Are Extended Car Warranties Worth It?

Whether your manufacturer’s warranty is about to expire or you’ve just purchased a new or used vehicle, you may be wondering about extended warranties. Are extended car warranties worth it? What do they cover, anyway? Will they save you money or will you pay more than the benefit you receive?

In this guide, we’ll take a look at extended car warranties and whether these service contracts are worth the price you’ll pay. 

How Do Extended Car Warranties Work?

Every new vehicle comes with a manufacturer’s warranty. This warranty is an agreement which states that if something go wrong with your car, the manufacturer will cover the cost of the repair. 

You may need to bring your car back to the dealership or to an approved garage, but you will rarely (if ever) pay out-of-pocket for repairs that are covered under your warranty. This is the case for, on average, 36,000 miles or three years. 

Once your warranty expires, your extended warranty kicks in. An extended warranty is like insurance for your vehicle that will cover the cost of repairs should they become necessary. You may be responsible for a deductible, or the service may be free of charge to you. Either way, the repair is generally less expensive than if you were to pay full price. 

Different warranties cover different repairs. Some may be basic, covering just the drivetrain and other systems. Others may be comprehensive, covering the “details” like your door handles and windows. 

Are Extended Car Warranties Worth It?

Extended warranties are a great idea in principle.

Imagine you’re about to head home from the grocery store. You turn your key in the ignition and thunk—you hear a sound that absolutely should not be coming from your engine. 

Engine repairs can cost thousands upon thousands of dollars. With an extended warranty, however, you may simply pay a deductible and then drive away in your repaired vehicle. 

Think to yourself, however, what is the likelihood that this will happen to you? How many garage bills will you accrue over the five or so years that your warranty is in place? Would you be readily able to pay for those repairs out of pocket?

Answering these questions will help you determine whether an extended car warranty is worth it to you. In reality, only about 45% of people who purchase extended warranties use them. Only about a quarter of people who purchased service contracts would do so again.

So, are extended car warranties worth the price? Usually not. Before you make your decision regarding an extended car warranty, consider very carefully how likely you are to actually use the service contract. 

Extended Warranty: Know Before You Buy

Before you plunk down your hard-earned cash on an extended warranty, you’re going to need to know some specifics about your contract. First things first: know that extended warranties are service contracts and not, in fact, warranties. 

The difference between a warranty and a service contract is simple: A warranty is a promise to repair anything that may go wrong while a service contract is usually more limited. Not all repairs may be covered, you may pay a deductible, and you may be limited to certain service providers. 

Consider the following as you decide whether an extended car warranty is worth it:

  • Are garages and dealerships convenient to you? What if you live in Tulsa but your car breaks down in Providence? Will you be able to find a repair shop?
  • What is included in your service contract? Consider not only the repairs, but also the “extras” like towing and roadside assistance. 
  • How long will your service contract last? Find out when your warranty will expire, both in mileage and in years. 
  • What is the deductible you’ll pay? Imagine you have a $2,000 bill for transmission repairs. How much will you pay out of pocket? And is there a maximum amount that your service provider will pay for your repairs?

Once you’ve explored the answers to these questions, decide whether your service contract is worth it to you. If you don’t generally have the money to pay for repairs upfront, an extended warranty could be a good idea. If you have a reliable vehicle and aren’t worried about upfront repair costs, reconsider the value of an extended car warranty. 

Summary: Is an Extended Car Warranty Worth It?

Are extended car warranties worth it? The answer to that question depends entirely upon you, your vehicle, and your driving habits. Ensure that you research your warranty options fully before you pay for a service contract that won’t benefit you.