Is it Smart to Buy an Extended Auto Warranty: Does it Pay Off?

Is it Smart to Buy an Extended Auto Warranty: Does it Pay Off?

smart extended car warrantyThe question of whether or not it’s smart to buy an extended auto warranty can certainly have more than one right answer, depending on your specific circumstances. If you’re a driver who likes to have a new car every few years and sells or trades in the old model while it’s still under factory warranty, an extended warranty might not make little or no sense for you. However, on the other hand, if you plan on keeping your vehicle past its original warranty term, or as some like to say “until the wheels fall off,” then having an extended warranty (also sometimes referred to as an “vehicle service contract”) makes total sense. As your initial safety net is now gone when the manufacturer’s warranty expires and you’re left liable for the cost of auto repairs.

When deciding whether or not to purchase an extended auto warranty, it comes down to how likely your car is to break down and how much it would cost you if it did. For some of us, paying $1,300 to have your air conditioning system replaced might not be an issue and merely an “expense of car ownership.” But for the majority of us, it isn’t likely we have an additional $1,300 just laying around, waiting for that AC unit to go out. While cars these days are being built to be more reliable and durable, the repairs have become more extensive and expensive.

You can buy an extended auto warranty on most cars, new or used. Like any other type of “insurance” policy, the cost of the coverage is reflected on a variety of different factors that can include: the make and model of your car, age of vehicle, vehicle mileage, driving history, and more. The older a car becomes, the more expensive the extended warranty coverage will be to buy because it’s assumed an older vehicle has a higher chance of requiring repair services. This is why we always recommend purchasing coverage earlier in your vehicle’s life so when the costly repairs begin to creep up, you are already protected from these costs. It also means that the chances of you using the coverage are also higher, which gives the extended warranty more value to you.

Manufacturers’ Warranties

manufacturers warranty expired

To give readers a better idea of what they are buying into, we wanted to go over the types of extended warranties that are available to drivers. The first, and most commonly recognized, is the manufacturer’s warranty. This is a warranty that is placed on a new vehicle that basically says: we have built this vehicle to the best of our ability and believe nothing will go wrong with it for a specified time or mileage. The coverage will be backed the manufacturer of your vehicle, whether it be Cadillac, GMC, Honda, Ford, etc. Generally, repairs must be performed by an authorized dealer or where you initially purchased the vehicle, so keep this in mind when the vehicle breaks down.

While it rarely happens that a car will not need at least SOMETHHING repaired while this coverage is in place, drivers can rest assured that the repair will be covered as long as this manufacturer’s warranty is still in place. However, for those automobiles that have sped past these mileage/age restrictions, generally 3-years/36,000-miles – whichever comes first, the vehicle and the manufacturer’s workmanship will not be covered any longer. This means that any repairs that need to be done, even it is 1 day or 1 mile past the expiration, will not be covered by Chevrolet, Lexus, BMW, or any other manufacturer of your car.

Dealership Extended Car Warranties

dealership warrantyIf you’re buying a new car or truck, the first place you’ll probably hear about an extended auto warranty is when you’re signing paperwork in the dealership’s finance office. You may have already been on the lot for hours looking at different models and taking test-drives before deciding on which vehicle to purchase. Then, more time is spent haggling over price and terms before you ever make it to the back office to finalize the deal. Once there, you’ll have other decisions to make, such as whether to order add-on applications like undercoating or upholstery fabric treatment.

Around this time, whoever you are working with will probably try to sell you an extended warranty. A successful warranty sale will boost his or her personal income and add profits to the dealership coffers, but offers little in value to the consumer. The new vehicle will be under factory warranty for several years and any extended warranty won’t kick in until the original protection has expired. Plus, dealership extended warranties are notoriously high-priced when compared to quality third-party extended warranties. To make matters worse, the majority of dealership extended warranties will usually allow you to roll the cost of the coverage into the price of the vehicle. While this may sound smart in theory, it will actually end up adding to the total cost of the vehicle, causing you to pay interest on the policy. This not only increases your monthly payment, but also the total cost of the vehicle. The fact is, you don’t need and shouldn’t buy an extended warranty when you buy the car from a dealership. Shop around and find more cost-effective coverage that will protect your car better.

