When you’re buying a new vehicle, it almost always comes with some form of warranty. That’s true for brand new cars, certified pre-owned models, and more. Towards the end of the process, you’ll more than likely be asked if you want an extended warranty as well. Do you need it, though?
The answer depends on the buyer. Some would never opt for the extended warranty, while others enjoy the peace of mind it brings. That peace of mind comes with an extra cost, of course. To decide for yourself if an extended warranty is something you need, here are the key factors to consider.
Length of Ownership
A three-year, 36,000-mile warranty is the minimum you’ll find on all brand-new cars. For plenty of manufacturers, the bumper-to-bumper to warranty lasts even longer. An extended warranty goes into effect after that period of time.
If you only plan on keeping your car for a shorter period of time than the factory warranty, there’s no need to pick up extended coverage. If this new car is something you plan on driving until it’s last leg, then an extended warranty is worth considering to help you cover the cost of repairs.
Will You Use It?
Warranties only cover specific repairs. That doesn’t include regular wear and tear, oil changes, new brakes, tires, etc. With that in mind, you have to consider if buying the warranty or bundling it into your car payments makes financial sense.
A Consumer Reports survey had found that drivers pay far more for their extended warranties than they get back in benefits. If you find the right dealer, they’ll tell you that few people end up needing the extended warranty.
If you’re worried about manufacturer defects, then there are better avenues to pursue like this Lemon Law attorney in San Francisco. Recalls are always covered by the manufacturer, as well. So, you need to ask yourself if that bumper-to-bumper coverage is something you’ll actually need down the road.
The majority of cars on the market feature a powertrain warranty that takes effect after the car’s bumper-to-bumper warranty ends. While that’s a lighter version of an extended warranty, it’s worth keeping in mind when looking at the cost of additional coverage.
Picking up your extended warranty while buying a new car makes things simple. You just roll it into your monthly payments and you’re done. However, you’re now paying interest on something you won’t be able to use for at least three years.
Opting to buy the extended warranty a few years down the road is a smart option. Not only does it save money, but you’ll know how the car has been and if it’s troublesome enough to need that extra coverage. Plus, you can shop around for the best price instead of being stuck with the dealership’s cost.
The last aspect to consider is, even if you do end up using it, will the cost be worth it? The average cost for an extended warranty is between $1,000 and $3,000. So, say you spent $2,000. A few years later, you’re hit with two repair bills that add up to $1,000.
While $1,000 is a hefty bill, you would still be saving $1,000 compared to the cost of the extended warranty. There are times when additional coverage makes sense, especially if your car proves to be troublesome, but most people would save money having not bought the extension even with repairs that fall outside of the factory warranty.