Should You Get an Extended Warranty on That Used Car?

You’re excitedly finalizing the purchase of a car from a dealer, and the sales rep begins explaining about the available extended warranty packages. These typically sound like a good idea – you surrender some extra money (possibly rolling it into your monthly payment) in return for added coverage in case of a problem or malfunction with your ride.

For some shoppers, it’s a no-brainer: the added cost of a few hundred (or thousand) dollars provides more worry-free driving for a longer period of time. Many new- and used-car shoppers set their budget with a good extended-warranty package in mind.

For other shoppers, an extended warranty may stretch their budget too far, not prove worthwhile, or otherwise be left on the table.

Then, there’s the middle ground – and here, the decision to get the extended warranty, or not, can be a tricky one. If you’re on the fence, you have some thinking to do.

Below, we’ll highlight a few things to bear in mind when faced with the opportunity to drop some extra cash on an extended warranty for your new, or newer used vehicle.

Understand the Extended Warranty

You Can Take It with You

When presented with the opportunity to add extended warranty coverage, ask the sales representative to take the information home with you, so you can read and understand it fully before making a decision. Why? There’s no extended warranty package out there that doesn’t have pages of fine print and conditions that you’ll need to be aware of to make an informed decision.

Thing is, extended warranty packages are typically sold at the conclusion of the sale, when your wallet is open and you’re excited to leave the dealer with your new car.

You’re best to spend an hour or so, free from distraction, going over all documentation relating to the extended warranty – instead of making an impulse decision at the salesperson’s desk.

If the sales representative says the warranty needs to be bought right away, put the sale on hold until you’ve had time to read everything. If the dealer pushes harder for your immediate decision, find another dealer.

Pro Tip

If you have any interest in considering extended warranty coverage, ask for any information on your first visit with the sales representative, rather than wait for it to be offered up as an impulse buy at the end of the sale. This will provide more time for you to read and understand it fully.

Peace of Mind, or Safe Bet?

There are many reasons shoppers opt for an extended warranty – and some have little to do with any perceived likelihood that they’ll need to make a claim. If you like to play it safe, have extra peace of mind, or enjoy being protected and backed up, an extended warranty may be a good idea – even if you’re fairly sure you’ll never need to use it.

Extended warranties are all about peace of mind, and some shoppers are willing to pay for it. Is a newer used vehicle likely to need $1,200 in warranty-covered repairs in the next 18 months? Everyone’s tolerance for risk and cost is different – assess yours after reading all relevant documentation and go with your gut.

Do Your Homework (You Can Copy Ours!)

Weekly, autoTRADER.ca publishes used car reviews that highlight commonly reported issues for specific used vehicles, tips and checks for shoppers to make before they buy, and some model-specific advice. Based on our research, we often advise readers of when a model is likely to benefit from extended warranty coverage. Have a look through our used car review archives for more information to help guide your decision.

Reduce Your Risk Regardless

Universally, vehicles are machines made out of parts and components that can and will eventually wear down, break, and require replacement or repair. This is part of owning a vehicle.

No warranty will cover each and every part of your vehicle that may ever cost you money, and not all extended warranty coverage is created equal. Also, remember that the way a used vehicle was cared for and maintained by past owners is arguably a better indicator of its long-term reliability than the badge on its hood, or the country where it was built.

The gist? Though extended warranties may be money well spent, proper, regular, and timely maintenance and inspections – and ensuring that previous owners have done so as well – can help reduce your ongoing costs, and extend the life of the vehicle too.

Questions to Ask

Do You Pay Up Front?

Some extended warranties require shoppers to have a repair authorized ahead of time, and to pay for said repair, then apply for reimbursement. Others require no money to leave your wallet. Be sure to read the fine print – know if, what, and when you’ll have to pay for any warranty-related repairs; and how long until you’re reimbursed.

Further, note that some extended warranty packages have a deductible, meaning that you may be on the hook for the first few hundred dollars of any repair job.

New Parts or Used?

Some extended warranty coverage only includes replacement parts sourced from a wrecker – meaning that if you need a new engine, transmission, or alternator; you may only be covered for a used, second-hand component, not a brand-new one.

Read the fine print and determine if this is the case for the warranty package you’re considering, weighing it against the price of that warranty and its value to you.

Once Bitten…

You’ll also want to double-check the fine print to see if you’re able to make a warranty claim for the same part a second time. We’ve heard from readers who have opted for extended warranty coverage, only to be told that the warranty package covers replacement of a given part or component a maximum of once. If your air conditioner conks out, some warranties will only repair it the first time. If it conks out again, you may be on the hook. Again, read the fine print.

What’s Not Covered

Though it’s typically presented clearly in the documentation, you’ll want to ask the selling dealer what the warranty package does not cover. For instance, some warranties don’t cover vehicles used as snow plows, or vehicles that have been modified from factory specifications, even slightly.

Other extended warranties don’t cover “known” problems with certain makes and models. For instance, if a certain model you’re purchasing is widely known to have a fluid leak problem from its axle seals, the warranty may not cover its repair.

Further, some warranty packages cover certain areas of the vehicle (finish, powertrain, electronics, suspension) to varying degrees. Be sure you fully understand what parts of what vehicle systems are covered, and which are not, before you decide.

Note that virtually no warranty will cover consumable components like tires, brakes, or clutches – even though many shoppers tend to believe otherwise when opting into the extended warranty package. Assume the warranty you’re considering does not cover these components, unless you see proof to the contrary.

Crunching the Numbers

Compare the Costs

To use a personal anecdote: I bought an $1,100 extended warranty package on a 2011 Subaru Forester that covered its powertrain, electronics, and numerous other components up to 120,000 kilometres. At 124,000 kilometres, the head gaskets on the vehicle failed. The repair cost was comparable to the cost of the extended warranty package – which would have covered this repair, had it been needed just one oil-change earlier. This was the only major repair my Forester ever needed, and it was a big one. There are many other examples.

The gist? Consider the extended warranty cost, and then consider putting that amount of money in your bank account. That way, you’ve got the cash on hand if you need a repair, and it’s money in the bank if you don’t. In my case, I wound up wasting $1,100, which could have been used to cover the cost of the blown head gaskets (or remained in my bank account if the head gaskets hadn’t failed).

Don’t Forget the Maintenance!

With most add-on warranty packages (and factory warranties too), you’ll need to maintain your vehicle meticulously – and you should, warranty or not. Thing is, missing, stretching, or skipping even one scheduled service, oil change, or inspection can void a warranty outright.

Is there a grace-period, if you go over the oil-change interval? Does a non-factory warranty package require oil changes and inspections more frequently than the factory warranty, as outlined in the owner’s manual? Are you able to meticulously and consistently maintain your vehicle to a schedule, without going over the service intervals?

Don’t underestimate the importance of sticking to the warranty’s prescribed maintenance schedule. So be ready to follow a strict maintenance schedule to avoid denied claims.

To warranty, or not to warranty? 9/24/2018 10:00:00 AM