Should You Walk Away From a Used Car Extended Warranty?

Extended Warranty for Used Cars Quick Tips

• A used car extended warranty might be worth it if the vehicle make and model has a poor reliability record.
• An extended warranty on used cars isn’t needed if the vehicle still has the manufacturer’s warranty.
• Consider used car warranties that exclude specific repairs rather than those that list what they will cover.
• Many people purchase extended warranties but never use the coverage.

If you’re shopping for a used car, you might consider getting an extended warranty. After all, a used car could be troublesome and have expensive repairs. An extended warranty might be a good way to avoid a hefty repair bill, or it could be an unnecessary expense.

Should you buy a used-car extended warranty? Read on as we explain a few situations when it might be a good idea and some instances when you should walk away.

• Should You Purchase an Extended Warranty?
• When to Consider a Used Car Extended Warranty
• When to Walk Away From an Extended Warranty
• Are Warranties Good for Used Cars?

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. Because they’ve usually done their homework, you’ll likely spend more on the extended warranty — $3,000 or more, in some cases — than any repair costs your car may accrue while the warranty is valid. Additionally, many people who purchase extended warranties never use them.

There are, however, some exceptions.

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When to Consider a Used Car Extended Warranty

When weighing the pros and cons of an extended warranty, understand that your vehicle might not experience any mechanical trouble. However, having warranty coverage might be beneficial 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 opinions from knowledgeable mechanics and drivers who have owned the same car.

If the car you want doesn’t have the best reliability record, here are two cases when to consider an extended warranty.

• It’s an exclusion warranty: Does the warranty cover everything except for items it expressly excludes? Exclusion warranties usually provide more comprehensive coverage and a lower chance for the warranty company to deny a claim. You should note that warranties do not cover routine maintenance or typical wear and tear items.
• The extended warranty cost seems reasonable. A warranty’s price shouldn’t be cost-prohibitive. You should not spend too much money to protect yourself against problems that may never come up. If the price is reasonable, consider what it will cover and weigh that against what costs you may face for any potential repairs.

[Editor’s Tip: Be sure to factor in the deductible cost when evaluating an extended warranty for your car. Years ago, my wife had an extended warranty on her Chevrolet Equinox. The only mechanical trouble it had was a faulty solenoid. While the warranty would cover the repair, the deductible was more than the cost of parts and labor. — Chris Hardesty, senior advice editor.]

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What Are the Downsides of Purchasing an Extended Warranty?

• Added cost: A typical used car extended warranty will cost upward of $2,500 or more.
• Deductibles: Most third-party extended warranties require the owner to pay a deductible for covered repairs, with the warranty paying the difference. The deductible can run $50 to $300, sometimes more, depending on the vehicle. The larger the deductible, the less valuable the warranty.
• Difficult claims process: Some extended warranty providers have more streamlined claims processes than others. Some pay the repair shop directly, while others require you to pay for the repairs and file a claim with them. In other words, the process can be tedious and time-consuming.
• Coverage gaps: No extended warranty covers everything. Even if the extended warranty is “bumper-to-bumper,” there will be exclusions. We recommend only buying an extended warranty in which covered repairs and components are itemized in detail.
• Untapped coverage: After paying thousands for coverage, many owners never file a claim.

When to Walk Away From an Extended Warranty

There are several circumstances when 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 might not 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’s, cover the repair or replacement of the vehicle’s powertrain for 10 years or 100,000 miles. However, that coverage includes select engine and transmission components and applies only to the original owner.
• 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 learn your vehicle’s reliability record. 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. As the name suggests, an inclusion warranty includes coverage of components only listed in the policy. This type of warranty isn’t very comprehensive, especially compared to exclusion warranties covering all parts with some exceptions. Read the policy very carefully to understand exactly which coverage you’ll be getting.

Warranty Company Reputation

Another significant point to consider when buying an extended warranty is to check the reputation of the company selling it. Some warranty companies have solid reputations and a nationwide presence. Unknown companies might not back up the warranty if your car develops a severe problem. We suggest you spend some time researching warranty companies to find one you’ll feel comfortable with if you plan on buying an extended warranty.

Are Warranties Good for Used Cars?

Used cars might have the remaining portion of the original new car warranty. Beyond that, used vehicles are typically sold “as is” and do not have warranty coverage.

There are instances when extended warranties for used cars may be valuable. However, the cost of coverage exceeds the benefit in most cases. Evaluate reliability reports for your vehicle, and steer away from a used car extended warranty if it has good reviews.

A comprehensive used car warranty can give you peace of mind if you worry about expensive repair bills. It is a financial decision that only you can make. You must decide if the additional cost is worth paying upfront or saving the money with the hope that you won’t need to use it for repairs.

Are Extended Warranties Worth It?

Generally, no. However, there are exceptions. If your used vehicle has a history of expensive repair issues, the deductible is low, the warranty inclusive, and the warranty cost reasonable, buying an extended warranty would make some sense. In this instance, though, the warranty must cover the most expensive components, drivetrain, air conditioning, and other costly items to repair or replace.

Can I Cancel My Extended Warranty?

Usually, yes, but it depends on the warranty provider. Many offer a process for canceling coverage; however, the time to find out what that process is is before laying out $2,500 or more. Moreover, financing the cost of that extended warranty coverage will make it virtually impossible to cancel.

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?
• What Is a Certified Pre-Owned Car?

Editor’s Note: This article has been updated since its initial publication.