Car Buying Tips

Are Extended Warranties Worth It?

All new vehicles come with a new car warranty. Even used vehicles come with a limited warranty, especially if they’re certified pre-owned (CPO). Should you pay extra for an extended warranty covering repairs that might be necessary after your current warranty expires? The answer is a definite maybe.

What Do Extended Warranties Cover?

Extended warranties vary, depending on which company is selling them: a vehicle manufacturer or a third party. Which parts they cover and for how long varies as well. Each vendor offers their own plans with their own terms and conditions.

There’s no one-size-fits-all choice, and you should take the time to discuss the details with the vendor before deciding if the extended warranty options they’re offering are right for you.

Most extended warranties, however, fall into a few similar categories. One of the most popular is a powertrain warranty, which typically covers the engine, transmission, drivetrain components, and other related parts.

In addition, most companies offer a more comprehensive option that includes the components mentioned above plus a few extra parts like the suspension, heating and cooling systems, steering components, and the like. Finally, you can usually find a more complete extended warranty option that offers coverage similar to the bumper-to-bumper warranty that comes with new vehicles.

Keep in mind that the more you want covered and the longer you hope to keep the coverage in place, the more you’ll have to spend on an extended warranty.

Extra Perks

Depending on the package you purchase, your extended warranty might include extras like roadside assistance with towing, flat tire change, emergency fuel delivery, jump starts (when your battery dies), help when you lock yourself out of your vehicle, etc. Some packages will even cover the cost of meals and lodging if your vehicle breaks down a specified distance from home.

Your extended warranty program might also cover the cost of a rental if your vehicle has to be in the shop for an extended time, and some will cover the cost of a taxi or Uber if that’s how you prefer to get around.

Conditions, Conditions

An extended warranty is a contract between you and the provider. While they agree to pay for certain repairs, you must agree to certain terms. One of the most important is that you maintain your vehicle according to the schedule specified by the manufacturer of your vehicle.

In other words, you must bring your vehicle to a garage or dealership on time for oil changes and other scheduled service. If you don’t, and your vehicle breaks down in the future, they may ask to see your maintenance records, and if you haven’t maintained your vehicle properly, they will likely decline to pay for the necessary repairs.

If you prefer to do the work yourself, you must be able to provide proof (receipts) that you purchased all the necessary parts and fluids to perform each service and that you did so on time.

In addition, extended warranties don’t cover wear-and-tear parts like brake pads and rotors, shocks and struts, belts, hoses, wiper blades, bulbs, air filters, timing belts, and the like. These are typically the responsibility of each individual vehicle owner.

Moreover, some companies won’t pay for repairs if your vehicle is used for commercial purposes, delivery, or ride-share services like Uber. If your vehicle was used for racing or off-roading, if it has been modified, or if it was damaged by “acts of nature,” a collision, vandalism, theft, fire, hurricane, flood, earthquake, terrorism, or any type of damage by an animal or insect, some companies will not pay for repairs. Ensure you have a thorough understanding of all the conditions and that you won’t do anything to void your warranty.

A Definite No!

If you’re OK with all the fine print and the conditions, let’s look at when an extended warranty would and would not make sense. First, let’s look at a couple of scenarios where you definitely do not need an extended warranty.

For starters, if you’re leasing a vehicle and planning to bring it back before the new car warranty expires, you definitely don’t want to pay extra for an extended warranty.

The same can be said if you’re one of the fortunate few who likes to purchase a new vehicle, drive it for a handful of years, and then sell it or trade it in for something newer. Here again, you’re likely never going to be able to take advantage of an extended warranty.

That said, an extended warranty might make sense in the scenario mentioned above because it would make your vehicle more appealing to a buyer who could rest assured that they’re getting long-term peace of mind when they buy your vehicle. Just make sure that the extended warranty you purchased is transferrable. Most are, but check the fine print to be sure. Also, some companies will charge you a fee to transfer coverage, while others won’t.

Do the Math

If you’re not the type of person who changes vehicles every few years and you plan to keep your vehicle for an extended period, then an extended warranty might make sense. However, the math must make sense as well.

Extended car warranties are big business, and they can be expensive. Dealerships and third-party warranty providers are eager to sell extended warranties because they’re quite profitable.

Consumer Reports looked into extended warranties and found that car owners typically paid more for the coverage than they got back in direct benefits over the years. Consumer Reports quoted a money expert who recommends creating an emergency vehicle repair fund or savings account rather than buying an extended warranty. If you end up never needing to tap into that fund, its expert added, you can put the saved money towards the purchase of your next vehicle.

In other cases, an extended warranty would be a good idea. If, for example, you drive a vehicle made by a brand that you know isn’t reliable, then the extra coverage and the extra peace of mind would be worth it. Moreover, an extended warranty would make sense if you know that the particular model you drive is prone to specific types of expensive problems, like transmission issues. In these cases, the extra coverage is more likely to pay for itself in the long run. Comb through used car reviews or online forums to research common problems with your vehicle and determine if the extra warranty could save you money in the long run.

If you’re interested in an extended warranty, shop around and don’t be afraid to negotiate. Just as the price of a vehicle is negotiable, so is the cost of an extended warranty.