There’s one universal truth that every car owner can agree on whether you drive your grandpa’s hand-me-down junker or the hottest car fresh off the lot. Car troubles are the worst.
Unfortunately, sometimes no matter the car you drive, you’re not immune to car problems and the inevitable car repairs.
It’s likely the reason there’s a whole billion-dollar industry related to an extended car warranty. People don’t like to deal with it when their things are broken. For many, the idea of an extended warranty provides the added peace of mind that any needed repair will be covered should it arise.
But the question is, will all repairs get covered? Are extended warranties all they’re really cracked up to be? Read on to learn more about what to consider with vehicle service contracts and whether buying an extended warranty is actually worth the investment.
What Is an Extended Warranty?
An extended warranty is something you purchase for your car to protect you in the event your car needs repairs. The extended warranty, sometimes called a vehicle service contract, usually kicks in after the manufacturer’s warranty has expired.
Sometimes though, a manufacturer’s warranty and an extended warranty can overlap.
There’s a lot of differentiation between extended warranty plans, both by who is providing the coverage and what’s covered.
Do You Need an Extended Auto Warranty?
Before you’re in a position at a car dealership trying to decide on an extended warranty, consider your needs first.
Do you get nervous and squeamish at the thought of a broken-down car? If this is anxiety-inducing, you might appreciate the peace of mind you get from an extended warranty and knowing most repairs would be covered.
Consider how good you are at saving. If you have good self-control and know you can have a car emergency fund available, maybe you don’t need an extended warranty plan.
On the other hand, if you’re not a good saver and major car repair might bust your budget, an extended warranty might make sense for you.
How Does an Extended Warranty Work With a Brand New Car?
Every plan is slightly different, but most extended warranty plans kick in after a manufacturer’s warranty. So, first, your vehicle is protected by factory warranties, then after you’d use the extended warranty.
So, you want to first consider how long you’re likely to keep the car and then how many miles you typically drive. Once you know how many miles you roughly drive each year, you’ll be able to calculate how long the manufacturer’s warranty will last.
Then consider how long beyond that it’s likely you’ll own the car.
Remember, most manufacturer warranties are pretty comprehensive, covering bumper-to-bumper and powertrain systems on new cars. It’s not likely you’d need both types of warranties at the same time.
How Does an Extended Warranty Work With a Used Car?
If you want to buy an extended warranty for a used car to cover repair costs, you’ll want to look closely at exactly what’s covered under the plan. Not all extended coverage warranty plans are alike.
Extended warranty plans cover repairs, but they don’t cover all auto repairs or auto maintenance.
You’ll want to do your research on the used car and its historical list of potential problems. Consider the mileage on the car and how long you intend to keep the car.
This will help you to gauge the importance of an extended warranty for the used car purchase.
What’s Covered With an Extended Warranty?
When you look to purchase an extended warranty, you want to first consider what type of warranty is available. They are offered in two types, inclusionary warranty, and exclusionary warranty.
An inclusionary warranty covers only the items that are specifically listed. An exclusionary warranty will cover everything except the things it lists to specifically exclude.
Usually, an exclusionary warranty provides better coverage and is often pricier.
Be sure to look at the actual contract of any extended warranty policy to see what’s covered and not covered.
Most policies will provide powertrain coverage, including engine, transmission, and drive axles. Bumper-to-bumper coverage will usually cover steering, suspension, air conditioning and heating, and electronics.
What’s Not Covered With an Extended Warranty?
While you want peace of mind from the policy, it’s good to know what’s not covered too. Generally, wear and tear from natural use will not be covered. Other non-covered areas usually include:
- Routine maintenance like tire rotations or oil changes
- Weather damage
- Damage from reckless driving
- Accident damage
- Damage from lack of maintenance
Remember, you wouldn’t likely need warranty coverage for most of the above items listed since your auto insurance covers damages from accidents.
Selecting an Extended Warranty Plan
If you’ve decided an extended warranty is good for you, it’s still important to do your homework. Plans vary greatly.
First, you should know who’s backing the plan of your purchase. Is it the car manufacturer? Is it an independent company? If it’s independent, you want to research the experience of other customers. Did they actually get coverage and get reimbursed?
One important thing to understand about the plan is payment for repairs. Will the warranty need pre-approval for repairs? Will they pay the repair person directly, or will you need to pay and get reimbursed?
A very important consideration is what repair shop you can use with the extended warranty. Are you limited to only a few options? Do you have to take it to a dealer?
What happens if you’re traveling and need repairs?
You want to know specifics related to how and where your repairs would be handled before purchasing the plan. The plan is of little value if where you get the repairs is completely prohibitive for you.
Understanding Who Backs the Warranty and Why It Matters
When you buy an extended warranty, as was previously mentioned, you need to know who backs the warranty.
If you’re buying a certified pre-owned vehicle from a dealership, you might be getting a plan backed by the manufacturer. Often this is easier because you can then go to a dealership that carries that manufacturer brand.
If the warranty is backed by a third party, you want to ask some important questions. How long have they been in business? What have other customer experiences been like? Will the dealership you’re buying from honor the warranty from this company?
