A car extended warranty, which also goes by the name of mechanical breakdown insurance or vehicle service contract, pays to repair your vehicle after the manufacturer’s warranty expires. Dealerships, auto clubs and insurance companies sell them. Plans vary in terms, cost and what they cover. The small print matters, too: Some warranties have waiting periods, exclude wear and tear items such as brake pads and require pre-approval for certain repairs. Some even have specific locations where repairs can be made.
A recent survey by Consumer Reports found that 55 percent of people who purchased an extended warranty never used it. That’s not surprising, as many of the repairs covered by these warranties are for components that fail due to normal use. That includes things like a faulty radiator fan or worn out brake pads. Having these repairs covered can make sense if you are worried about high out-of-pocket repair costs, but it’s worth noting that your car’s maintenance schedule is designed to address such issues before they become problems and that it may be cheaper to simply put money into a “rainy day” fund for unexpected repairs.
How much an extended warranty costs depends on the plan you choose, which dealership or auto club you purchase it from and its reputation, as well as your budget and your personal needs. An extended warranty that comes close to the original manufacturer’s warranty is best (preferably offered by the car’s manufacturer and not a third party), but even these can run into the thousands of dollars. It’s also important to consider how long you plan on keeping your car. If you only expect to own it for a few years and drive it 15,000 miles each year, an extended warranty won’t be worth the investment.
When considering an extended warranty, look for one that covers the same components as the manufacturer’s factory warranty, and doesn’t include a lot of add-ons or restrictions. Read online reviews to get an idea of how satisfied other customers are with the product and company they bought from.
Finally, if you are purchasing an extended warranty at a dealership, ask whether you can roll the cost of the policy into your car loan so that you’ll pay for it over time instead of out-of-pocket. That can help reduce your initial stress level and give you peace of mind when you are making the purchase.
Be skeptical of any contact warning that your vehicle’s warranty is about to expire, as these can be scams designed to pressure you into a sale. Be sure to check with the dealership, your state motor vehicle department and the manufacturer before acting on any such claims. It’s also smart to consult your mechanic or an independent automotive repair shop for advice on a good extended warranty for your vehicle. Taking the time to compare the available options will be well worth it in the long run. Good luck with your new (or old) car..