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Should I Get An Extended Warranty On My Vehicle?

Mar 11, 2023 | Warranty

The latest cars are filled with all kinds of cool technology, including advanced drivetrains, safety systems, and connected infotainment systems. The only problem is that when these high-tech components break, they can be expensive to repair or replace.

An extended car warranty can take some of the sting out of unexpected car repair expenses. The peace of mind doesn’t come cheap, though. Plans frequently cost thousands of dollars, but they can pay for themselves if you use them as your car ages.

Buying a new car is a massive expense. Unfortunately, most car buyers only look at the initial cost of the vehicle. Not what it will cost to insure, maintain and repair over its lifespan.

When buying a car, you will most likely be offered extended warranty coverage of some type. Extended warranties are also known as extended service contracts, mechanical breakdown insurance, vehicle service contracts and service agreements. They promise to pay for unexpected mechanical repairs that are needed when the basic warranty has expired.

This brings up the obvious question of rather you should purchase an extended warranty for your new vehicle. When you are considering an extended warranty for your vehicle, consider the following factors: the vehicle’s cost, your financial comfort level and the price and quality of the warranty.

In this guide, we’ll look at the factors that you should consider in your decision-making process. We’ll use the different names for these contracts interchangeably in this guide since they’re similar products.

The final decision of whether to buy an extended warranty plan is a gamble. Don’t use it, and you will have spent money on nothing. Use it for a couple of costly repairs, and you can save thousands of dollars.

What is an Extended Warranty?

An extended warranty is a service contract that extends the original manufacturer’s warranty. It covers repairs to your car, but may not cover all parts of the vehicle.

An extended warranty can be purchased at any time during or after you have purchased your new car. What’s covered varies from plan to plan, and most agreements don’t cover routine maintenance items such as tires, brakes, wiper blades, air filters or oil changes. Like a vehicle’s standard bumper-to-bumper warranty, extended coverage is generally written to cover a maximum number of miles or years, whichever comes first.

Warranty plans may include extras, such as roadside assistance or trip interruption protection. Many extended warranty plans require you to pay a deductible toward repairs; others will cover every dollar of the repair bill.

Benefits of an Extended Warranty

  • Peace of mind
  • Avoid unexpected repair costs
  • Increased resale value if transferrable

Do I Need an Extended Warranty?

If you’re thinking about buying an extended warranty, there are a few things to consider. First, you will want to think about your finances and your financial comfort levels . Then you’ll want to consider the price of the coverage and the company that stands behind it.

How comfortable are you with taking a risk and what is your financial situation?

If you are nervous about the potential of high repair costs after your vehicle’s standard warranty expires, an extended car warranty may give you peace of mind.

If you have the willpower to save money for an emergency fund instead of spending it on extended warranty, you might be able to skip the warranty and pay repair costs yourself if they come up.

In the end, would a costly car repair bill destroy your monthly budget to the point where you’d have to put off paying other bills to pay it? In that case, an extended car warranty may be worth the money.

Consider How Long Do You Keep Your Cars

If you buy a new car so often that the new car smell hardly dissipates before your next one arrives, you don’t need an extended warranty. On the other hand, if you typically keep your car well past its factory warranty expiration, think about buying an additional auto warranty.

Warranties provided by the manufacturer cover certain problems with a new vehicle for a set amount of time or miles. If the factory warranty doesn’t cover your needs, you can buy an extended warranty for longer or more comprehensive coverage of mechanical or electrical malfunctions.

If you drive a lot and will quickly surpass your factory warranty coverage, it might be wise to purchase a high-mileage cap extended car warranty with a short time horizon.

How to Choose the Right Extended Warranty

When you’re shopping for an extended warranty, it’s important to understand exactly what is covered and what isn’t. Check the fine print carefully to ensure that your coverage meets your needs. Below are some things to consider when purchasing an extended warranty:

How Will You Be Reimbursed for Repairs?

When researching a warranty, it’s important to find out how the company will reimburse you for repairs. Will you have to apply for repayment and wait for the warranty company to send the money, or will they work directly with the shop, so you’ll never have to pay more out-of-pocket than your deductible?

Are there any appeal procedures if the warranty provider does not cover a repair that you or your mechanic believes should be covered by the warranty?

Where Can I Get My Car Serviced?

The choice of a service center for your vehicle’s warranty coverage can be crucial to your satisfaction with the warranty. Will you be able to choose the service center, or will the company dictate where you must go?

