Should I Buy an Extended Warranty?
Extended warranties are add-ons to factory warranties. They typically kick in at the end of a factory warranty and “extend” the time that a vehicle is covered. The question for many people is: should I buy one? Car dealers will often suggest them because they provide the customer with the security that any future repairs are covered. On the other hand, what is the probability that you will need the longer coverage? If it’s a low probability, some will argue, it might be best to save your money.
Extended Warranty Pros
As our friends at Cass Burch Chrysler of Valdosta, GA, point out, if you plan to keep your vehicle past the expiration of the factory warranty, an extended warranty will buy you piece-of-mind. Although this will cost you additional money, you may be able to fold the payments of your extended warranty into your monthly new-car payments. Boiling it right down, extended warranties eliminate the risk that you will get socked with a big repair bill in the future.
Extended Warranty Cons
There are clear downsides to extended warranties, as well. Yes, having an extended warranty gives you piece-of-mind but if you never need it, one can argue “why buy it.” Also, another item to consider is: coverage. An extended warranty might not cover the same items that the factory warranty does, so be sure to read the fine print.
The Company Behind the Warranty
If you are considering an extended warranty, another detail to look at is the issuing company. In other words, who is the company behind the extended warranty and are they a good company. In some cases, the insurance company is the manufacturer themselves. This is usually going to be a good warranty because a major name is backing up the product. Quite often, though, dealers offer warranties issued by third-party insurance companies. In this case, do your research and make sure a good company is behind the product.
Factor the Factory Warranty into Your Decision
Some argue that given the increased reliability of modern vehicles across the board, purchasing an extended warranty isn’t necessary. That’s especially true if the warranty offered from the original-equipment manufacturer is quite long to begin with – for example, Hyundai offers a 5-year/60,000-mile bumper-to-bumper warranty and a 10-year/100,000-mile powertrain warranty.
When It Really Makes Sense
Where an extended warranty might make the most sense is when purchasing a pre-owned premium luxury car from a European manufacturer. That’s because these high-end, feature-packed machines can be quite expensive to repair.
There’s obviously no way to predict the future when it comes to whether your new car will need an expensive repair or not, however you can look into historical performance. For example, J.D. Power has dependability data that you can look at. Consumer reports has the same. If it seems that the car you are considering is a highly reliable model, you may want to skip buying an extended warranty. If your new car is an expensive car with lower than average reliability, it is probably worth considering an extended warranty.