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Extended Car Warranty: Do You Really Need One?


Sitting in a dealership’s business office as you sign off on your new car purchase is not the time to be wondering, “Do I need an extended warranty?”

Opting for the extended warranty largely varies depending on your personal needs, but it can be a great way to keep you protected from unexpected repairs or maintenance on your car. Saving money in an emergency might be worth the extra cost of the warranty.

Arming yourself with some research on those extras before heading to the dealership to buy will not only save you some money but will also keep you from regretting decisions you had to make on the fly.

Here’s what you need to know, what you need to ask yourself, and what you need to find out about extended warranties before going to the dealership.

What is an Extended Car Warranty?

An extended warranty is a service contract covering the cost of specified repairs after the car’s manufacturer warranty expires. Think of it as medical insurance for your vehicle. However, be wary that most extended warranties don’t cover many routine services like oil changes and often don’t cover as many things as the manufacturer’s warranty.

Some extended warranties are more comprehensive than others. Some have deductibles, while others don’t. If possible, steer clear of extended warranties that have deductibles. While having one may help reduce the overall price of the warranty, they can charge you on a per repair basis, meaning if you have multiple repairs in one visit, you will be charged a deductible on both. If a deductible is necessary, go for the per-visit option rather than per-repair.

If you opt for the warranty, be sure to read between the lines to make sure you understand what is covered.

What Repairs Are Covered?

Make sure items most likely to fail, break, or wear out are covered: anti-lock brakes, electrical systems, powertrain, transmission, air conditioner, and other electric components. Read the contract’s fine print to determine exactly what is included and what is excluded. Many times, a bumper-to-bumper warranty does not include everything you may need to be repaired.

Different levels of warranty often are offered with coverage increasing with each bump in price.

Do You Really Need an Extended Car Warranty?

Different warranties cover different repairs. An extended warranty kicks in after the manufacturer’s warranty expires. Most new car warranties last 3 years/36,000 miles. Other manufacturer warranties like Kia may last 5 years/60,000 miles.

At the core of the “need” question is how long do you plan to keep the car?

If you trade in a car every two or three years, chances are the warranty that came with the car will still be in force. But if you plan to keep a car for five years or longer, an extended warranty may pay for itself.

Advantages

  • Financial protection. The number one reason why people opt for paying thousands for the extended warranty is the potential financial protection that it provides.
  • Pays for itself. The warranty could end up paying for itself in just a few years if your car requires costly repairs that are covered. This is especially true for luxury cars, where costs are typically higher for replacing items. And let’s be honest, every vehicle will require repairs and maintenance at one point or another.
  • Saves money. Opting for an extended warranty could save you money away from actual repairs.
  • Increases a car’s resale value. Studies have shown that drivers who purchase an extended warranty are often better and safer drivers. This means that the resale value of the car will increase compared to those without it.
  • Peace of mind. Having the warranty might become an afterthought. However, when it’s time to swipe your card for a costly repair, you’ll be happy you have one.

Drawbacks

  • Costs more than it’s worth. Having an extended warranty can often cost more than it’s actually worth. Since most people never actually use their extended warranty, for some, they are useless. When extended warranty holders do try to use it, oftentimes it does not cover what is getting fixed.
  • Basic repairs not covered. When your check oil light comes on, your brakes start to squeak, or if you notice that the tread on your tires is getting low, don’t expect your extended warranty to cover any of the costs. 
  • Restricts where you can get repairs. Most times, the extended warranty restricts what repair shop you can go to, based on who your extended warranty provider allows.
  • Overlapping coverage. While this is rare, sometimes the extended and the manufacturer’s warranty can overlap, making you pay for it while not receiving any benefits.

How Long Does the Extended Car Warranty Last?

The length of the extended warranty is completely up to you, the buyer. The extended warranty will kick in after your manufacturer’s warranty expires.

If you only plan to have the car for about three years, then it would be essentially a waste of money to opt for the extended warranty since you won’t even have the vehicle anymore. However, if you plan to keep your car for years to come, an extended warranty might be a good investment.

Just like with most plans, the length of the warranty is entirely up to you. Whether you go through a trusted third-party vendor like CARCHEX or the manufacturer, you can customize the length of the warranty based on your specific needs. Some companies even offer short-term contracts on a month-to-month basis.

How Much Does an Extended Car Warranty Cost?

The warranty price varies on how much coverage you want, the condition of your car, the make and model, and how long you want the coverage to last. Since there are so many factors that go into determining your cost, many dealerships try to inflate the price of your warranty to earn money. Here are a few tips to avoid spending more than you should.

  • Research other third-party and even the manufacturer’s deals to see how much a fair price would be.
  • Manufacturer-backed warranties are the smarter choice as they are usually cheaper.
  • Decide before you buy your car. Determine whether or not you want the extended warranty before you head to the dealership to purchase a vehicle.
  • Take your time. You can purchase an extended warranty anytime before the original warranty expires.
  • Know your car. Your rates will depend on the condition and make, model, and year of your vehicle.

If you decide that an extended warranty is right for you, be prepared to spend some money on it. The average extended warranty costs about $3,000. However, you would pay monthly if you decide to bundle it with your car payments. As a result, this means that you would be paying interest on a warranty that you may, or may not use.

Luckily, you can negotiate this price down. But it all depends on how low the warranty seller is willing to go.

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Editor’s Note: This article has been updated for accuracy since it was originally published.

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18 COMMENTS

  1. I had a 2011 Mercedes GL450, which I bought in 2012 with 23,000 miles.  I did not have an extended warranty, nor did I have any warranty repairs during the manufacturers warranty period.  In the five years following the warranty expiration, I had $13,500 in repairs, replacing three of four air shocks (the fourth air shock collapsed moments before I traded the car), the AC evaporator and compressor replacement and other small repairs (like under $500 each). Due to acid reflux and other Mercedes nightmares, I finally traded the MB with only 62,000 miles in 2019.  They don’t build Mercedes like they used to.  A 5 year, 100,000 mile extended warranty on the 2018 MB I purchased cost $4,400 with $100 deductible.  IOW, about 1/3 of what I spent on the old car. Of course I hope I never need a claim under the extended warranty, but I’m not brave enough to go naked any more!

    • 2014 MB GL450 that’s cost me $9k this year alone. Plugs which didn’t fix the rough running engine. Fuel injector, replaced turbo coolant lines, and now the rear air shocks are shot. Biggest hunk of junk I ever bought. Looking forward to my new Chevy Tahoe coming next month. Sayonara MB. I’ve had enough of the $500 oil changes and $1000 brake jobs.

  2. I used nationalrepairsolutions.com they gave me the most coverage and the lowest price plus when I did need to make a claim my deductible was low and service was all good

  3. Just got an extended warranty from Mazda. They pay for 3 years and I took it for 2 more years. $20/month more. I keep my cars til they’re dead 350,000 Kms was the last one.

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