Typically, extended car warranty programs offered by automakers require you to visit one of their franchised new car dealerships to get covered service. Third-party providers may have you go to dealerships, networks of approved shops or any ASE-certified repair facility.

Some car dealerships offer warranties that only allow you to receive vehicle service in their own shop. But if you’re traveling, moving or the dealership closes, those warranties may not be of much use to you. Another issue to consider is will the warranty cover additional costs if you’re not happy with the level of service provided and want to go to a different mechanic.

It is important to include those details important to you in the contract. If you can’t find an answer to a question, consider it a red flag and look for another program.

Who Stands Behind The Warranty?

Warranties are not much use if the company issuing them goes out of business. If a warranty is backed by a company on shaky financial footing or with horrible customer service, you could be out thousands of dollars when it comes time to make a claim.

Your vehicle’s manufacturer backs some extended warranties. That’s often, though not always, the case when you’re offered an extended warranty when buying a new car or a manufacturer-certified pre-owned vehicle.

Extended warranties are often sold by third-party providers. These companies have no relationship with either the dealer or automaker.

Can The Warranty Be Transferred?

When you sell your car, an extended warranty can add value if it is transferrable to the new owner. Most extended warranties are not transferrable. Some are limited to one transfer, and then they become non-transferable.

If you plan to keep your car for a long time, transferability isn’t important. If you frequently replace cars, however, you may be throwing money away if you buy a non-transferable warranty.

What Extras Come With The Extended Warranty?

Extended auto warranty products often include extras, such as roadside assistance, towing, trip interruption reimbursement and rental car coverage.

When you’re buying a warranty, you need to know what is and isn’t covered, how you get reimbursed, who provides the extras and what other limitations apply to the extras. Typically, the extras only apply if you need assistance because a part covered by the warranty has failed. Also consider whether you have duplicate coverage from being a AAA member or some other organization.

What Can Invalidate an Extended Warranty?

Most extended warranties have a very specific set of circumstances in which payment will be made and claims will be accepted. The terms of these plans are usually listed in a section labeled “Driver Responsibility” or “Buyer Responsibilities.”

They will detail your responsibilities as a buyer and will clearly state what you need to do and how you need to do it in order to receive and maintain coverage. Typically, these types of plans require that you adhere to the vehicle’s regularly scheduled maintenance plan like clockwork on the timeline suggested by your car’s manufacturer. 

For example, if you choose not to get your oil changed regularly and then the engine  suddenly developes a new sound that needs to be checked out, the ensuing repairs in all likelihood will not be covered. Modifying your vehicle can also result in your policy becoming inactive. 

Also, if you plan to use your vehicle for commercial purposes like driving for a food delivery service or delivering packages, you might want to first check with your insurance company to ensure that your insurance covers such usage. Additionally, such activity may invalidate your service plan. Specialized extended warranties and service contracts are available for gig drivers, but they are still a very new idea for most insurers and warranty providers. Check the fine print first!

Note that repairs that arise because of regular wear and tear or that are due to the failure to abide by the routine maintenance plan are generally not going to be covered by an extended warranty. It is also important to mention that if you buy a used vehicle with existing damage, issues caused by the prior accident will not be covered under a new extended warranty plan.

Where Should I Buy an Extended Warranty?

There are several places where you can buy an extended warranty. Your choice depends on the type of car you’re buying and whether it’s new, certified pre-owned or used.

When you buy a new car at a dealership, you’ll most likely be offered an extended warranty when you’re signing your purchase paperwork. The product will be backed by the manufacturer of the car you’re buying, the dealership itself or a third-party company.

Banks, credit unions, and insurance companies offer extended car warranties. You don’t even have to have a car loan or auto insurance with one of these organizations to buy a warranty.

When you are looking for a warranty, do not just evaluate the company selling it to you. Instead, check out who backs the warranty because this is more important than evaluating the company selling it to you. This way, you can get bids on similar products from an array of sellers so that you can compare prices and warranties themselves.

Should You Buy an Extended Warranty Plan?

Your particular needs and vehicle choice, will  help you determine whether to purchase extended auto warranty coverage. First, you should check the status of your factory warranty; if your car is over 6 years old, chances are good that it’s out of coverage.

Extended warranties are a great way to protect your car and keep it running smoothly. They can be especially beneficial if you have an older vehicle, as they help cover maintenance costs that would not be covered by normal insurance policies.

As with everything else about warranties, read the fine print and verify any details you’re unclear about before you sign on the dotted line.




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