Are Extended Car Warranties Worth It?

How to judge whether you need an extended warranty or not

byAustin Fracchia|
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It's a big choice that many vehicle owners face after the new car factory warranty has expired: Should you extend the warranty for extra peace of mind? Extended car warranties have many benefits under the right conditions, but they aren't always necessary or even an option, depending on the age and condition of your vehicle. 

So, when you're trying to figure out whether an extended service contract is right for you, there are a few things you should think about. More importantly, knowing what an extended car warranty is and isn't is a must.

Many vehicle owners have misconceptions about the factory and extended warranties, especially when they do and don’t kick in to save you money.

The Basics of Any Extended Car Warranty

You don’t need to read the fine print or warranty consumer reports to understand the value of an extended warranty. The basic idea of any warranty is to save money when there are issues with the car. 

For manufacturer's warranties, the automaker itself tends to foot the bill under certain conditions. Usually, when there is a factory defect, this is when the factory warranty applies.

Extended car warranties work in a similar manner but tend to have a larger scope of issues they cover. In other words, you won't just need a factory defect to actually save money with an extended car warranty. This is particularly true if you go with a third-party extended warranty over a manufacturer’s extension plan.

The best thing about many extended car warranties is the level of customization they potentially give you. It's easy to shop around for different warranty options, particularly third-party providers, to see what plans they have and which ones you may be eligible for. 

This is also a good way to shop within a specific budget if money is a concern when buying an extended warranty.

Are Extended Car Warranties Worth It?

If this is the main question going through your head right now, we have some good and bad news. The good news is there is an answer; the bad news is “it depends.”

The worth of an extended warranty isn't always a guarantee, meaning you won’t always save money. In fact, the only way a car warranty will be worth something to you is if you save more money than you spend on the warranty itself.

There aren’t universal conditions where all extended warranties apply; these conditions tend to vary from plan to plan. You have to know what conditions may be most applicable to you and your vehicle.

For example, do you drive an older vehicle that is more prone to breaking down or having component issues? Do you want to save some money on repairs or maintenance? There are many extended warranty options that may be right for you.

However, If you drive a brand-new vehicle that may only experience the occasional factory defect, you may be spending more on the extended warranty. In this case, the original factory warranty, if it’s still in effect, may be the better option to keep before exploring any extended warranties.

How to Assess Extended Warranty Options

If you're really interested in looking at extended car warranties, you have to do your homework ahead of time. Ultimately, the choice to go with any extended warranty and what particular plan to choose comes down to value.

Value from a vehicle service plan comes in many different forms.

How Much Money Can You Save Elsewhere?

The tricky thing with many automaker’s extended warranties is the fact that they roll the cost into the purchase of a new or used vehicle. This can make it difficult to see how much you are actually spending on the extended warranty. If you have a car loan, you may also be spending more money, since you'll be paying interest on the price of the vehicle and the extended warranty together.

Third-party extended warranties, on the other hand, tend to be easier to assess in terms of costs. Reputable third-party providers, for example, should be able to give you a free quote ahead of time, giving you a good idea of the expenses and how you will be paying them.

More importantly, third-party warranty expenses are paid over the length of the coverage. This may be paid on a monthly or yearly basis, so you can manage the cost without getting yourself into financial trouble. Good third-party warranty providers will also make it easy to work with your financial needs before you buy anything.

The Scope of the Coverage

Any kind of vehicle warranty or service plan is going to have its limitations. Traditionally, automotive warranties are more limited in the types of issues they cover and how long they last. Factory defect issues, for example, are the industry standard; original and extended factory warranties only apply when there is a problem caused by the factory itself. This is true for both powertrain and bumper-to-bumper warranties.

Third-party warranty providers can offer a larger scope of services and issue coverage. You will find many third-party providers can offer some kind of vehicle service plan or auto repair insurance for things like normal wear and tear, incidental damage, or other unexpected problems that can cost a lot of money.

Customization Options

One major value of any extended warranty is the ability to choose the specifics of that coverage. Unlike most factory warranties that are limited to a single set of terms, you will find many automakers and third-party warranty providers give you more customization options. 

You may be able to choose the specific length of the warranty in terms of the years and miles it will last, the services the warranty includes, and different payment options.

Since every vehicle and driver has different needs from an extended warranty, you can often find something that works for you in the long run from a third-party warranty provider. Better still, good third-party providers make it easy to work with them, often through representatives, to get all the important details you need to make the final decision. 

Extra perks like towing to a nearby repair shop and general roadside assistance also help to save money. Any kind of maintenance plan that offers help on common oil changes and other car repairs or services is also valuable for keeping the repair bill down.

Getting the same level of service from an automaker usually requires going to a dealership in person. 

Making the Right Choice

There isn’t a single correct option you can choose when finding the right extended car warranty or even choosing whether to buy one at all. Instead, the particulars of the warranty itself and your own vehicle/driving needs are what matter most.

So, take the time to think about these needs, research different plan and provider options, and think about what is most important to you.