Are Extended Warranties on Cars Worth It?
Nathan Stretch July 30, 2015

Have you ever heard someone claim that new cars are a safer financial choice than used, since you won’t be stuck with expensive repairs and no warranty? Well, let’s put that idea to rest.

New cars typically lose about half their value in the first three years. It would have to be a pretty terrible car for the warranty to save you that much in repairs! And second, you can get an excellent warranty for a used car, as we’ll cover here.

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This article will cover:

  • how to decide whether an extended warranty or “Vehicle Service Contract” (VSC) is right for you.
  • the differences between the highest-quality plans from well known companies and the other, cheaper options.
  • our recommendations for choosing an extended warranty company and a specific plan.

Should I buy a warranty?

The first question to ask yourself is do you even want or need a warranty at all?

Well, it depends.

Basically, an extended warranty is just another form of car insurance. You probably pay for liability coverage with your auto insurance, just in case you get in an accident and someone is injured. Certainly you don’t expect that to happen, but it’s nice to have the coverage just in case.

Regardless of what some companies imply, don’t expect a warranty to pay for itself. It might, and it might not. On average though, the companies selling warranties expect to make money, which would be difficult if they paid more for repairs than the cost of their warranties. So, if you’ve already managed to save up several months’ expenses for emergencies, you might consider forgoing the auto warranty.

On the other hand, if you’re like most people and a repair bill in the thousands of dollars would cause you significant pain, you might prefer the affordable monthly payment and peace of mind that an extended warranty offers.

If you do decide to purchase an extended warranty though, don’t go halfway. There’s little point in deciding on a warranty, then trying to save a bit of money by opting for a plan with only partial coverage. You’ll end up paying for the warranty, while still having no guarantee that you won’t face a large repair bill! You’re better off getting a plan with comprehensive coverage. That way when you need your warranty, you know it will be there for you.

What to look for in a warranty

If you’ve decided to go the warranty route, you now need to be sure that you get the right one. Different warranty companies will offer different coverage and options, so it’s important to always read the fine print to fully understand what it is you’re paying for. As a general rule, the more expensive the plan, the more it will cover.

Here are some of the details about your warranty you need to know before you make your decision:

  • What car components are covered in the plan?
  • How much is the deductible?
  • If something does happen, where can I get the car repaired? Is there a specific repair shop I need to take it to?
  • How does the mechanic get paid? Do you get reimbursed, or does the company deal with the mechanic directly?
  • Is there rental car coverage?
  • Does the warranty cover towing?

And remember, it’s all about the details. So think through how the different coverage options will affect you.

Most people focus on what parts of their car will be taken care of, which is an important consideration. A powertrain warranty will generally repair the engine, transmission, drive axles and drive shaft. The specific parts covered will be listed. A bumper to bumper plan is more comprehensive and covers almost all your car’s parts. Any parts not covered will be listed. Since you’re buying a warranty for peace of mind, we recommend a comprehensive plan.

But also give the other aspects of the coverage careful consideration to make sure that you do actually need them. Do the math on deductible options, for example, as it might make more financial sense to pay a bit more deductible in order to save on the up-front cost. If the policy offers free towing, but you already get that service through a roadside assistance plan, the extra cost is not worth it.

The bottom line – don’t wait until you’re in trouble to get a complete understanding of what you’re covered for. And don’t just take the word of the salesman. If you have any doubts at all, ask for clarification. The company will only cover what’s in the contract, so make sure that you fully understand it before signing that dotted line.

AutoTempest Recommends

We’ve already discussed the importance of choosing a warrantee plan with comprehensive coverage. There are many, many options available to you. To help you save time, we’ve done a considerable amount of research ourselves, and have found the Titanium plans from CARCHEX to be a great choice.

Carchex "A Smarter Way To Do Car..." Logo

They possess all the qualities we look for in a warranty company, such as:

  • Long operating history (suggesting future reliability).
  • Nationwide coverage.
  • Your choice of repair shop.
  • Comprehensive, “bumper to bumper” plans.
  • Direct payment to repair shop (so you’re not out of pocket).
  • Excellent ratings and customer reviews.

Or, in their own words, check out their benefits and how they compare with their competitors.

We highly recommend their Titanium plans in particular because they offer the true “bumper to bumper” coverage we’ve already touched on. The quality of these plans is one of the main reasons we recommend CARCHEX.

And yes, as a CARCHEX partner, we do get a small cut if you buy from them. We partnered with them because they’re worth recommending, not the other way around.

Get a quote now:

 

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If you’d like some more information about choosing a warranty plan for your car, the folks at CarsDirect have put together a very comprehensive article with further details about the world of car warranties.

Header image courtesy of stevendepolo on Flickr.

Nathan Stretch Founder & CEO

Founder of the AutoTempest used car search engine, as well as SearchTempest.com. I do a bit of everything around here now, and may even get a chance to write some blog posts! Oh, and I drive a 2003 Z4 3.0i, but working from home I don't get to drive it much; 12 years old and it's got under 70k miles on it. I'll have to get working on that too...