An extended car warranty is a form of insurance you can purchase for your vehicle to cover the cost of repairs after the manufacturer’s warranty expires.
Read Next: 4 Low-Risk Ways To Build Your Savings in 2025
An extended warranty acts as a service contract to cover the cost of some repairs. Most new cars offer a warranty that lasts for three years or 36,000 miles. It’s still an added monthly bill, though, so are extended car warranties worth it? Consider the following:
Earning passive income doesn't need to be difficult. You can start this week.
When an Extended Car Warranty Can Be Worth It: 8 Pros
As a car owner, you might benefit from some of these:
1. Peace of Mind
If an expensive part like your engine, transmission, or a major electrical component fails, the warranty should cover most of the repair costs. Since many people rely on their vehicles as a lifeline to get to work, knowing you can afford car repairs relieves that one financial worry.
2. Expensive Luxury Vehicle Repairs
Some vehicle types, such as luxury foreign cars, often cost more to repair. For instance, Bentleys, Land Rovers and BMWs top the list of most expensive cars to service, with 10-year maintenance costs ranging from $15,000 up to more than $36,000, according to CarEdge.com.
Some domestic brands are also costly to repair. Ram trucks, for instance, have a 10-year maintenance cost of $21,595. On the other hand, Toyotas cost just over $5,500 to repair over 10 years.
3. Covers Cost for Older or High-Mileage Cars
If you have an older or high-mileage vehicle, chances are you’ll need a major repair at some point. A car warranty could easily pay for itself if you can hang onto your10-year-old car on the road for a few more years.
4. Monthly Payment Options
You can finance your extended car warranty through monthly payments, which may fit into your budget better than a one-time payment.
5. Decreased Cost of Ownership
Simply put, you’re spreading out potential repair costs over time. Plus, if you have to file a claim that costs more than the warranty, you’re effectively reducing the price of repairs — and the cost of owning a car.
6. You Can Include the Warranty Cost in Your Auto Loan
If you buy the extended warranty from your car dealer, you can roll the costs of the warranty into the auto loan .
7. Benefits You Can Use
Many extended car warranties come with added benefits like roadside assistance, trip interruption coverage or rental car coverage while your car is in the shop.
8. Transferrable to a New Owner
A car warranty may be transferable to the next owner if you decide to sell the vehicle. It might make the car easier to sell, as this add-on could be more enticing to the next buyer.
The Cons: 8 Reasons Not To Buy an Extended Warranty
An extended car warranty may not be the best financial choice for every driver and here’s why.
1. Many Buyers Never File Claims
Although nearly half — around 47% — of car owners have an extended warranty, only 10% of those have ever filed a claim, as previously reported by Sazua.com . While the peace of mind may be worth it, if you don’t need to use the extended warranty, it’s like throwing money away.
2. Low Return on Investment
Extended warranties are notoriously profitable to the companies that sell them, which means most consumers won’t make their money back.
3. Fine Print Contains Exclusions or Limitations
One reason people may not get their money’s worth from their car warranty is because of the contract’s fine print. Many extended warranties come with an extensive list of exclusions and limitations. Some services typically not covered include:
- Routine maintenance, such as brakes, tires, oil changes, etc.
- Pre-existing conditions
- Damage caused by accidents or natural disasters
It’s important to read the fine print of your extended warranty carefully to know exactly what you’re getting and when the service contract expires. Most have time and mileage limits.
4. Deductibles Add to the Cost
If your extended warranty has a deductible, this can add out-of-pocket costs, too.
5. Not Ideal if You Have a New Car
Your contract may expire around the same time your car is getting older and more likely to need expensive repairs. If you have a reliable vehicle with low maintenance costs, it’s probably worth it to skip the extended warranty.
6. Don’t Pay Twice for the Same Coverage
Don’t pay for coverage that you already have. Your manufacturer’s warranty might already cover what the extended warranty offers.
It may make more sense to create an emergency savings fund that will cover the cost of repairing or replacing your older vehicle if it breaks down.
How To Choose an Extended Car Warranty: Is It Worth It?
Does an extended warranty make sense? Here’s a checklist of what you should do when you’re finally ready to add one on.
Research Different Providers
Are you working with a car dealer, insurance company or a third-party warranty?
While price is important, make sure you choose a reputable company. Read customer reviews and check ratings at sites like BBB and Trustpilot.
Manufacturer or Third-Party Warranty?
Manufacturer’s warranties are often limited in both coverage and duration, while a third-party warranty may have more flexible options.
A manufacturer’s warranty often guarantees the use of genuine parts and repairs at a service center specializing in that vehicle brand.
On the other hand, if you have a third-party mechanic at a service center you trust, a third-party warranty might cover those costs.
Get Quotes and Negotiate
It’s a good idea to get multiple quotes, as you would when making any large purchase. You can also negotiate prices for your warranty; know how much you want to spend and ask for a lower amount, since the warranty company might meet you in the middle.
Read the Fine Print
Before you opt in to an extended warranty read the fine print to understand coverage, exclusions, deductibles and how to file a claim.
Watch Out for Extended Warranty Scams
You might have received calls before — and heard the jokes — about robocallers “trying to reach you about your vehicle’s extended warranty.”
Avoid buying a warranty from a company that calls unsolicited, or any company using high-pressure sales tactics. Don’t hesitate to ask the salesperson to slow down and explain the coverage, exclusions and costs.
Alternatives to an Extended Warranty
Not every driver needs an extended warranty. You can find other ways to fund unexpected car costs. Here are some examples:
- Set up an emergency fund for car repairs
- Deposit money to a high-yield savings account
- Have a monthly budget and allocate a small amount toward car repairs
- Buy a new car with high reliability ratings
- Keep up with regular maintenance on your existing car
Should You Buy an Extended Car Warranty and Is It Worth It?
It’s a completely personal decision, but getting an extended car warranty depends on how often your car will need repairs and how long you plan to hold onto it.
An older car that’s less reliable will likely need more repairs than a newer car that hasn’t shown any issues. If that’s your car, and you don’t have a ton of money saved up, create a budget and put a small amount toward a car repair fund regularly.
It might be worth speaking to friends or family who’ve purchased an extended warranty on their experience. Shop around for the best quotes too. It could be worth it if an extended car warranty fits your budget and offers that peace of mind you’re looking for.
FAQs on Extended Car Warranties
Think that extended car warranty is worth it? Maybe these answers can help you make the decision.-
Should I buy an extended warranty on a used car?
-
Buying an extended warranty on a used car depends on what you need and your finances. Ask yourself the following:
- Do you have enough savings set aside for car repairs?
- How reliable is your car?
- How old is it?
- You might want an extended warranty if your car is older or you anticipate it might need some ongoing repairs or maintenance over the long haul.
-
Buying an extended warranty on a used car depends on what you need and your finances. Ask yourself the following:
-
What are two reasons not to buy an extended warranty?
- Two reasons not to buy an extended warranty is the high cost of the warranty and the long list of exclusions, or repair costs that may not be covered by a warranty.
-
What's the difference between a manufacturer's extended warranty and a third-party one?
- A manufacturer's extended warranty is typically available on new or certified pre-owned vehicles and is available through the car dealership when you purchase the vehicle. A third-party warranty can pick up when your initial manufacturer's warranty expires, typically after three years or 36,000 miles.
-
What is not covered under an extended warranty?
- An extended warranty typically does not cover damage caused by an accident or natural disaster. It also doesn't cover routine maintenance or parts that break or fail due to normal wear-and-tear, such as brakes or tires.
This article originally appeared on Sazua.com : Are Extended Car Warranties Worth It?
