A smiling woman is holding up an iPad that says Extended Warranty on it.

A Few Facts About Extended Warranties Before You Buy

You’ve reached the end of the manufacturer’s warranty on your vehicle, and your mind naturally strays to the worry about what could happen now. What if parts start needing to be replaced? What if my car breaks down and I have to pay out of pocket? This may be the moment when you consider the options of an extended warranty. Quite honestly, buying an extended warranty at the moment your manufacturer warranty runs out may not be the best timing, but if you already own your vehicle without one, it may be moot. Before you purchase one for your vehicle, it’s a good idea to weigh extended warranty pros and cons.

What is an Extended Warranty?

All cars come with a limited warranty when purchased new at a dealership, typically covering defects and recalls for free, some general maintenance up to a certain passage of time or number of miles, replacement for certain parts if they break or wear out, and usually, a couple of oil changes and basic tire rotations might be thrown into the mix. When this time period or number of miles is up, the owner is now responsible for any repairs that may arise. This is the point where an extended warranty may take the place of the original manufacturer’s warranty.

The extended warranty is more like buying insurance against the need for potential repairs. Since you can’t know when a need for repairs may arise, you may not like the idea of having to pay expensive repair bills out of pocket. An extended warranty can offset some of that concern by offering you a monthly payment toward coverage of specific repairs your car may need. No two warranties are alike, however, so it’s important to read all the details before you purchase. It could include a wide variety of repairs if you purchase at a higher trim, but you might be unpleasantly surprised to learn that many basic repairs from typical wear and tear are not covered.

Reasons to Like an Extended Warranty

Shop around for pricing and coverage, but dealerships are usually the best place to purchase due to the wider options you may get. For instance, Chevy offers a limited warranty, which is called “bumper to bumper.” This is the original warranty that comes with the vehicle when purchased new. If you choose to extend a warranty with Chevy, an extended warranty will typically continue the bumper to bumper coverage you had with the original limited warranty. When you purchase your vehicle, you have the option of wrapping the price of the extended warranty into the monthly payments on your car. This can be a boon to those who prefer to pay a little at a time to ensure the car will be covered for certain major repairs.

Purchasing such an extended warranty from the manufacturer will usually mean you can take your car to any dealership nation-wide, so if you’re on a road trip, you can rest assured that anything covered by the warranty will be repaired anywhere you go. Some dealerships will also throw in roadside assistance, which adds to peace of mind. On the other hand, buying a third-party extended warranty might save you cash upfront. Though there are reasons to be careful of these contracts offered by companies that do not represent the manufacturer, you will often save money on the monthly bills to obtain your coverage.

A smiling couple is using their laptop to research extended warranty pros and cons for their car.

If you happen to be purchasing a used vehicle, an extended warranty may be a good idea. Though the internet has made it much easier to find out what has happened to your car prior to your ownership, you really don’t know how well your car was treated. Sometimes we get lucky and can purchase a used car whose history is known, but this is rare. In the event of lax maintenance, poor driving habits, or other problems, an extended warranty could help maintain the longevity of a used vehicle. You never know what might be lurking in a used car’s future, so if a dealership is willing to sell you a manufacturer’s extended warranty, you might want to wrap that cost into the purchase loan.

Even if you choose to purchase the extended warranty later, monthly payments can ease the strain on your bank account. If you stick to a manufacturer warranty, you can often transfer it to another owner. So, if you plan to gift your car to a family or friend, this is a good deal. Again, read the fine print and ask questions when you plan to purchase.

Why an Extended Warranty May Not Be Right for You

If you are offered an extended warranty, even at a dealership, it’s always a good idea to check to see what company is holding that contract. It’s not always the manufacturer. Sometimes a third party strikes up a partnership with local dealerships, and then the dealership sells you the extended warranty held by a separate party. This may mean you are limited to repairs at your local dealership or region, so if your car breaks down while on a trip out of town, you won’t have coverage. It could also mean the devil is in the details. You may only be covered for your drivetrain, and not the bumper to bumper coverage you believe you’re getting. Read the whole contract and ask questions before signing or paying for anything.

Another consideration to take into account is the higher percentage of car owners who find they paid more for the extended warranty than they would have paid in actual repair costs. Cars are becoming more and more reliable since 2013, and are requiring less in repairs caused by manufacturer defects or even wear and tear. It may be wise to run a little research on the particular make and model you want to buy so you can decide if an extended warranty would benefit you. Obviously, research can’t pinpoint exactly when or if your car will break down, but you can learn whether or not a car generally has a good track record for reliability.

Like insurance policies, extended warranties often come with a need to pay a deductible before repairs. Third-party warranties will usually be much higher than those you would pay through a manufacturer. With the manufacturer, such costs may run an average of $200, but this is a good question to ask prior to purchase. A third-party contract could also expect you to front the money for the repairs, and then you are reimbursed at a later date. Depending on the company, this could take a long time. Be wary if dates are not provided in the fine print

Take the time to prepare yourself prior to purchasing a vehicle, whether used or new. Decide ahead of time if you believe the warranty will be a purchase you need, and you can save yourself the trouble of feeling pressured into buying if you realize later you didn’t really need it. Again, take the time to read the paperwork, know your terms ahead of time (such as “limited warranty” or “manufacturer’s warranty”), and be prepared to quiz the salesperson who helps you. They will typically refer you to the department that handles the specifics of a warranty but do your homework about the purchase so you can confidently answer any requests the dealership will make