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When to Choose an Extended Warranty for Your Vehicle

EXPECTED READ TIME: 7 MINUTES

You’ve got a lot riding on your car.  

To protect your investment and remain on solid financial ground if major issues come up, you may want to consider purchasing an extended warranty.

Read on to learn how these optional protection plans work and determine whether one makes sense for you.

Are Extended Car Warranties Worth It

What Is an Extended Warranty for a Car?

An extended warranty for a car is exactly what its name suggests: additional coverage you can purchase to lengthen the amount of time your vehicle is covered under a standard factory warranty. Extended warranties are sometimes referred to as vehicle service contracts or vehicle protection plans.  

Extended warranties function a lot like medical insurance for your vehicle. They’re designed to offset what could otherwise leave you with some hefty repair bills should major issues arise.

Here’s everything you need to know about buying a new car.

What Does an Extended Warranty Cover on a Car?

Generally speaking, an extended warranty covers the cost of repairs related to a mechanical or electrical breakdown on your vehicle. This often includes:

  • Engine
  • Transmission
  • HVAC system (heating, AC)
  • Electrical systems

It’s worth noting that most extended warranties don’t pay for routine maintenance (oil changes, tire rotation or replacement, new brakes, etc.) or damage caused by normal wear and tear. Depending on the plan you choose, roadside assistance may or may not be covered.

Depending on the plan you choose, roadside assistance may or may not be covered.

How Do Extended Vehicle Warranties Work?

First things first, when you buy a new car, it usually comes with bumper-to-bumper and powertrain warranties from the manufacturer.

  • Bumper-to-Bumper Warranties: Most bumper-to-bumper warranties last for three years or 36,000 miles and cover all of the vehicle’s mechanical systems and components, as well as onboard computers, the HVAC system, and various other electronics.
  • Powertrain Warranties: Powertrain warranties, on the other hand, guarantee the automobile’s engine and transmission against defects in workmanship. This coverage usually expires after five years or 60,000 miles.

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Once the manufacturer warranties expire for your vehicle, you’re left to cover the cost of any and all repairs. That’s when extended warranties are designed to kick in.  

In most cases, if something covered by an extended warranty breaks down and needs replacement or repair, you can take the car to an authorized shop and have it fixed free of charge or for the cost of the plan’s deductible. 

Extended warranties are sometimes referred to as vehicle service contracts or vehicle protection plans.

How Much Do Extended Vehicle Warranties Cost?

You can purchase an extended warranty through the dealer for roughly $2,000 to $3,000. They’ll usually fold the cost of the warranty into the loan, allowing you to pay for it over time.  

If that price tag has you choking a bit, consider extended warranty options from other sources. You might be able to find an attractive, reasonably priced alternative without going through the car seller.

You don’t have to purchase an extended warranty the same day you buy the vehicle.

It’s also a good idea to call a few finance and insurance managers at other dealerships in your area to find out what they charge for extended warranties. This will give you a good frame of reference and provide some leverage when negotiating (yes, extended warranties are negotiable).

Pros and Cons of an Extended Vehicle Warranty

There are a number or pros and cons to consider when thinking about whether to purchase an extended warranty for your car or truck.  

Pros Cons
Covers many costly repairs after regular warranties expire Adds to the overall purchase price of the vehicle
Can tailor coverage to meet specific needs and budget May limit coverage to approved repair centers or providers
Easy to purchase, whether through the dealership or with a third party Doesn’t cover the cost of all repairs, including routine wear and tear
Provides additional peace of mind Often goes unused, similar to car insurance

Should I Buy an Extended Warranty for My Car?

When deciding if you should purchase an extended vehicle warranty, ask yourself this question: If you run into a major car problem, could you afford to pay for it or would it throw you into financial chaos?  

Ideally, you’d have a cushy emergency fund to take care of unexpected repairs. However, if you don’t have a lot of money set aside for a rainy day (or none at all), an extended warranty can help protect your budget, keep you from taking on high-interest credit card debt, and provide some peace of mind.

Do you have enough saved for emergencies?

Purchasing an extended vehicle warranty may also be a good move if you:

  • Plan to keep your vehicle longer than the length of your factory coverage
  • Buy a newer car or truck that’s heavily equipped with computers and electronics
  • Purchase a make or model that has a history of being unreliable
  • Tend to worry a lot about the what-ifs
Ask yourself this question: If you run into a major car problem, could you afford to pay for it?

You don’t need an extended warranty when leasing a vehicle unless you plan to buy it outright once the lease period ends. A leased vehicle will remain under the factory warranty throughout the time you drive it.

Keep in mind that you don’t have to purchase an extended warranty the same day you buy the vehicle. In fact, it might be a good idea to sleep on the decision, particularly if you haven’t researched alternatives to the extended coverage plans offered by the dealer.

You don’t need an extended warranty when leasing a vehicle unless you plan to buy it outright once the lease period ends.

The Takeaway

Whether purchased from a dealership or a third party, extended warranties are designed to cover the cost of expensive car repairs that could otherwise climb into the hundreds or thousands of dollars. So, if you’re looking for a little extra peace of mind, a vehicle protection plan may be the add-on that keeps you riding worry-free in your car or truck for miles on end.

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