Car Warranties Are They Worth It – Extended car warranties can be a lifesaver when you experience a mechanical breakdown, but they can also add a few thousand dollars to your cost of vehicle ownership. In the end, are extended car warranties worth it?

In this article, we’ll go over the pros and cons of extended car warranties, break down typical costs, and give you recommendations on where to buy the best extended car warranty.

Car Warranties Are They Worth It

An extended car warranty, or vehicle service contract, promises to pay for certain car repair costs after your factory warranty expires in exchange for an upfront or monthly payment. Unlike auto insurance that covers you in the event of a collision, extended auto warranties protect against mechanical breakdowns or manufacturer defects in materials or workmanship.

Is An Extended Car Warranty Worth It?

There are many types of vehicle service contracts available, the most common being a bumper-to-bumper warranty and a powertrain warranty.

Bumper-to-bumper coverage is similar to the factory warranty on a new vehicle, covering most car parts in the event of mechanical failure. These are also known as exclusionary warranties because they cover everything except a few named components. Bumper-to-bumper warranties are typically the most expensive coverage plans a provider offers.

Powertrain warranties usually only cover the parts of your vehicle that make it move. These include your engine, transmission, drive shafts and related parts. They usually last longer than bumper-to-bumper warranties and tend to be cheaper but cover far fewer components.

Many insurance companies also offer coverage levels between these. These warranties, sometimes called extended powertrain warranties, cover other major systems, such as air conditioning and brakes.

Are Extended Car Warranties Worth It In 2023?

Many drivers believe that extended car warranties are worth it if only for the peace of mind they provide. With an extended car warranty, you don’t have to worry about whether you can afford mechanical repairs after your factory warranty expires. In fact, according to a survey by Pegasystems Inc., 60 percent of extended warranty owners reported benefiting from their coverage in the past year.

But an extended warranty may not be worth it for every driver. Below, we’ve compiled a list of pros and cons to consider before deciding whether to purchase coverage.

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Repair costs can add up quickly, especially for major repairs like replacing a head gasket or fuel pump. New cars come with a manufacturer’s warranty that protects against these costs for the first few years of your vehicle’s life. But after it expires, you’re on your own to cover the full cost of car repairs.

Extended warranty plans pay for parts and labor for covered repairs, leaving you responsible only for your coverage premiums and your deductible. You may also end up saving money in the long run if you use your extended warranty coverage multiple times or have an exceptionally large repair.

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Manufacturers sometimes have several extended warranty plans to choose from, but third-party vendors almost always give you many options. Our two top recommended providers, Endurance and CARCHEX, offer drivers five different levels of coverage. These range from basic powertrain plans to full bumper-to-bumper warranties, so you can ensure you’re only paying for the coverage you need.

With almost every extended car warranty plan, you get additional benefits beyond the coverage you choose. Standard benefits include 24/7 roadside assistance, trip interruption cover and rental car cover. Some providers, like Endurance, go the extra mile to provide perks like free tire changes, key fob replacements, entertainment vouchers and more.

Extended car warranties are a great choice if you think you will use them. Otherwise, you could end up paying for coverage you don’t need. You should consider your vehicle’s reliability as well as your ability to pay for unexpected repairs outright to determine if an extended warranty is the best option for you.

In some cases, especially with certain car manufacturers, you are limited to one or two coverage options. You may also not have any flexibility with deductible amounts. If you’re stuck in a position with too few options, perhaps skip the extended coverage or opt for a third-party plan.

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Most extended warranty plans have a 30-day, 1,000-mile waiting period before coverage begins. This allows the supplier to ensure that there are no pre-existing problems with your car. Sometimes the benefits that come with your plan are still available during this period, but often you have to wait to use them as well.

As we mentioned, extended car warranties can save you money if you need costly repairs. Let’s break down how much an extended warranty can cost you and what factors go into pricing.

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Based on our research, a good price for an extended warranty is anywhere from around $1,700 to $3,000. The reason for such a wide range is that the costs are very variable and depend on your vehicle, the company you buy your plan from, and the choices you make about your coverage.

There are no one-off prices for extended warranty coverage. Companies base the cost of your coverage on a few key factors, including:

What Is An Extended Car Warranty? And What Does It Cover?

Now that you know how much a warranty can cost you, let’s take a look at how much you can pay out of pocket for repairs without a vehicle service contract. We looked at the five most popular car brands in the US and compiled a table of their average annual repair costs, according to RepairPal.

These numbers are brand averages, so they may vary by vehicle model. Additionally, repair costs are likely to be higher for older vehicles or vehicles with longer mileage. But even with these averages, it’s easier to decide if an extended car warranty is worth it.

For example, according to our research, a five-year comprehensive warranty on a new Toyota Camry could cost you between $1,700 and $2,500. If you skip the extended coverage and pay for Toyota repairs out of pocket, you could end up paying about $2,200 over five years.

You can determine whether an extended car warranty would be worth it for your vehicle by looking at average repair costs on RepairPal and comparing the data with quotes from several extended warranty companies.

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Figuring out your ideal extended warranty provider is another piece of the puzzle. In general, you have two options: your car manufacturer and a third-party supplier.

Usually you have to buy an extended warranty from the manufacturer when you buy your car or before your factory warranty expires. Unfortunately, this doesn’t give you much time to decide if you really need longer coverage. Time limits on manufacturer extended warranties typically max out around 100,000 miles, which isn’t very long compared to third-party contracts.

Most of the time, manufacturers also force you to return to the dealer to get covered repairs done. On the one hand, you’re sure to have access to factory-trained technicians and authentic parts. On the other hand, you are limited in where you can go for service.

If your vehicle is still covered under the original factory warranty, call your local dealer to explore plan options and get a quote. If not, you will probably need to look for coverage from an aftermarket warranty provider.

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Some car insurance companies sell mechanical breakdown insurance (MBI) as a policy add-on. These work in the same way as extended warranties, covering the cost of mechanical repairs if necessary.

Most insurance companies only offer one level of MBI cover. Some policies come with additional restrictions compared to plans offered by independent providers.

Third-party warranty providers tend to offer more flexibility than manufacturers in terms of cost, repair shop availability, and coverage options. Reputable extended warranty companies may offer terms of up to 15 years and 250,000 miles, depending on the supplier. Drivers who plan to stick with their car for long distances would definitely benefit from such a long coverage plan.

With a third-party provider, you can also choose from multiple coverage plans that allow for more customization based on the level of protection you need. Plus, you can usually take your vehicle to thousands of authorized repair shops across the United States, including dealerships and mom-and-pop shops.

Ways To Negotiate An Extended Warranty

In many cases, an extended car warranty can be worth the cost. If your vehicle needs major repairs to the powertrain or other critical components, these costs can easily exceed the cost of the protection plan and save you money.

But even if you end up spending more on your warranty plan than you would on repairs, an extended warranty still has value. Having coverage provides real peace of mind, knowing you won’t have to come out of pocket or run up a credit card bill to pay for repairs.

Ultimately, whether an extended car warranty is worth it to you and your vehicle depends on how you prefer to manage your expenses and how much risk you’re willing to take. If you decide to purchase coverage, be sure to get quotes from a few providers and read all the fine print before making a decision.

Are extended car warranties worth it? Yes, if you go with the right provider and know you need the extra protection. When weighing your options, it’s a good idea to get quotes from more than one company.

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