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 an extended 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 walk away.
Should You Purchase an Extended 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 extended warranty — $3,000 or more, in some cases — than any repair costs your car may accrue during the period when the warranty stays valid. Additionally, many people who purchase extended warranties never use them.
There are, however, some exceptions.
RELATED STORIES: Certified Pre-Owned: Why Not Just Buy an Extended Warranty Instead?
When to Consider a Used Car Extended Warranty
When weighing an extended warranty, you’ll want to know about the exceptions and the times you may need one. For example, if the used car make and model is notoriously unreliable.
You can check the vehicle’s performance by researching car reliability ratings and checking out reviews, including on Autotrader. You can also get 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, check out the two cases when you might want to consider an extended warranty.
- It’s an exclusion warranty: Does the warranty cover 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. Of note, typical wear and tear items will be excluded.
- The extended warranty cost seems reasonable. A warranty’s cost shouldn’t be cost-prohibitive. You don’t want to spend too much money to protect yourself against problems that may never come up. If it’s reasonably priced, consider what it will cover and weigh that against what costs you may face for any potential repairs.
When to Walk Away From an Extended Warranty
There are several circumstances in which you should walk away from an extended warranty on a used vehicle.
- The used vehicle is still under a manufacturer’s warranty. If the manufacturer’s warranty still covers the car, we strongly caution against buying an extended warranty. You have no idea if you’ll 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. Some manufacturer warranties like Hyundai cover the repair or replacement of the vehicle’s powertrain for 10 years or 100,000 miles. That includes select engine and transmission components. However, that coverage applies only to the original owner starting with Hyundai model year 2004 and newer vehicles.
- The car gets good reviews. You should avoid a warranty if your car gets great scores for reliability. Once again, check reviews or ask 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.
- When it’s an inclusion warranty. 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 covering all parts with some exceptions. 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 is to check the reputation of the company selling it. Some warranty companies have strong reputations and a nationwide presence. Unknown companies might not back up the warranty if your car begins having serious problems. We suggest spending some time researching warranty companies to find one that you’ll feel comfortable with if you plan on buying an extended warranty.
Related Used Car Stories:
- Is it Bad to Buy a Used Car With Unusually Low Mileage?
- Can a 10-Year-Old Used Car Still Be Reliable?
- Here’s When Not to Buy a Certified Pre-Owned Vehicle
Editor’s Note: This article has been updated for accuracy since it was originally published.