A car is a significant investment, and buyers want as much protection as possible. Vehicle owners buy car insurance policies and do their best to maintain their vehicles. However, not every car is perfect. Defects can decrease your vehicle’s quality, and some can make your vehicle unusable. Manufacturing flaws during the vehicle’s assembly aren’t your fault, and an extended auto warranty can take you off the hook for extra costs. Essentially, extended warranties help protect against surprise costs from vehicle breakdowns and often include benefits like reimbursements for hotels and rental cars should your car break down.
What are Extended Car Warranties?
Most manufacturers and dealers offer a free warranty for new buyers. Eventually, that warranty will expire and eliminate your protections. You are responsible for making payments if a defect gets discovered after the vehicle service contract expires. An extended car warranty increases your costs, but it extends your protection. Your vehicle may have a defect after the initial contract ends, but an extended warranty can make the warranty provider responsible for the car part expenses.
How Does It Differ from a Factory Car Warranty?
A manufacturer’s warranty comes with the car and has basic protection. The extended warranty increases the duration of your contract and provides extra coverage options. In addition, the extended warranty has a broader scope of issues you can bring to the vehicle manufacturer or dealer’s attention and have them pay to fix your vehicle.
Key Components of an Extended Warranty
An extended warranty covers repairs and replacements after the original manufacturer’s warranty expires. The following components are typically covered under these policies:
- Mechanical and electrical systems, including the engine, transmission and electrical components
- Additional components, like air conditioning, heating and cooling systems
- Labor costs for covered repairs
However, coverage doesn’t extend to routine maintenance, normal wear and tear, and pre-existing issues prior to the purchase of the warranty.
Types of Extended Warranties
Here’s a closer look at the most common types of extended car warranties.
Manufacturer-Backed Warranties
Manufacturer-backed warranties, also known as OEM warranties or factory warranties, are provided by the car’s manufacturer. They typically kick in after the original warranty expires, and repairs are required at authorized dealerships. So, only certified technicians work on your vehicle.
These warranties cover a wide range of issues similar to the factory warranty, providing peace of mind. They also often include perks like roadside assistance. However, they can be more expensive compared to other options.
Third-Party Warranties
Third-party warranties are offered by independent warranty companies that are not affiliated with car manufacturers. These warranties usually provide more flexibility, as they allow you to get repairs done at a wider range of service centers.
They can be more customizable, as you can choose coverage plans that suit your specific needs and budget. And these warranties are often cheaper than manufacturer-backed warranties.
Hybrid Warranties
Hybrid warranties combine elements of both manufacturer-backed and third-party warranties and are typically available through dealerships. However, they are administered by a third-party warranty provider.
Keep in mind that they can sometimes be as costly as manufacturer-backed warranties and might not cover as many independent repair shops as third-party warranties do.
Is It Worth It to Get Extended Warranties for Cars?
An extended warranty can save you a lot of money if you end up using it. However, some cars do not encounter any defects, and the factory warranty may be sufficient. An extended warranty will increase your costs, but it can help. Your car’s status plays a significant role in determining if an extended warranty is right for you.
Old Cars
A used car is less reliable than a new one, making it more likely to experience defects and need repairs. Some car owners buy their vehicles through a lease purchase program, at which point the vehicle has lost value. However, it may be a good idea to purchase another car instead of repairing older vehicles. An extended warranty protects your asset, but not every asset is valuable enough to acquire protection.
New Cars
New cars are more reliable than old cars and less likely to experience immediate wear and tear. However, costly repairs can require thousands of dollars. Your car may never have issues, but if the thought of a $5,000 emergency expense frightens you, the extended warranty may be worth it. In addition, getting a refinance on your motorcycle, car, or other vehicles can provide you with the extra cash to cover this emergency expense if necessary.
Advantages of Extended Warranties for Cars
Are you on the fence about an extended warranty? Most people opt for an extended warranty for one of these reasons.
