Congratulations on your new car! There are few experiences more thrilling than hitting the road in a fresh-off-the-lot vehicle. Your car probably came with a bumper-to-bumper warranty, which means that should anything go wrong, the repair costs will be low cost or no cost to you at all.
But what happens after that warranty expires? Should you buy an extended warranty on a new car? In this guide, we’ll look at extended warranties, what they cover, and whether this coverage is right for you.
What is an Extended Car Warranty?
Almost every new car sold in the United States comes with a vehicle service contract. This warranty ensures that you won’t be financially responsible for defects in your automobile such as in the engine or the electrical system.
Your warranty will generally last for between three to five years, or between 36,000 or 60,000 miles, whichever comes first. After that, your warranty is expired, and you’re no longer covered.
So what happens when the odometer hits 36,001? Are you now fully responsible for all vehicle repairs? The short answer is “yes.” Unless you have an extended warranty, that is.
An extended warranty can be purchased at the time you buy your vehicle or any time before your manufacturer’s warranty expires. Your extended coverage can last until your vehicle hits 200,000 miles-or even longer. And while your coverage may not be comprehensive, the warranty can certainly save you from expensive out-of-pocket repair costs.
Should I Buy an Extended Warranty on a New Car?
Extended warranties aren’t for everyone. They can be expensive, and that cost becomes even higher when your warranty is rolled into the financed amount for your vehicle. In fact, many extended warranty owners say they ultimately pay more for the coverage than they receive in benefits.
There are groups of drivers who may benefit from an extended warranty, however. Individuals who drive more than the average are one of these groups. If you anticipate that you’ll surpass the 36,000 miles of your original warranty quickly, an extended warranty may be a good option.
People who don’t generally have money on hand to deal with expensive vehicle repairs may also see the value in an extended warranty on a new car. While you may have to pay a deductible to fix your car, the out-of-pocket cost will usually be considerably less than the repair itself.
When deciding whether to purchase an extended warranty for your vehicle, be sure to consider all the costs. Familiarize yourself with the upfront costs, the monthly costs (don’t forget interest if your warranty is rolled into your loan), deductibles, and other expenses. Weigh these costs against whether you will likely use the extended warranty, then base your decision on that.
Alternatives to an Extended Warranty
Many dealerships will pressure you to purchase an extended warranty on the day you purchase your vehicle. Don’t make this decision unless you’re absolutely certain you’ll benefit from the coverage. After all, you have other options for car repairs.
First, you may consider setting aside money each month-the amount you’d pay for your car warranty-and using it for unexpected car repairs in the future. Not only will you not pay interest on that money, you may also earn interest. If you don’t use it for vehicle repairs, it can be a down payment on your next car.
Secondly, you can always just wait to buy an extended warranty. You can wait until you’re approaching the end of your original coverage to shop around for third-party providers, or to contact the dealership about purchasing coverage. You won’t be able to include the car warranty in your vehicle loan, but you will save on interest charges.
Finally, consider buying a more reliable vehicle. If you sincerely anticipate needing an extended warranty, evaluate whether you’re making a sound purchase decision. Does your vehicle have a reputation for unreliability? Normal wear and tear on your car will be inevitable, but large and expensive repairs shouldn’t be the norm.
Only you can decide whether you should buy an extended warranty on a new car. Be sure to weigh the costs and the risks, as well as consider the alternatives to an expensive service contract.
Summary: Extended Warranties
If you’re deciding whether you should buy an extended warranty on a new vehicle, you certainly have a lot to consider. While extended vehicle warranties aren’t for everyone, they may give you a bit more assurance that you’ll be able to afford repairs after the original warranty expires. It’s peace of mind that extends beyond the factory warranty and could save you a small fortune in the event that you need extensive repairs.
The only question is whether or not that peace of mind and additional cover is worth the extra cost.