Third-Party Extended Auto Warranties

car warranty save moneyYou can purchase an extended auto warranty at any time, although waiting until the original factory coverage has expired will generally mean paying a higher premium rate. The most advantageous time for purchase may be near the end of the original warranty term. At that point you can do some shopping around to find out what types of coverage and rates are available for your year and model vehicle. This will give you a basis for comparison from one policy to another. It’s important though, that you carefully choose where to purchase extended warranty policy. While the selection of providers is very large, many will most likely not fit your requirements for a quality warranty provider. These contracts are typically filled with fine print that will ensure that your policy isn’t worth the price of the paper it’s printed on. Avoid these companies at all cost and opt for a reputable and trustworthy one!

Each third-party provider will have their own list of items covered for repair under their warranty. There are numerous different levels of coverage that you can purchase, so make sure that the level of coverage that you choose will fit the needs for your vehicle and your budget. Buying too little coverage can lead to components and parts not being covered, which will result in a costly repair bill. You want to feel secure that in the event that anything would happen you’re fully covered. On the other hand, buying too much coverage can be a not-so-great plan as well. Be sure to check what is included in the policy and if you see that the majority of parts or components listed to not even apply to your vehicle, ask your Vehicle Protection Specialist if there are any other coverage plans that better fit your needs.

Just as important, check out the list of exclusions, which are items not covered. Fully comprehensive coverage, commonly referred to as a “bumper-to-bumper auto warranty,” is best, but we want to make sure you’re aware that it is also the highest priced. But most drivers know from their auto insurance statements, that the more coverage you place on your vehicle, the more expensive it will be. Even the most comprehensive coverage, however, is worthless if you’re buying from a untrustworthy company. If the warranty is being underwritten by a company that may be gone next month or next year, your policy will not be valid and you’ll be out quite a bit of money. Check out the financial history and claims-paying reputation of any company you’re considering. And while you’re at it, ask their rating with the Better Business Bureau and whether the company is certified by the Vehicle Protection Association. These are two very important factors to consider when choosing a protection plan from one the best extended car warranty companies.

Is an Extended Auto Warranty a Smart Buy?

extended warranty denied claimsGetting back to the original question at hand, the short answer is yes. The longer answer… well, that depends on who you are, what you drive, and how much you have saved for unexpected car repairs. The major reason that car repairs are such a financial stressor on drivers is because they oftentimes occur at the least convenient times possible. It’s usually when you’re miles away from home or when you just paid off all your monthly bills or around the holidays when other expenses are present. It would be nice if we could pick and choose when our car will break down, or rather, when we will have the money to fix it, but it just doesn’t work like that.

Think of it like your auto insurance. If the state where you live didn’t require you to have collision insurance, which oddly enough some do not, would you choose to purchase it? With so many bad drivers that are distracted by their cell phones and drive-thru combos, many of us would feel much safer with insurance to cover us in the event we ever got into an accident. Now think of it this way, how many times have you actually been in a collision? The answer is probably pretty few, if any at all. But answer this question: How many times has your vehicle broken down? The answer to that is probably more than you can remember. That’s why it is smart to buy an extended vehicle warranty, because it’s something you will undoubtedly use.

Your vehicle was fully protected when it was new, but now that is getting along in years and starting to show its true mileage, wouldn’t now be the time you would need protection the most? Get your free quote from Endurance today on vehicle protection and know that you’re working with the nation’s premier provider of extended vehicle protection. We are the only direct-to-consumer protection provider that is both A+ rated by the Better Business Bureau and Gold-Certified by the Vehicle Protection Association. We offer affordable payment plans to fit into any budget and our award-winning customer service is always here to assist. At the end of the day, the question really isn’t whether or not it is smart to buy an extended car warranty, but rather, can you afford not to? Call us today to get back to the world of worry-free driving!

 

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*A Vehicle Service Contract (VSC) is often referred to as an “extended car warranty”, but is not a warranty.  A VSC does, however, provide repair coverage for your vehicle after the manufacturer’s warranty expires. A VSC is a contract between you and a VSC provider or administrator that states what is a covered repair and what is not. Endurance is an administrator of VSCs and does not sell warranties.*

A Vehicle Service Contract (VSC) is often referred to as an "auto warranty" or an "extended car warranty," but it is not a warranty. A VSC does, however, provide repair coverage for your vehicle after the manufacturer’s car warranty expires. A VSC is a contract between you and a VSC provider or administrator that states what is a covered repair and what is not.