Drive Your Car Worry-free for Longer
When your warranty expires, you become responsible for repair costs. Cars lose value yearly from depreciation, reflecting the increased risk of holding onto a vehicle as it ages. Not everyone can afford repairs, and you will have greater peace of mind when you are on the road. An extended warranty reduces stress and can make your car more affordable. If you want to make your vehicle more affordable, you can also apply for an auto refinance loan to lower your monthly payment.
Keep up-to-date with Technology
If your car has an issue, you will have to take it in for repairs. Car owners without warranties may opt for older technology to save on repairs, only to end up with the same problem a few months later. If you know the dealership or manufacturer is paying the bill, you can get the latest technology for covered repairs to your vehicle. This technology can improve your vehicle’s efficiency and extend the time between repairs.
Customize What You Need to be Covered
Extended warranties provide additional protections that the factory warranty will not cover. You can customize your contract to see what your current plan covers. Each protection will increase your monthly costs. You will have to decide which protections are worth the investment, but it’s your choice. Drivers like to have a sense of control over their vehicles.
Get Added Benefits
An extended warranty offers more benefits and coverage than a factory warranty. You can save thousands of dollars by investing in an extended warranty.
Disadvantages of Extended Warranties for Cars
An extended warranty increases your protection, but that protection comes at a cost. These disadvantages dissuade car owners from investing in extended warranties.
Repairs Might Cost Less Overall
In the worst-case scenario, repairs can cost thousands of dollars, but not every repair is that expensive. For example, vehicle repairs may only cost a few hundred dollars, which would not make the extended warranty worth the additional expense.
Doesn’t Cover Everything
Extended warranties cover more ground than factory warranties, but they still don’t cover everything. If an event or circumstance outside the contract affects your car, you will have to pay for repairs.
Requires Proof of Maintenance
The manufacturer or dealership will want you to take responsible actions to keep the vehicle in good condition. You will have to commit to a routine maintenance schedule to use the extended warranty in the future. You may lose your extended warranty rights if you do not maintain your vehicle. The maintenance plan will increase the total costs of vehicle ownership. While this schedule can increase your car’s lifespan, it will make it more difficult to profit from the extended warranty.
Overlaps/Gaps in Your Protection
Protection isn’t as simple as it sounds. Your extended warranty may overlap with the factory warranty. Some consumers would prefer to extend the contract instead of buying additional protections. In this case, the overlap is a waste of money since you have two active warranties at the same time. You may also have a gap in coverage between the factory warranty and the extended warranty. If anything happens to your vehicle during this gap, you have no coverage.
Pay a Deductible
You may have to pay a deductible before the manufacturer or dealership covers the remaining repair costs. Some people may not have enough funds for this deductible, which can range from a few hundred dollars to over $1,000. A vehicle refinance can help you come up with the funds for a deductible if necessary. You should review deductibles before paying for an extended warranty.
How Much Is the Average Cost of Extended Car Warranties?
Extended car warranty costs range from $1,000 to $4,500, but the average extended warranty costs roughly $2,550. Your monthly costs and warranty duration will depend on the warranty you select. Car owners can select from different plans and incorporate several safeguards.
Extended Warranty Cost Factors
Type of Vehicle
Luxury or high-end cars typically have higher warranty costs because their repairs are more expensive. Vehicles with a history of reliability issues may also see increased rates.
More complex and rare vehicles usually require specialized parts, making repairs costly. For instance, a luxury SUV will have a higher warranty cost compared to an economical sedan.
Coverage Length
Depending on the provider, coverage options can span from one year to several years. Shorter plans are cheaper but may not offer the level of protection you need or desire.
Deductible Choices
A higher deductible means lower monthly payments, while a lower deductible increases monthly costs but reduces out-of-pocket expenses during repairs.
Selecting a deductible that fits your budget is essential for managing repair expenses.
Some providers offer zero-deductible plans, but these tend to have higher premium costs.
