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Should I get an Extended
auto Warranty?

Getting a car is an exciting time. Whether it’s a necessity or a passion, owning and buying cars takes a lot of decision-making and it’s a big investment so you better do your due-diligence. Even once you buy a car, the experience doesn’t end after only paying a few thousand bucks and finally getting to drive it around.

A lot of people get too wrapped up in car shopping and purchasing a new car that they forget it costs money for maintenance and repairs down the road.

Taking care of your vehicle and ensuring that it’s in proper condition can be very expensive depending on the kind of car you own and how you pay for the repairs. In some situations, you can purchase an extended warranty depending on how old the car is and it can make or break your bank.

A lot of people have asked me whether getting an extended warranty is worth it or not and I’m here to weigh the options for you. Whether you’re considering buying a used car or a new one, I’ve put together this list of pros and cons for you to think about before purchasing a car warranty.

Also, I’ve uncovered some helpful information on finding the right warranty based on your budget, and your car, make and model.

First of all, what is an extended car or auto warranty?

Most, if not all, of vehicles sold in the industry, have warranties for at least three years or 36,000 miles after you purchase them. These warranties cover all kinds of repairs except for parts that undergo normal wear-and-tear such as brake pads, the clutch, seat belts, windshield wipers, and tires.

An extended car or auto warranty comes in handy when the original manufacturer warranties expire so the extended warranty acts as an additional protection for your vehicle. After all, you always have to maintain your car to keep it in good shape, and it’s likely the repairs will eventually pile up over time.

Many see the necessity of an extended car warranty when they prefer the idea of paying for a bunch of repairs at one time, rather than worrying about the costs of unavoidable and sometimes urgent repairs each time.

While it’s called a warranty, it would be more fitting to think of it as “repair insurance” or a “service contract.”

There are two types of extended warranties that you can purchase:

Warranties offered by vehicle
manufacturers.

Remember the “bumper-to-bumper” warranties I mentioned earlier? Vehicle manufacturers offer comprehensive policies that cover a certain number of years or mileage. These warranties could stretch to a period of time, allowing the owner to undergo repair beyond the initial coverage of the warranty.

Warranties offered by third-party
insurance companies.

When you purchase an extended warranty from a third-party insurance company, it allows you to have repairs performed by a variety of service providers. All you need to do is get the receipts and submit them to the third-party company for reimbursement, but keep in mind that hundreds of providers exist. It would be good for you to exercise due-diligence about the company’s reputation and operations before you make a final decision on the provider of your extended warranty.

So, should I get an extended warranty?
Here are the pros and
cons.

Cons

  • You may not be able to maximize the warranty
  • It could be more expensive than paying outright for repairs
  • It might not save you that much more money

One main hesitation some car owners have about purchasing an extended warranty is potentially not being able to maximize the use of the warranty.

Also, another deciding factor is that for some cars, it might be more expensive to get the warranty than to just pay for the occasional repairs.

Let’s say your car will not break down during the time you own it. If you buy an extended warranty, in the end, you could’ve used that money to pay for the normal maintenance or saved it to use for other bills or purchases.

Another downside to buying an extended warranty is that it may not even save you that much money. Sometimes people buy an extended warranty, they end up paying more money or their savings are next to nothing.

However, in many cases, I think that the pros far outweigh the cons of getting an extended warranty.

Pros

A survey conducted by Endurance Warranty Services on whether Americans are prepared for expensive car repairs sends one glaring message: they’re not. And that’s despite knowing that they may be using their cars for a long time:

  • About 75 percent of drivers will drive their vehicle for over 100,000 miles.
  •  Over 13 percent say they will drive their vehicle as long as it lasts.
  • 64 percent of drivers plan on keeping their new vehicles for at least eight years.
  • 62 percent of drivers don’t have money saved up for repairs.

As if these figures are not enough, here are a few more reasons why an extended warranty is essential:

Car breakdowns could be extremely stressful and totally random

They happen when you least expect it. Having an extended warranty in place saves you the trouble of looking for the most cost-effective service provider while you are in the middle of an emergency. Some extended warranties may even provide a range of extra services, from towing your car, all the way to hotel costs and a rental vehicle in crisis situations.

Car owners are keeping their cars for a decade or longer, based on this Forbes article.

Some Americans are keeping their vehicles for as long as 11.5 years. Using a vehicle for that long, and having only three years of an original manufacturer’s warranty, it would be more worth it to get an extended one so you don’t have to pay the outrageous costs for repairs.

Many extended warranties can be transferred to future owners.

This is actually advantageous for sellers and re-sellers as it makes the resale value more attractive, for a minimal transfer fee. Here are other ways you can maximize your resale value.

Extended auto warranties help you keep your car in tiptop shape while avoiding unnecessary stress, i.e. extremely expensive repair fees, finding a service provider in cases of emergency, and getting ripped off in the process.

So, should I really get an
extended auto warranty?

Here’s a good rule of thumb for gauging whether an extended warranty is for you: assess the general
condition of your car and the general condition of your wallet.

Ask yourself the following questions:
  • Do you think that the car is likely to break down? Extended warranties may not be available for automobile brands and models with a good track record in quality and reliability. Unless you feel that your car has run its course (literally, and in this case, for over a hundred thousand miles), you may look for vehicle reliability and quality ratings online to make sure.
  • Do you have a fixed budget and would rather spend for a set of repairs at one time rather than each time? Do you hate surprises, especially for expensive and often times unexpected repairs?
  • Do you plan to keep your vehicle for more than three years or 36,000 miles (the usual coverage for original manufacturer’s warranty)?
  • Does your vehicle have high repair costs, and are they likely to pile up or happen all at once? Costs vary from one brand and model to another. It will be prudent to check repair costs on parts that commonly break before getting an extended warranty.
  • Is your original manufacturer’s warranty about to expire?

If your answer to all the questions above is yes, then you know what to do.

Which extended warranty
should I pick?

There are tons of insurance companies and vehicle manufacturers that offer extended warranties so
be sure to ask yourself these questions before you buy:

  • Is the contract recognized by various service providers?
  • Is the company in good credit standing? Is it certified by key industry peak and regulatory bodies?
  • What does the contract cover and not cover? Does it include roadside assistance?
  • How much is the deductible?
  • What is the reimbursement process and turnaround time?

If you perform enough due diligence on various service providers and get several quotes, you’re well-placed for getting yourself a good deal.

 

The answers are different for everyone, but I hope this page helps you gauge whether you should get an extended auto warranty and if so, find the one!

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James Quan – CarShop

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James Quan – CarShop

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James Quan – CarShop

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James Quan – CarShop