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Is an extended car warranty necessary?
Consider your car's reliability rating and average repair costs first.
An extended warranty covers repairs after your manufacturer warranty runs out — but they’re often considered a waste of money. Weighing the pros and cons can help you decide if it’s right for you before you add another couple thousand dollars to your car purchase.
How do I know if I need an extended car warranty?
If you’re like most people, you probably won’t use an extended car warranty. And even if you do use it, it’s unlikely you’ll get the full value out of it.
Around 55% of car owners didn’t use their extended warranty despite the high price tag, according to a 2014 Consumer Reports study. And those that did use the extended warranty rarely made up for the initial cost, losing about $375.
But the numbers depend on your car. When determining if you need an extended warranty, check your car’s reliability rating and its average repair costs. If it looks like you might actually use your extended warranty — and save money overall — it might be worth investing in one.
3 questions to ask before getting an extended car warranty
Compare the potential savings against the risks by asking yourself these three questions before saying yes to an extended car warranty:
1. How likely is it my car will need repairs?
When researching potential cars, look up reliability ratings. If you opt for a car rated as more reliable, you may be able to skip out on an extended warranty without too much regret. But if the car you’re purchasing is known to need frequent mechanical repairs, then an extended warranty could help you save in the long run.
2. How much will it add to the total cost of my car?
Extended warranties don’t come cheap, with many priced in the $1,000 to $3,000 range. If you choose to roll the cost in with your car loan, you’ll have to pay interest on that amount. This may only be a few extra dollars a month, but over the life of your loan, it could be hundreds.
Since you typically have a few years to purchase an extended car warranty, it may be smart to hold off on buying it and create a savings account to cover the amount. If you go with a high-yield savings account, you could even make money in the process.
3. What is the deductible policy?
Every extended car warranty has its own deductible structure. Some charge per repair, others per service visit. This means you could still pay $100 or more out of pocket when you bring your car to the mechanic. If you don’t have a repair extensive enough to even meet the cost of the deductible, you may find that you don’t get much — if any — use out of your extended warranty.
Where can I get an extended car warranty?
Most manufacturers offer extended warranties, as well as third-party companies that work through dealerships and financing companies.
A manufacturer extended warranty is typically more expensive, but it comes with a few benefits. Not only will it be easier to get a component covered, you’re more likely to receive genuine parts. Manufacturers are also more likely to approve repairs faster.
A third-party extended warranty often comes with a lower price tag. But the downside is that they tend to have higher deductibles and won’t cover extensive repairs. You may also have to visit a specific mechanic or settle for aftermarket or refurbished parts. If you’re buying a used car, a third-party extended warranty may be the only choice you have.
Can I get an extended warranty on a used car?
Yes, but it may not be necessary if you’re buying a newer used car or a certified preowned (CPO) car with its own warranty. Many manufacturers allow their warranties to be transferred to a second driver, which means a newer car with low mileage may still be under the same warranty as when it was first purchased.
But if your car is older or the original warranty wasn’t transferable, then it may be worth looking into an extended warranty.
What other warranties can I purchase for a new car?
Beyond an extended warranty, dealerships and manufacturers offer a few other warranty programs to help keep you covered. These aren’t always the best deal, though. Before you take the plunge, compare the costs against the likelihood that they’ll actually be used.
- Roadside assistance. Roadside assistance is one of the most popular additions to any car purchase, but that means you have plenty of options to choose from. Check your insurance policy and loan contract to see if it’s already included before you pay for coverage you already have.
- Rust or corrosion warranty. Unless you’re buying a much older car, this may not be worth it. Many manufacturers offer standard rust and corrosion warranties that last up to a decade — no matter how many times the car has changed hands. Check your car’s original warranty to see if you’re already covered before purchasing this add-on.
- Federal emissions warranty. Some manufacturers are beginning to include this with their standard warranties, but it may still be treated as additional coverage by dealerships. This type of warranty can help ensure your car meets the EPA standards for emissions, though you’ll want to check what specific defects are covered before you purchase it.
Some of these warranties may even come standard with some manufacturers. You can check out our guide to car manufacturer warranties to compare coverage offered by different automakers.
Compare car loans for new and used cars
When you’re nearing the end of the sales process, don’t let sweet talking drag you into an extended warranty you don’t need. Keep the questions rolling and make sure it’s something you actually want before signing the dotted line. Learn more about how extended car warranties work with our guide.
Ready to finalize your car sale? Compare your car loan options to ensure you’re getting the best deal.
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