Are extended car warranties worth it?

Whether you’re buying a car or your manufacturer’s warranty has expired, you’re probably wondering, are extended car warranties worth it? Extending coverage may protect you from certain costs, but it’s not for everyone. 

To drive you in the right direction, we unveil how extended car warranties work and weigh their pros and cons. 

What is an extended warranty?

Other than your auto loan, you also need to consider any insurance and warranties involved in your purchase. An extended warranty, or a vehicle service contract, is optional coverage for certain car repairs, including mechanical or electrical issues. Keep in mind though that it’s different from the manufacturer’s warranty. 

While it’s commonly availed when a car is new, you can typically buy an extended warranty at any point in your vehicle’s life. Many automakers offer it once your manufacturer warranty ends. But you can get them from dealerships and third-party providers, too. 

With that in mind, extended warranties vary in their terms and coverages across states and providers. So, pay close attention to the contract to ensure it aligns with your needs. Considering factors, like mileage, vehicle age, and other exclusions.

What does an extended car warranty cover?

Though having an extended warranty covers some of your car-related expenses, they don’t shield you from all costs. The level of coverage they also offer varies since they depend on states and providers. But usually, an extended car warranty covers a range of repairs, including labor and parts. Here are some types of extended warranties that you may stumble on:

Bumper-to-bumper warranty

Bumper-to-bumper warranties cover most components of the car from front to back. These are also called exclusionary warranties because they provide comprehensive coverage except for a list of exclusions.

It usually covers vehicle issues for 3 years or 36,000 miles, but depending on your provider, it may be longer. Since they cover almost everything, this type of extended warranty is typically the most expensive one that automakers, dealerships, and third parties offer.

Powertrain warranty

Another coverage you may encounter is a powertrain warranty. This plan covers parts that make your vehicle go, like the engine, transmission, and drivetrain. With this, your car is typically covered for around 5 years or 60,000 miles.

Drivetrain warranty

This type of warranty specifically targets components responsible for transmitting power from the engine to the wheels. These include your car’s transmission, driveshaft, axles, and differential. Depending on your provider, this plan may last up to 5 years or 60,000 miles.

Corrosion warranty

Corrosion warranties protect your car from rust and corrosion. They normally cover repairs or replacements due to salt, water, and other environmental factors.

Since each warranty differs, some may provide services, such as flat tire assistance, towing, fuel delivery, etc. However, note that extended warranties do not cover regular maintenance, like oil changes, new tires and brakes, and more. 

How do extended car warranties work?

Extended car warranties provide extra protection aside from your manufacturer’s warranty. When you purchase an extended warranty, you first have to choose where to get it – from automakers, dealerships, and third-party providers. 

Even if automaker warranties generally come at a higher price, they usually offer broader coverage. And compared to third-party warranties, replacement parts come from the manufacturer. 

Meanwhile, third parties offer cheaper options but may limit where repairs can be done. This also affects you when you decide to sell your vehicle soon. When you transfer the third-party warranty, you may need to pay a fee. 

Other than the provider, you also need to consider what type of extended warranty you’re after. Since each warranty and provider has different rules, make sure you read the fine print and pay attention to any limitations and exclusions. This way, you reap the advantages of your extended warranty. 

How much do extended car warranties cost?

Though an extended car warranty may cost you thousands of dollars, it varies from policy to policy. So, it’s important to gain insight into how different factors affect your warranty cost. 

Level of coverage

The extent of your coverage impacts how much you pay for it. Of course, comprehensive warranties, like bumper-to-bumper, tend to be pricier than basic plans since they cover more. 

Length of warranty

The duration of the coverage also affects the price you pay. Remember, a longer term means you pay more for your extended warranty. Say you choose a 6-year extended warranty. This then costs you more than a 3-year plan. 

Deductible

Your overall premium is also going to be higher if you choose a lower deductible. Otherwise, you can pay for a higher deductible to reduce your premium. With these in mind, consider which one you’re willing to pay – a higher premium or a higher deductible when your vehicle needs repairs.

Vehicle’s make, age, and mileage

The type, age, and mileage of your vehicle also play important roles in the cost of your warranty. With older vehicles or cars with high mileage more likely to break down or require repairs, their warranties are more expensive. 

Is getting an extended warranty on a car worth it?

Before settling on a decision, make sure you weigh the advantages and disadvantages of an extended auto warranty. 

Pros 

• Peace of mind: Repair costs can add up over time and put a dent in your budget. But with an extended warranty, you have peace of mind knowing you won’t shoulder expensive repairs on your own. With this, you potentially save in the long run. 
• Extended coverage: Once your factory warranty expires, you have to pay out of your pocket. If you have an extended warranty, it eliminates your vulnerability to unexpected costs.
• Customizable: Providers also offer flexible options to personalize your warranty based on your car’s needs. This, in turn, allows you to select the coverage that suits you best.
• Prolonged ownership: As your vehicle ages, it’s bound to wear and tear. However, let’s say your extended car warranty covers the repairs that your vehicle needs. This helps extend the lifespan of your car. In the end, you may keep it with you longer. 

Cons 

• Cost: One downside to extended warranties is their expensive cost. While the price varies, on average, you may need to pay around $2,500 a year. Sometimes, the cost of your warranty may outweigh the potential savings you get especially if you end up rarely or never using it.
• Limitations: Your extended warranty plan may come with limitations and exclusions. Meaning you have to pay for certain components or specific types of damage that are not covered by your warranty. In some instances, you may also be limited to the repair shop where you can take your vehicle. So, carefully review the fine print to understand the included and excluded repairs.
• Overlapping coverage: At times, your extended coverage may overlap with your manufacturer’s warranty. This leads to unnecessary expenses. 
• Unnecessary for reliable cars: If your car has a strong record of minimal repairs, you may not need an extended warranty. Because the chances of serious breakdowns are low, getting extended coverage may just cost you more. 

How long does the manufacturer’s warranty last?

The manufacturer’s warranty serves as the automaker’s guarantee to replace or repair issues from faulty materials. These warranties typically cover a range of components, like bumper-to-bumper, powertrain, corrosion warranties, etc. 

Manufacturer warranties commonly last for 3 to 5 years or 36,000 to 60,000 miles. Meaning your warranty covers repairs for the first 3 to 5 years or 36,000 and 60,000 miles you drive, whichever comes first. Typically, powertrain warranties last up to 5 to 10 years or 60,000/100,000 miles.

But remember, the length of the factory warranty depends on your carmaker and car model. Some manufacturers may offer shorter or longer warranty periods. So, make sure you check with your manufacturer what your warranty covers. 

Extended warranties for new cars

When buying a new car, the car price usually includes the manufacturer’s warranty. That said, extending warranty coverage may be unnecessary right away when it comes to new cars. Since the manufacturer’s warranty is still in place, some repairs are still covered by your automaker. Before your original factory warranty expires, that’s when you can decide if you want to continue having coverage. 

Extended warranties for used cars

Unlike new cars, used cars won’t have coverage unless their original warranties haven’t lapsed yet. But some used cars are certified pre-owned (CPO) vehicles. Meaning they have some kind of coverage though they tend to be more expensive than non-CPO cars. So, make sure you check the Buyer’s Guide on the windows if they come with warranties and review the terms before making a decision.

Summary

Extended car warranties offer peace of mind and financial protection, but they come with a high price tag. With that in mind, carefully consider the coverage, cost, and your car’s reliability to ensure extended coverage is right for you. Through this, you can weigh the pros and cons and make a decision that safeguards your vehicle and budget.

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