Extended car warranties are optional plans that drivers can purchase to help offset repair costs. They can provide peace of mind for people who own older, less reliable cars, and they can be used to extend coverage for new cars once the original warranty has ended. While they can be a good choice for people who aren’t able to financially prepare for major car problems, many people find that they pay more for the extended warranties than they ever get back in direct benefits. You’ll have to decide if the extra expenses are worth the peace of mind.
What Is an Extended Car Warranty?
Also known as a vehicle service contract, an extended car warranty typically starts providing coverage once the original warranty has expired. Extended car warranties don’t cover the same parts, repairs, routine maintenance and roadside assistance as the original warranty. Each policy has a specific coverage amount based on your car’s make and model, as well as what the company is willing to cover, so it’s important to determine exactly what is included in the service agreement before you make a purchase so you can decide if it’s right for you and your needs.
How Much Do Vehicle Extended Warranties Cost?
When you purchase a car from a dealer, they’ll usually ask if you want an extended warranty, but the price can be extremely high. Make sure to negotiate with the dealer to lower the price. You can also purchase an extended warranty from a third-party source after you’ve brought your vehicle home.
The price of an extended warranty depends on the make and model of your car, as well as the parts and repairs that you want it to cover. The upfront cost of an extended warranty can be anywhere from $1,000 to $3,000. If you choose to have the policy included in your auto loan, you should also budget for the interest it will accumulate.
Extended warranties usually require you to pay a deductible when you need repairs. These can be charged per repair or per service visit. The deductible depends on the policy agreement, but it’s common to pay anywhere between $50 to several hundred dollars. Look at your policy carefully. If you’re paying per service visit, and you need to bring your car in several times for one repair, you’ll have to pay the deductible every time.
Should I Buy an Extended Warranty for My Car?
If you’re considering an extended warranty, weigh the pros and cons. The biggest benefit is that you won’t be on the hook for the entire cost of a car repair, as long as it’s covered under your contract. All you’ll need to pay is your deductible. This can be useful for drivers who can’t afford to be surprised by a massive, unexpected car repair bill.
However, according to Consumer Reports, 55% of drivers never use their extended car warranty — meaning they paid the upfront cost for nothing. Many drivers who do use their policies find that their auto repairs cost less than what they paid for the warranty.
Extended warranties also don’t cover everything the manufacturer’s warranty does, and if you have any overlap in coverage, you could be paying for services you don’t need. There may also be fine-print considerations, such as depreciation on coverage based on mileage or restrictions on which shops you’re allowed to visit. Take the time to fully understand your plan.
Working With an Auto Repair Shop
If you do decide that an extended warranty is worth the money, it’s important to visit an auto repair shop that honors them. Otherwise, you risk paying the full repair cost and not getting any use out of your warranty. Many shops note their acceptance of extended warranties on their websites, and you can always call ahead to be sure. Taking your car to a repair shop that doesn’t honor the extended warranty is like going to an out-of-network hospital for healthcare; you’ll be on the hook for the entirety of the bill. It’s worth doing your research to avoid unexpected costs.