Additional Features
Additional features like roadside assistance, rental car reimbursement, and trip interruption coverage can increase the warranty cost. These features provide valuable services but add to the overall expense.
Consider what services you need and whether they justify the added cost. Some plans offer customizable features, so you only pay for what you use.
Should You Get an Extended Car Warranty?
Extended car warranties provide great protection for expensive repairs and make you feel safer on the road. You won’t have to worry about a surprising defect ruining your finances. However, an extended warranty takes up space in your monthly budget, and you may never use it to save money on repairs. Even if your vehicle needs repairs, some minor incidents will cost less than the actual warranty. An extended warranty is not for everyone. You can spend all of that money for nothing, or you can end up saving thousands of dollars in repair costs.
How to Choose the Right Extended Warranty
When researching extended warranty options for your vehicle, consider your driving habits, the car’s reliability, and the coverage plans available. You should also read the fine print to understand what is covered and what is not.
Assess Your Driving Habits
If your daily commute is lengthy or you frequently take road trips, choose a plan with higher mileage limits so your coverage will last as long as you need it. But if you don’t hit the road often, a plan with lower mileage limits might be a better, more cost-effective option.
Examine the Car’s Reliability
Reliable cars may need less comprehensive coverage, saving you money. Cars with higher repair costs or frequent issues might benefit from more extensive plans.
Certain brands have known reliability records. Research how your car’s brand fares and check the average cost of repairs. If the car is prone to breakdowns, ensure you pick a warranty that covers those potential repairs.
Compare Coverage Plans
By comparing coverage plans, you can determine which components of your vehicle will be protected. This aspect also defines what repairs and services are included within the contract. Typically, extended warranties cover components like the engine, transmission, and electrical systems. However, reading the fine print is crucial to understand any exclusions or limitations.
Read the Fine Print
Carefully read the fine print of any extended warranty contract. Understand any exclusions, such as pre-existing conditions or wear and tear, and check if regular maintenance is required to keep the warranty valid.
Also, be aware of the claims process, including how to file a claim and the documentation required. Find out if you need to use specific repair shops or if you can choose any certified mechanic.
Common Misconceptions about Extended Warranties
“Extended Warranties Aren’t Worth It”
Many people think extended warranties are a waste of money. This belief often comes from hearing stories about people paying a lot for coverage they never used.
In reality, extended warranties can save you money on expensive repairs.
“All Repairs Are Covered”
A common myth is that extended warranties cover all types of repairs. Unfortunately, this is not true. These warranties usually cover specific parts and types of damage.
Always read the warranty’s fine print. Knowing what is and isn’t covered can save you frustration later.
“You Have to Buy Immediately”
Some people think you need to buy an extended warranty as soon as you purchase your car. This is not the case. In fact, you can buy an extended warranty anytime before your factory warranty expires.
Waiting can give you time to see how your car performs and whether an extended warranty is worth the cost. Dealers often push immediate purchases, but taking your time can work in your favor.
Will You Lose Your Warranty if You Refinance Your Car?
A car refinance can help you lower your monthly loan payments and get extra cash or reduce the overall amount you pay on your vehicle loan. You can achieve other objectives with a refinance, but some drivers shy away from a refinance because they wonder how it will affect an extended warranty. Fortunately, a car refinance will not impact your warranty. You can keep your contract and save on lower monthly loan payments. If you want to pay your auto loan quicker, you can shorten your loan through a refinance. This financing strategy also helps you capitalize on lower interest rates.
A car refinance is a valuable choice for vehicle owners, especially if you want to squeeze an extended warranty into your budget.
Another way to save money and possibly lower your monthly payments is to get the best possible rates for your vehicle right from the start. You can easily do this with Experian’s Auto Insurance Marketplace. Experian’s Insurance Marketplace matches you to personalized quotes from the top insurance carriers so you can choose the one that’s right for you. They’ll also help you switch to a new plan and cancel or request a refund on your old one. Sign up for a free Experian account to get started.
