warranty carefully and research its reputation.
Extended Warranties for Cars You Already Own
If you want to add warranty coverage to a vehicle you already own, you're probably familiar with its maintenance needs and repair costs. If you really like your car, but are on a first-name basis with your service adviser thanks to the vehicle's cantankerous nature, you're probably a good candidate for an extended warranty.
That said, if your current car is highly rated for its reliability and you've kept up with the manufacturer's suggested maintenance, an extended warranty may not be worthwhile. Your financial comfort level is a critical factor, too. Though purchasing a warranty can be costly upfront, it may keep some of your repair expenses to just the deductible over the long run.
When Shouldn't You Buy an Extended Car Warranty?
If you're thinking about selling or trading in your car in the near future, extending its warranty is likely a cost you don't need to incur. Looking closely at the warranty coverage provided when your car was new can also save you from having to buy an extended warranty. Some automakers include extended coverage for certain powertrain components that can be costly to repair (think engine, transmission, and axles) in their new car warranties.
If you perform most maintenance and major repairs yourself, you may not need a shop to handle repairs. Also, you can plan to skip the warranty if its provider has a questionable reputation or only works with a limited number of repair shops.
What Else Should You Know About Extended Car Warranties?
The cost of adding an extended car warranty is negotiable, even if it's directly offered by a vehicle manufacturer. It's worth asking for a discount or even to cross-shop different warranty vendors.
Like new car warranties, extensions don't cover maintenance and wear items. An extended car warranty won't pay for tire replacements, oil changes, or tune-ups. It will typically cover internal engine and suspension components as well as certain electronics.
Only you will be able to determine if an extended warranty is right for your vehicle by taking time to learn about your options.
