Is an Extended Car Warranty Worth It?

When something happens to your vehicle's engine or transmission, an extended car warranty may pay for its repairs. If your car's original manufacturer warranty is about to run out, you're probably trying to decide if buying an extended warranty is worth the cost.

You'll have the option to buy a warranty from your vehicle's manufacturer or a third-party provider. You'll also be able to choose from several warranty options so you can cover the repairs that concern you most.

While an extended car warranty or vehicle service contract has a lot to offer, the answer to whether you should buy one is tricky. An extended car warranty isn't the right choice for all car owners. For example, some warranty plans are very expensive. Or, maybe you're not planning to keep your car much longer. In these cases, a warranty is probably not the way to go.

Is an extended car warranty worth it? Before you commit to an extended warranty, you should keep a few things in mind.

What Does an Extended Car Warranty Cover?

Extended warranties cover the major components of your vehicle, including the engine, transmission, gaskets, and axles. In a way, an extended warranty can act like an insurance policy since you pay a pre-determined deductible for necessary repairs to these parts of your car. If your car is in compliance with the required maintenance schedule, your repairs will be covered if you take your car to the specified auto shop.

Some extended car warranties also include roadside assistance. Roadside assistance includes services like towing your vehicle from the side of the road to an auto shop or bringing you a tank of gas if you're stranded. Roadside service also covers assistance with flat tires and dead batteries.

An extended warranty is also beneficial if you have to stop your trip due to car issues. For example, a warranty could cover reimbursement for a rental car or for hotel rooms you have to cancel. If you travel frequently, a warranty with trip interruption coverage could be a great deal.

Keep in mind that extended car warranties don't cover regular maintenance or wear-and-tear damage. Additionally, you could void your extended car warranty if you don't take your car in for regular maintenance. If you aren't able or willing to stick to the schedule, the extended warranty is probably not worth it.

When Can You Get an Extended Car Warranty?

If you're considering an extended car warranty, you need to know if you're eligible to buy one in the first place. In most cases, you'll be offered an extended warranty by the manufacturer when the original factory warranty expires. At this point, you can choose to purchase the policy from the manufacturer or find a third party you'd rather buy from.

You can also purchase an extended warranty through a manufacturer on the day you buy a new or used car. The paperwork should detail exactly how much the warranty costs and what kind of warranty you're paying for.

Of course, you can buy third-party extended warranties whenever you'd like. These companies have their own stipulations for when you're eligible to buy a new warranty.

Should You Buy an Extended Car Warranty from a Vehicle Manufacturer?

Buying a car warranty from a manufacturer offers some benefits. For instance, your repairs will be completed by a factory-trained mechanic, and all replacement parts will be from the manufacturer. You can trust that the repairs are done by somebody who is familiar with your vehicle.

If you sell your vehicle, you'll also have the opportunity to easily transfer that car warranty to the vehicle's new owner. This could be a great selling point for a private party who wants a reliable vehicle. It could even slightly increase the value of your car.

The downside to this option is that you have to take your vehicle to an official dealership for repairs. If you don't live near a dealership, this could make repairs and maintenance more difficult.

Ultimately, buying an extended warranty from the manufacturer is a good idea in some situations. For example, you might consider this option if you have a unique car or only trust the dealership to handle repairs.

Additionally, your local dealership may be more suited than any other local mechanic to fix your specific car, especially if it's a unique vehicle, like a sports car or hybrid.

Should You Buy an Extended Car Warranty from a Third Party?

A third-party extended warranty also offers a few benefits. You may have more mechanic options to choose from because you don't have to take your car to a dealership for repairs. You could also have a broader list of authorized auto repair shops that can take care of your vehicle, so you don't have to worry if you live far from a dealership.

Keep in mind that even if you buy a third-party warranty, you may still be required to have your repairs done at an authorized provider. Additionally, the repairs may be completed with aftermarket parts.

You can also transfer a third-party warranty when you sell your vehicle, but there's a catch. While you can transfer the warranty to the next owner of the vehicle, you may have to pay a fee to do so. As a result, transferring the warranty may be less of a selling point.

When Is an Extended Car Warranty Worth the Cost?

Extended car warranties are a good idea for many drivers, but not everybody will see the same benefit. You should ask yourself a few questions before you commit to a plan. These questions include:

Is Your Vehicle Unreliable?

An extended warranty is worth your time if your car isn't extremely reliable and you wouldn't necessarily be able to pay for major repairs right now. If you purchase a used car from a dealer, an extended warranty could be the right choice if you're uncertain about a vehicle's reliability. Additionally, a warranty could be worth the cost if you know that your car is prone to specific types of problems, like transmission issues.

Will a Warranty Relieve Your Anxiety?

For some drivers, an extended warranty offers peace of mind. If you feel more comfortable on the road having a warranty, it's worth it. Maybe knowing you have access to free repairs could give you the freedom to take road trips you wouldn't take otherwise, for example.

Are You Willing to Pay for a Service You May Not Use?

Many people buy an extended warranty and never use it. There are no refunds or reimbursements for not using an extended warranty, so some feel they've lost money when they buy one without using it.