An extended car warranty covers some or all repair costs after the manufacturer’s warranty expires, easing anxiety about potential mechanical breakdowns. But it’s important to do some homework before deciding whether this protection makes sense for you. Prices and coverage vary widely, so you should compare quotes from several providers.
The best extended warranties may offer flexible payment plans, a transferable contract and perks like roadside assistance and rental car reimbursement. But some contracts have fine print that could limit coverage, such as rules that prohibit using aftermarket parts or failing to follow the provider’s recommended maintenance schedule. Also, the seller of an extended warranty may go out of business, leaving you with no recourse if repairs are needed.
Extended warranties can be purchased from dealerships or independent providers, and they typically cost more than those sold by the car manufacturers. You can negotiate the price of a warranty and roll it into your car purchase or finance, but you should always consider the value and quality of the coverage before agreeing to buy it. The cheapest warranties tend to be offered by companies that specialize in repairing cars, such as CarMax and Pep Boys. Some of these warranties cover only certain parts, such as the engine and transmission. Other companies offer broader plans, including bumper-to-bumper coverage and replacement parts such as brakes and tires.
When choosing a provider, look for one with an outstanding reputation, a good number of customer reviews and coverage that meets your needs. You should also find out how deductibles work. Some companies require you to pay a deductible for each repair, while others charge per service visit or maintenance visit. In either case, it’s important to keep detailed receipts of all maintenance and repair work, as failure to do so could result in your warranty being voided.
Unless your car is very new or expensive, an extended warranty probably won’t make financial sense. Instead, Ramsey recommends that you spend a little extra on a car with a better than average reliability record (Consumer Reports and JD Power are good sources of long term reliability data) and follow the manufacturer’s recommendations for regular maintenance. If you do need to invest in a car, choose one with a reliable track record and a low cost of ownership. This will help ensure your investment is protected and you’ll have a car that’s worth keeping on the road for years to come.