Choosing an Extended Warranty: Quick Tips
- Newer vehicles with existing factory warranties don’t need extended car warranties.
- Having an extended warranty doesn’t mean free repairs — you’ll probably have to meet a deductible or pay a reduced service fee.
- Shop around for competitive pricing and comprehensive coverage, but also consider the warranty company’s reputation and customer service.
- Selecting an extended warranty for your car is a financial decision that may provide peace of mind regarding expensive mechanical repairs.
A new vehicle typically comes with a manufacturer’s warranty covering mechanical repairs during the first three years of ownership or the initial 36,000 miles it’s driven, whichever comes first. But what happens after three years or when the odometer displays 36,001? That’s where extended car warranties might come into play.
An extended car warranty provides coverage for when your vehicle breaks down after the manufacturer’s warranty has expired.
Many dealers and independent companies may try to sell you an extended warranty to help “protect” your purchase. Some car owners say they aren’t worth the cost. Others argue that an extended warranty for your car is an investment worth having. It’s a financial decision that involves careful consideration. Keep reading for a better understanding of how these warranties work and, more importantly, how to choose an extended car warranty that fits your needs.
- Types of Extended Warranties for Cars
- Extended Car Warranty Pricing
- How to Choose an Extended Car Warranty
- Additional Considerations
Types of Extended Warranties for Cars
Some original equipment manufacturers (OEMs) and used car dealerships offer extended car warranties, but the most common types are from third-party vendors. Coverage will last for the length of your contract term, and you’ll pay a monthly fee to cover the cost of the policy.
If your car has a covered problem and needs repair, you’ll pay an additional service fee or deductible to have your vehicle serviced. Presumably, those costs are less expensive than paying the repair shop’s bill directly. However, some contracts may require you to pay the repair bill out-of-pocket and then file a warranty claim for reimbursement. Extended warranty policies do not cover regular maintenance like oil changes, new tires, brake service, or air filter replacement.
Extended warranties apply to older cars since factory warranties cover newer vehicles up to a specific mileage or number of years. Popular names like CarShield and Endurance offer policies that include other services like roadside assistance and courtesy towing. These options can be helpful if your current insurance policy is limited to liability coverage and doesn’t provide those features.
Extended Car Warranty Pricing
Pricing will vary from one company to the next. It also depends on the year, make, model, and mileage of your vehicle. Newer cars with lower mileage will always cost less to cover; geographic location also plays a role. CarShield advertises their coverage starts at $99 per month. Depending on certain qualifiers, their monthly fee can rise to almost $200, and the same is true of other companies like autopom!, Endurance, and Toco.
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How to Choose an Extended Car Warranty
Here’s how to choose the right extended warranty for your situation.
Determine How Much Coverage You’ll Need
If your car is still relatively new, it’s likely covered under the factory warranty. This means you don’t need an extended warranty, and the manufacturer will cover major mechanical failures. If the factory warranty has expired, first consider your emergency savings. How much money could you reasonably spend in the event of a major system failure? Can you afford to replace your engine or rebuild your transmission costing $4,000 to $5,000? Do you have separate savings specifically for car maintenance and repairs? A full coverage extended warranty may be worth it if the answer is no.
If you can cover the cost of minor to moderate repairs like a sensor replacement or a new alternator, consider your car’s track record. Is the vehicle known for specific issues after a certain mileage? Are there many cars like yours on the road after 100,000 or 150,000 miles? Use the history of your make and model to your advantage when making this decision.
Get Official Quotes From Multiple Companies
Cost and coverage are the most important things to consider when purchasing an extended car warranty. Don’t just go by the numbers you see online. Call multiple companies and get exact quotes for your vehicle and the level of coverage you need. When comparing costs, look at how much you’ll pay out of pocket for individual service appointments in addition to the monthly payments. Also, review cancellation fees, online claims fees, and other sneaky charges.
If you decide that having an extended warranty is right for you, we encourage you to shop around. Do not immediately sign up with a company after an unexpected phone call or react to any too-good-to-be-true direct mailings you receive.
Read the Terms and Conditions
Examine the fine print and compare the small details. Are you required to comply with the manufacturer’s suggested maintenance schedule? Are there constraints on where you can have your car serviced or what mechanic you can use?
There may also be payout limits or coverage restrictions. For example, CarShield limits the payout for a battery jump-start, towing service, and flat tire changes to $100 in their platinum coverage plan. The policyholder is responsible for the remaining balance. Endurance car warranties do not cover a standard transmission clutch assembly, exhaust components, or carburetors, according to their sample contract. Comb through the details of each policy before making a decision.
Consider policies that exclude specific repairs because they’re generally more comprehensive. Avoid warranties that provide a list of repairs they cover are usually less thorough and more restrictive.
Consider Customer Service
If you ever need to file a claim, the right customer service team can make all the difference. It should be easy to contact an agent, and getting any information you request should be a straightforward process. If you have trouble reaching a live person before you sign the contract, there’s a good chance you’ll have a similar experience when it’s time to file a claim.
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Additional Considerations
Some extended car warranties offer discounted coverage for military members, senior citizens, and government workers. Your employer may also offer promotional pricing as a benefit. In this case, the costs might be worth it, especially if your car is older and the factory warranty has expired.
Lastly, additional coverage in case of a major system failure offers many drivers the peace of mind they might not otherwise have, especially for those with a more modest savings account or people on a fixed income. If your vehicle is over a certain age or has surpassed 100,000 miles, an extended warranty may offer the added security you’re looking for.
