Are Extended Car Warranties Worth It?

When shopping for a new car, you may be offered an extended car warranty. But should you take it? After all, if things go wrong, it could prove costly to cough up for repairs, so making sure you have the right warranty could really pay off in terms of money and peace of mind.

Most new or certified pre-owned cars sold by dealerships will come with a standard warranty from the manufacturer, but you may also choose to purchase an extended warranty plan to gain protection for a longer period, or to include extra repairs.

Your car’s age, brand, model, and your plans for how long you’re anticipating keeping the vehicle, will all affect whether taking out an extended warranty is worth the higher cost. Essentially, you’ll need to decide if potential repairs could cost more or less than the price of your extended warranty. Here, we walk through all the options to help you weigh up the benefits of an extended warranty.

What is an extended car warranty?

An extended car warranty might also be known as a “vehicle service contract”. It’s an agreement between you and a third-party provider in place to offer protection over and above the standard manufacturer’s warranty. Extended warranties can be purchased at any time, when buying a new car, for example; or to add a level of cover to an older car, when the original manufacturer’s warranty expires, say. They will often cover aspects of breakdown and repairs that a standard warranty won’t, and these can sometimes be tailored to your particular concerns.

READ NEXT: Average Miles Driven Each Year

What does an extended car warranty cover?

Extended car warranties vary according to the policy you take out, but can often cover the following:

• Engine
• Transmission
• Gaskets
• Tech
• Rust
• Roadside assistance and/or towing
• Tires (except wear and tear)
• Batteries
• Trip insurance due to car problems
• Rental car coverage

What isn’t covered under an extended warranty?

Everyday wear and tear, or problems caused as a result of you failing to maintain your vehicle properly, aren’t usually covered by an extended warranty. You’re always responsible for keeping up with regular servicing at an approved garage, as well as for maintenance such as keeping the oil topped up, and driving appropriately – all of which can void a warranty if not observed.

How much does an extended car warranty cost?

As a ballpark figure, an extended car warranty can cost around $100 a month. This figure can vary widely from one provider to the next, the level of cover you choose, and other factors. You should bear all of this in mind and consider that the average claim is $850.

What affects the cost of car warranties?

The price quoted for an extended car warranty is subject to several variables. In terms of the plan, the cost can be affected by the duration of cover, the level of cover required, how much deductible you’re willing to pay, and who is providing the plan. Shop around for a suitable plan, obtaining quotes from dealerships, auto clubs, and insurers.

The vehicle in question will also affect the quote provided and will take into account factors such as:

• Age of the car
• Reliability of the car brand
• Current and annual mileage
• Whether your manufacturer’s warranty is still valid
• Where you live

READ NEXT: Which Gender Pays More for Car Insurance?

Extended car warranty cost calculator

Benefits of extended car warranties

Much of what’s provided by an extended car warranty comes down to peace of mind. Vehicle repairs can be expensive, and knowing that you’re covered by paying a flat monthly or annual fee can be tempting for many people – even if you end up paying more than any potential repairs in the long run. Of course, the alternative would be to simply pay the warranty fee into your own savings pot in case of emergency; but this doesn’t suit everyone.

Another benefit of an extended warranty is that if it’s provided by the manufacturer then you have the reassurance of knowing that all repairs will be carried out by a mechanic trained in your vehicle brand, and that all parts will be straight from the manufacturer, with no corner-cutting.

Drivers with high annual mileage may also find an extended warranty beneficial since most standard warranties have a limit. If you’re considering selling your vehicle in the near future, you should check your particular cover; but some extended warranties are transferable to the new owner, which means you may achieve a better resale value.

READ NEXT: The 25 Most Sold Cars in the USA

Types of car warranties

There are two main types of car warranty, as we’ve already outlined above. The manufacturer’s warranty, which comes as standard with new or certified used vehicles, covers basic repairs if the vehicle has been properly maintained, but excludes several issues such as rust, interiors, and tech. The terms of a manufacturer’s warranty will depend on the brand, but will be limited to a few years and up to a certain mileage.

An extended warranty will include all of these things once the manufacturer’s warranty has expired, covering additional repairs, too, such as wear and tear and tires, depending on your level of cover.

Other warranties, which may or may not be part of an extended or manufacturer’s warranty, include:

• Bumper-to-bumper warranty – Comprehensive warranty covering all parts.

• Roadside assistance – Your provider will pay out for breakdown emergencies and may cover an alternative vehicle if yours is in the garage.

• Restraint systems – Covering damage to seat belts and airbags.

• Corrosion warranty – Rust protection.

• Emissions warranty – To cover components involved with limiting your car’s emissions.

• Engine warranty – Protection against engine breakdowns.

• Powertrain warranty – Covers all the mechanics that work to move the car.

• Hybrid and EV component warranty – Covers any parts specific to hybrid and electric vehicles.

Are extended car warranties worth it?

It really depends on the reliability of your vehicle, the age of your vehicle, your plans for your vehicle, and what you’d potentially be prepared to pay out yourself for unexpected repairs. The older and less reliable your vehicle, the more it makes sense to protect yourself against things going wrong. And for many people, the peace of mind offered by investing in an extended warranty can be invaluable.

Extended car warranties FAQs

Where should you get an extended car warranty?

An extended car warranty can be purchased directly from the manufacturer or dealer, or you may prefer to source your own protection via an independent provider.

When should you get an extended car warranty?

Usually, you’d purchase an extended warranty just before the manufacturer’s warranty expires; this could be anywhere between three and seven years after purchase. Otherwise, if you’re unhappy with the level of cover provided by the manufacturer’s warranty, an extended warranty can protect your peace of mind for wear and tear, for example, and customised to cover other extras. If you’re buying a used car that’s out of warranty, you should purchase an extended warranty to cover any repairs.

Cancelling car warranties

Occasionally, you may experience buyers regret after purchasing your warranty; perhaps the extra cost is causing concern or you didn’t read the small print properly. Most car warranty providers offer a cooling-off period of around 14 days for you to change your mind and cancel. Once this period has elapsed, you’d need to consult your particular contract for its cancellation terms – and it’s unlikely you’d receive a full refund; your provider would consider how long the vehicle has been under its cover and the mileage accumulated.

What voids an extended car warranty?

As with all warranties, extended warranties can be invalidated by not maintaining your vehicle as stipulated. Be sure to have your car serviced on time at approved garages, and maintain the usual day-to-day components to run your vehicle effectively. Improper use (speeding, dangerous driving, and more) and exceeding the agreed annual mileage will also result in your cover being void.