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Buying a Used Car: Should You Walk Away from an Extended Warranty?

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author photo by Doug DeMuro

If you're interested in buying a used car, you might be thinking about getting an extended warranty to go along with it. After all, a used car could be troublesome or expensive, and a warranty may be a good way to avoid risk. Should you buy an extended warranty? We explain a few situations when it might be a good idea and a few more when you should just walk away.

Consider the Warranty

In general, we don't recommend buying an extended warranty on a used car. Warranty companies are in business to make money, and they've usually done their homework. This means you'll likely spend more on the warranty than any repair costs your car may accrue during the period when the warranty is valid.

There are, however, some exceptions. One is if your car is notoriously unreliable, which is a fact you can check by perusing J.D. Power reliability ratings, automotive forums, or by simply getting some opinions from knowledgeable mechanics and other drivers who have owned the same car.

If the car you want doesn't have the best reliability record, you might want to consider a warranty if two conditions are met. First, it should be an exclusion warranty, which means that it covers everything except for items that it specifically excludes. That usually allows for a more comprehensive warranty and a lower chance for a claim to be denied. Second, the warranty's cost shouldn't be prohibitive. You don't want to spend too much money to protect yourself against problems that may never come up.

Walk Away From the Warranty

There are several circumstances in which you should walk away from an extended warranty on a used car. One is obvious: If the car is still covered by the manufacturer warranty, we strongly caution against buying an extended warranty. You have no idea if you'll even own the car when the factory warranty expires, so you'll have ample opportunity to buy an extended warranty as the factory warranty's expiration date draws nearer.

Another reason you should avoid a warranty is if your car is a reliable one. Once again, check J.D. Power data and talk to knowledgeable mechanics and other drivers to find out what your car's reliability record is like. There's no point in spending money on an extended warranty when your car probably won't have any issues.

We also suggest walking away from most inclusion warranties, which only cover specific parts. These warranties aren't very comprehensive, especially in comparison to exclusion warranties that cover all parts except for the ones they name. Read the policy very carefully to find out exactly which warranty you'll be getting.

Another major point to consider when you buy an extended warranty: Check the reputation of the company who's selling it. Some warranty companies have strong reputations and a nationwide presence while others are unknown firms that might not back up the warranty if your car starts to have serious problems. We suggest spending some time online researching warranty companies to find one that you'll feel comfortable with.

Our Take

In the end, a warranty can help you breathe easier when you're buying a used car. Use our tips, and you'll breathe even easier by avoiding a warranty that may be unnecessary or one that won't stand behind your car in the event of a major problem.

This image is a stock photo and is not an exact representation of any vehicle offered for sale. Advertised vehicles of this model may have styling, trim levels, colors and optional equipment that differ from the stock photo.
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Buying a Used Car: Should You Walk Away from an Extended Warranty?