Is an Extended Auto Warranty Right for You?

 

 

Should I get an extended auto warranty?
You’re at the car dealership, almost ready to drive home your new car. But should you buy an extended warranty before the dealer hands you the keys?

Well, first it’s important to understand types of auto insurance, what an extended auto warranty is, and where it fits in the picture!

 

Types of Warranties 

There are extended warranties offered by the carmakers (a.k.a. original equipment manufacturers or OEMs) and warranties offered by a third party.

A tale of two extended warranties
Extended warranties offered by OEMs include:

• Powertrain
• Bumper to bumper

 

Powertrain
A powertrain warranty covers your engine, transmission, and suspension against defects.

 

Bumper-to-bumper
A bumper-to-bumper (“limited”) warranty covers most everything else. With a bumper-to-bumper warranty, you will also need to decide how much you are willing to pay for a deductible. Note that deductibles for OEM warranties are rarely more than $200.

 

Third-party warranties
Many third-party (“aftermarket”) warranties offer similar coverage to OEMs, but there are some differences. Third-party warranties:

Pro: Usually cost less than OEMs.

Pro: Might be the only option available.

Con: Might have exclusions, rules, and requirements that OEMs don’t have.

Con: Have limitations on where you can have your vehicle fixed.

Con: Can have expensive deductibles.

Con: May require you to pay for repairs up front and file for reimbursement (which might take awhile).

 

Used-car warranties
Warranties aren’t exclusive to new cars. However, with used-car warranties, find out if it’s transferable and how much of the warranty is left. That is, does the clock start ticking when the warranty was purchased or when you buy the car? Usually all or part of a warranty is transferable to the next buyer.

 

Where an extended auto warranty fits into the picture

 

Warranties already included with your car
New cars come with a variety of warranties, including a bumper-to-bumper “factory” warranty that covers you for at least three years or 36,000 miles. It covers repairs but doesn’t pay for parts that wear out or for routine maintenance.

 

Are you already under warranty?
How long will you keep your car? If your vehicle comes with a warranty of three years, or 36,000 miles, and you plan to sell it in three years, you’re already covered.

If you’re purchasing a used vehicle with a warranty that has run out and you intend to drive the car for years, an extended warranty would protect you against the unknown car history and the unknown risk of it breaking down costing you pricy repairs.

 

What’s covered and what isn’t?
Plans might seem essentially all the same, but nuances can become a big deal when you need to make a claim. Make sure you read the fine print.

 

Find out how long you will be covered
Does the warranty for a used vehicle start when you take ownership or when the car was new?

 

Understanding your policy is key
You have the factory-included warranty, so it’s important to understand how long it will cover you and what would be covered by additional insurance. An extended auto warranty covers repairs after the included warranty expires.

 

An extended warranty is an insurance policy on your vehicle. Consider the pros and cons:

Pro: Peace of mind knowing that you’re covered.

Pro: No unexpected expensive repairs.

Pro: If you have an expensive problem – it won’t be your problem!

Pro: It’s rare to find a used car with a confirmed history of all its maintenance and repair.

Con: Costs extra.

Con: You might pay for something you never use – but you will always have peace of mind knowing that expensive repairs won’t drain your savings.

Con: Extended warranties don’t cover routine maintenance, such as oil changes, timing belt replacements, and tune-ups.

Con: Most extended warranties don’t cover items that wear out, such as brake pads and windshield wipers.

 

Keep it up!
Make sure to keep up with regularly scheduled maintenance. Some warranty companies refuse to cover a repair if the owner hasn’t routinely serviced the car. Keep your receipts!

 

Situations to consider
Each individual’s situation is different. Consider if any of the following apply to you:

 

Lease protection in lieu of an extended auto warranty
If you’re leasing, you are most likely required to have an extended warranty. Drivers who are buying have a decision to make.

 

The mechanically inclined
If you are mechanically inclined and love tinkering with cars as a hobby, you might be able to repair your car yourself. Make sure that your vehicle doesn’t have a lot of computerized technology that isn’t easily repaired.

 

Older vehicles no longer under warranty
If you have an old vehicle that’s no longer under warranty, an extended warranty serves as just that: an extension to the original warranty that ran out.

 

Can’t afford to have a non-functioning vehicle
If you’re in a situation where you must have a vehicle, an extended warranty could be a good option. If you can’t afford to have a vehicle not working, an extended warranty ensures you get your car fixed without disrupting your monthly budget by an unforeseeable expense.

 

Consider the following questions:
An extended auto warranty is like repair insurance after the manufacturer’s warranty expires. Let these questions guide you to a decision that’s right for you.

1. Are you leasing or buying?
2. Is a running vehicle a “must have”?
3. Do you have an older vehicle?
4. Are you mechanically inclined?
5. How likely is the car to break down?
6. Will repairs be expensive? Does your car have a lot of computerized technology?
7. Will repair costs be more than what you pay for the warranty?
8. Is the peace of mind worth the price of an extended warranty?
9. How risk averse are you?

An extended auto warranty is unique to each person, car, and circumstance. Weigh your options and decide what is right for you!

 

 

 

 

 

Links:

https://www.thinkthelen.com/

https://www.edmunds.com/auto-warranty/understanding-extended-warranties.html

https://www.consumerreports.org/used-car-buying/when-an-extended-car-warranty-is-worth-it/

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