While extended warranties give many drivers peace of mind, some drivers will never need to use them, leading consumers to ask “Are extended warranties worth it?” With this guide to extended warranties, you’ll know about the advantages and drawbacks of having this protection. Also, you’ll have the information you need to decide whether an extended warranty is best for you.
What Is an Extended Warranty?
The car, truck, or SUV you purchase should have a warranty covering necessary repairs related to manufacturing defects or faulty materials. An original warranty typically lasts up to five years of ownership or 50,000 miles of driving, whichever comes first. You can purchase an extended warranty that extends coverage to 75,000 miles or 100,000 miles if you want to go beyond your initial protection.
What Do Extended Warranties Cover?
While some extended warranties cover the same parts as the original warranty, that isn’t always the case. Before purchasing an extended warranty, you should always read the fine print to see what it covers. New vehicle and extended warranties typically don’t cover routine maintenance like oil changes, tire replacements, and brake replacements. Some luxury brands may offer roadside assistance as part of their warranty packages, but in most cases, it’s a separate purchase.
Manufacturer Extended Warranty vs. Third-Party Extended Warranty
If you want extended warranty coverage from your car’s manufacturer, you must purchase it before your original warranty expires. However, if you’re not sure you want an extended warranty, you can wait and buy coverage from a third-party provider any time you want. Here is a comparison of manufacturer warranties and third-party warranties:
- Parts: A manufacturer warranty ensures that your vehicle gets repaired using genuine factory parts, while third-party warranties only cover repairs using aftermarket parts.
- Technicians: Manufacturer warranties ensure that a factory-trained technician makes the repairs. A third-party provider uses a network of technicians who may or may not have the training to work on your specific vehicle.
- Repair shop options: Manufacturer warranties stipulate that your vehicle’s repairs must happen at an authorized dealership. A third-party warranty lets you take your car to any reputable repair shop of your choosing.
- Selling your car: If you decide to sell a vehicle covered by a manufacturer warranty, the warranty automatically transfers to the new owner, enhancing the vehicle’s value. With a third-party warranty, you might have to pay a transfer fee.
- Refunds: Manufacturers make it easy to cancel your extended warranty and receive a prorated refund. With a third-party provider, you might have to pay a cancellation fee and may not receive any refund.
- Customer satisfaction: Drivers who purchase a manufacturer’s extended warranty report higher satisfaction than drivers who go with third-party providers.
- Price: A manufacturer’s extended warranty typically costs between $1,000 and $3,000. Third-party warranties are usually around the same price.
- Out-of-pocket expenses: Sometimes, your manufacturer’s extended warranty may require you to pay a deductible. Some third-party protection plans also include a deductible, but you may have to pay the mechanic out-of-pocket and get a reimbursement from your provider.
Types of Extended Warranties
Manufacturers and third-party providers sell different levels of extended warranty coverage, including:
- Bumper-to-bumper: A bumper-to-bumper warranty offers the most comprehensive protection of any extended warranty plan. It covers all your vehicle’s parts and systems, excluding routine maintenance like oil changes and everyday wear and tear, such as worn-out brake pads.
- Powertrain: A powertrain warranty covers your car’s engine, transmission, and any power components that travel to the vehicle’s wheels.
- Drivetrain: The drivetrain warranty covers the same parts as a powertrain warranty, excluding the engine.
- Wrap warranty: A wrap warranty supplements your powertrain warranty, effectively providing bumper-to-bumper coverage.
- Corrosion warranty: A corrosion warranty pays for damage caused by rust.
What Are the Benefits of an Extended Warranty?
Here are some benefits of purchasing an extended warranty:
- You can save money on unexpected repairs. An extended warranty can save you money on sudden, unexpected car repairs, especially if you drive a luxury vehicle or your vehicle has a lot of mileage.
- You will have peace of mind. Many drivers prefer to purchase an extended warranty for this reason alone.
- An extended warranty has customizable options. If you get an extended warranty from your vehicle’s manufacturer, you get a coverage plan tailored for your car’s specific needs, while third-party providers offer several customizable options. Either way, you can choose the best plan for you and your vehicle.
Are There Any Drawbacks to Purchasing an Extended Warranty?
Before purchasing an extended warranty, consider the following:
- Will you ever use it? Many drivers who buy extended warranties never use them. If you use your extended warranty, you might find that the repairs cost less than the warranty.
- Is there a depreciation clause? Some extended warranties include depreciation clauses, meaning that your provider or car manufacturer will only pay for a portion of repairs instead of the entire cost, depending on your vehicle’s mileage.
- Is your warranty provider reliable? Under an extended warranty, the manufacturer or third-party provider is responsible for paying for warrantable repairs. If your provider’s business folds, you’re stuck with a useless warranty.
Here’s the Bottom Line: Are Extended Warranties Worth It?
After weighing the pros and cons of extended warranties, you may decide it’s worth purchasing one, especially in the following situations:
- Your original manufacturer’s warranty is about to expire, and you want to continue your coverage.
- You don’t have any emergency savings available to pay for unexpected repairs.
- You want the peace of mind that comes with extended coverage.
Purchasing an extended warranty might not make sense if:
- You have lots of time left on your original manufacturer’s warranty.
- You have emergency savings that you can use for surprise repairs.
- Your vehicle is reliable, and it doesn’t have any issues.
- Your car is old or has high mileage because warranties only cover vehicles up to a certain age and mileage.
If you decide to purchase an extended warranty, read the fine print to ensure that it provides necessary coverage and you don’t encounter any surprise expenses.
It’s easy to see why some drivers purchase extended warranties while others forgo the option of extra coverage. Hopefully, this guide will help you decide which choice is right for you, and you can drive your car, truck, or SUV for a long time.
At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.