Do I Need an Extended Car Warranty?

To decide whether it's right for you, you'll have to weigh the peace of mind from extended coverage versus the extra cost.
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Extended car warranties cover repairs after included manufacturer warranties expire — at an additional cost. Although the idea of more coverage sounds nice, it can be difficult to determine whether it’s a good deal.

There isn’t an easy or quick answer about whether to buy an extended warranty. To make the best decision, it’s important to consider what is covered by certain warranties (like bumper-to-bumper and powertrain warranties), how reliable your car is and whether you can afford to pay for major repairs out of pocket.

Included car warranties

All new cars come with a variety of warranties. The most notable is the bumper-to-bumper “factory” warranty, which is provided by the dealer and backed by the carmaker. The bumper-to-bumper warranty covers repairs to most things on the vehicle between the front and rear bumpers. The warranty doesn’t pay for routine maintenance, such as oil changes and tire rotation, nor does it cover “wear items” like brake pads and windshield wipers.

Even after the bumper-to-bumper warranty expires, there’s still the included powertrain warranty, which covers the cost of repairs to everything that moves the car down the road: the engine, transmission and suspension.

Some carmakers also offer several other automotive warranties, some of which are not as common. These include roadside assistance, rust or corrosion warranty, emissions warranty and more.

New car warranties typically remain in effect for at least three years or 36,000 miles.

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What do extended car warranties cover?

Extended car warranties, also referred to as service contracts, cover the cost of parts and repairs after initial warranties expire. For example, if your car breaks down after the bumper-to-bumper warranty expires, you'll have to pay to get it fixed. But if you bought an extended warranty, the repair might be made at no cost to you.

These warranties are sold by dealers, manufacturers and third-party providers not connected with the carmaker at an additional charge and come in a varying combination of mileage extensions and deductibles that can lengthen the bumper-to-bumper warranty. The cost, length of coverage and what repairs are covered differ by dealer, car type and more. Generally, extended coverage can cost between $1,000 and $4,000 — and sometimes more.

Extended warranties often are bundled with other types of coverage, like a free rental car and roadside assistance. Because coverage differs by dealer and comes with varying limitations regarding what they cover, it is important to carefully review what items are covered by the extended warranty before you buy it.

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“Third-party warranties” — issued by car warranty companies, auto lenders and some auto insurance companies — might cost less but might require you to pay for repairs yourself and then apply for reimbursement.

Extended warranties for used cars

One of the benefits of buying a certified pre-owned car from a new car dealership is that a factory warranty is usually included. Even so, the dealer will probably offer to sell you an extension to that warranty for an additional price.

Similarly, if you buy a used car that isn't certified, you can usually still purchase an extended factory warranty, assuming the car isn’t too old or doesn’t have that many miles on it. Before you buy the additional warranty, make sure you understand how much remains — if any — of the original warranty and whether it is transferable.

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How to decide whether you need an extended car warranty

Generally, you should only consider adding a service contract if you intend to keep your car longer than three years. That's because you can buy an extended warranty at any point before the included factory warranty expires, which means you can hang on to your money for three years and then buy an extended warranty if you decide you need one. By then, you’ll have an idea of how reliable the car has been. Or you might at that point decide to trade the car in or sell it — meaning you won't need a warranty.

Consider these questions when you’re deciding whether to get an extended car warranty:

  • Do you have a reliable car that's not likely to break down and will you have enough money saved to cover the cost of a major or unexpected repair if it does?

  • Does the extended warranty coverage overlap with the manufacturer's warranty, meaning you’ll end up paying for coverage you don’t need?

  • Is having peace of mind worth the cost of the extended warranty?

  • Will the cost of repairs exceed what you pay for the warranty?

Note that regular maintenance to your car is necessary to guarantee that a warranty won’t be voided. A warranty will remain valid no matter who performs the repairs, meaning you can use your own mechanic rather than the dealer’s service department. However, it’s a good idea to keep the receipts as proof that the work was done.

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