Benefits of an Extended Warranty
There are some real benefits in purchasing an extended warranty. Let’s take a closer look at some of the benefits worth noting.
When you select an extended car warranty, you can select what’s most important to be covered. Of course, you can vary comprehensive coverage. This also means you will likely pay more.
You can also get plans where you select what you want to be covered. For example, you might opt to cover the car powertrain, which often leads to the most expensive repairs.
Protect Your Budget
Most people select an extended warranty to protect themselves from an unexpected and expensive repair. There’s no doubt that an expensive repair can bust a budget.
As long as you have money set aside to cover your part of the deductible, which can vary from plan to plan, then an extended warranty can protect your budget.
There are people who will know something is potentially wrong with their car. They hear the noise or recognize it’s not running well. Yet, they avoid taking the car to the repair shop because they’re afraid of the potential huge bill that comes with a car repair.
When you know your repairs are covered, you can maintain better vehicle maintenance.
Peace of Mind
There’s always some risk in purchasing a car, especially a used car. You don’t really know everything there is to know about the car.
A huge perk of the extended warranty is the peace of mind it offers from the unknown about what could go wrong down the road.
Tailor for Your Needs
One feature offered by many third-party companies is the ability to tailor a plan that fits your needs. Perhaps it’s adding powertrain coverage beyond your manufacturer’s warranty mileage.
You can also research the history of the car and think about where a repair is most likely going to show up. You can also consider the length of time you plan to own the car and the mileage you drive each year.
Then tailor the plan, so you have the coverage you need.
Covering Those Big Ticket Repairs and Technology
Cars today are coming with more technology and more computer components. These are often the most expensive repairs. Knowing your potentially most expensive repairs would have coverage is important.
Paperwork and Payment
Knowing who takes the warranty is important for the paperwork and payment. If the warranty is honored at the dealership, they often handle all the extra paperwork and get payment. This makes the whole process so much easier for you.
Often plans that have this feature are a little more costly but worth it if you need to actually use the warranty.
Potential Negatives With Extended Car Warranties
Let’s also consider the potential cons of purchasing an extended warranty. You have to weigh whether these are worth overlooking to gain the benefits.
Extended warranty plans can be expensive. They vary based on the vehicle’s make, model, and age. You’re hedging a bet that as you make this investment at some point, you may need the repair.
The question you’ll have to grapple with is if the repair will be more costly than the actual warranty.
Potential to Not Cover All Repairs
Cars can be unpredictable. Is it possible you buy the warranty and then have a repair that won’t be covered?
Might Never Need It
Ultimately, you want a car that doesn’t need repairs. So, when you purchase an extended warranty, you’re preparing for a worst-case scenario.
You may invest in an expensive plan and then never use it.
Extra Perks of an Extended Warranty Plan
Again, when you sign up for a plan, look at the level of coverage offered. Some plans come with some extras.
They may not require an inspection of the vehicle before covering it. They might offer roadside assistance, including towing and gas delivery.
You may get some of this coverage other ways, so make sure you don’t jump on the warranty because of the extra perks you may already get through your auto insurance or auto club plan.
Questions to Consider Before Purchasing an Extended Warranty
Let’s take a closer look at some of the most common questions associated with car extended warranty plans. This might help you make a final decision if one is right for you.
What Is the Cost?
Cost is a big factor in any decision. You want to weigh whether the cost of the plan is better than a potentially expensive repair. Could you handle an expensive repair without the warranty?
Is It Worth It or Even Necessary for New Cars?
New cars come with manufacturer warranties. Often the whole reason you opt to purchase a new car is to avoid the breakdown. So, you need to weigh the likelihood that your new car would need repairs that wouldn’t already be covered under the existing warranty.
Is It Worth It for Used Cars?
Used cars are a different matter because often they don’t come with the same manufacturer’s warranty as a new car. Again, it’s smart to weigh the age of the car and the amount of time you’re likely to own the car. Then you can assess the potential for a big repair during that time period.
When Should the Extended Warranty Get Purchased?
The sooner you opt to buy a plan, the better. Plans cost more for older cars that have higher mileage.
Some dealerships will want you to make the purchase as part of your car purchase.
How Long Does the Coverage Last?
The length of coverage time is also negotiable, like what’s actually covered under the plan. It can be based on the age of the car, mileage, or a pre-established time period.
This is an important one to consider as you weigh how long you’ll likely own the car.
Can I Transfer the Warranty to Another Car?
Some plans allow you to transfer a plan to the new owner. This can be a selling point if you hope to resell your used car.
Often the plans will charge a minimal transfer fee to move the plan from one owner to another.
Extended Warranty Plan for Car Repairs
There’s no doubt that dealing with car repairs can be daunting. An extended warranty can help cover the costs of a repair when needed. As a car owner, you need to weigh whether the cost of the plan is worth the likelihood of actually needing it.
If you need help evaluating your car insurance needs, we can help. At LoPriore Insurance Agency, we want to make sure you have the insurance protection you need. Contact us today to set up a time we can discuss your insurance needs.