Pros and Cons of Buying an Extended Auto Warranty

Is it Worth it?

Buying a new car is always an exciting but often stressful experience. Most people would rather give up the best things in life than negotiate with a dealer. Not only do you have to negotiate with multiple dealers, finding the best option also requires hours of research and price comparison. So by the time you sign your documents and drive your new car off the lot, buying an extended car warranty would be the least of your concerns. This is very common among car shoppers.

The purpose of this article is to help you understand how extended car warranty works and if it’s a good investment for you in the long run.

How Does Extended Car Warranty Work?

There are two types of warranty: original manufacturer warranty, or OEM, and an aftermarket warranty offered by a third-party vendor.

An extended OEM warranty often mimics what’s covered by the original “bumper-to-bumper” manufacturer warranty with some additional benefits such as roadside assistance. So if your car breaks after the original warranty expires, repairs will be made at no cost to you.

Third-party, or aftermarket warranty, is similar to OEM but often comes with some exclusions. The biggest limitation of a third-party warranty is that it includes strict limitations on where you can get your car fixed without any guarantee that the OEM-certified parts will be used. You will most likely buy an extended warranty from the third-party provider if you are looking for savings as third-party warranties usually cost less than those offered by the OEM.

Pros of an Extended Car Warranty

It Reduces the Cost of The Repair

Different dealerships offer different warranty prices. Their cost will vary based on the model, make and age of your car which is often rolled into your car payments, if you choose to finance your vehicle. Since warranty ensures you against having to pay for repairs, the out of pocket cost of each repair will be much less than what you’d pay if you didn’t have the warranty at all.

It’s Customizable to Fit Your Needs

Normally, dealerships have a hand full of warranty plans you can choose from. While the extended bumper-to-bumper warranty covers almost all the repairs, it is also the most expensive one. So you could choose to opt for powertrain instead. Powertrain warranty covers the parts of a car that provide power and make it move, which is where the majority of the repairs will come from anyway. You can also choose how long you want your warranty to last.

It Gives You Peace of Mind

Once you pay for the extended warranty, you can rest assured that you won’t have to pay for any major repairs out of pocket. And if your warranty provider offers a fast and smooth claim experience, you won’t have to worry about having to go through the stress of finding a good mechanic or shop around for parts. Your dealer will take care of everything for you.

Cons of an Extended Car Warranty

Service Provider Limitations

As mentioned above, warranties offered by a third-party provider are often limited to the list of repair shops that partner with your provider. These shops are most likely located in the same area, so if you ever decide to move, you may not be able to find another partner shop in your new location.

It’s Often A Gamble

No one can guarantee that your car will need a repair anytime soon, so you may not even need a warranty. If your car hasn’t acquired any repairs under your extended warranty, you will probably lose hundreds of dollars in monthly payments. And if you’ve opted in for financing, you will also end up paying interest on the unused warranty.

Extended Warranty Doesn’t Cover All The Repairs

We recommend to thoroughly read the fine print when you sign an extended car warranty contract. It lists all the exclusions that aren’t covered such as parts, systems and major repairs. Additionally, if you fail to follow service intervals correctly or choose to install parts that are not factory approved, your warranty can be voided.

So there, you have it: the pros and cons of buying an extended auto warranty. While there is no right or wrong answer as to purchasing an extended warranty, remember to do your research and consider how much risk you can take. And always ask your dealer the right questions so you could make an educated decision.

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