Are Extended Auto Warranties Worth the Cost?

by Reader Contributors

Are you wondering if you should purchase an extended warranty for your car? We explore whether extended auto warranties are worthwhile or worthless.

Dear Dollar Stretcher,
I have a question about extended warranties for cars. Are they really worth it? Or should I put the money I would spend in the bank to handle repairs? I notice that my dealership wants me to buy a 5-year/50,000 mile warranty. Yet when I have had a car repair (my car is under 36,000 miles), I have been told that the repair was covered by factory warranty.

What gives? Are they just trying to sucker a woman?
Ann

Extended Car Warranties: A Professional’s Opinion

I am an ASE master tech with 17 years dealership experience. What the warranty you are purchasing covers is the biggest question to answer. Does it cover electrical, or just basic power train? What about rental car bills, seals and gaskets, cracked or broken parts? I see warranty policies that cover cracked heads but not leaking head gaskets. I see warranties that won’t cover alternators.

I also see warranties that don’t cover normal wear and tear. If your transmission fails at 99k miles it can be deemed that it was normal wear and tear or they want to put a used transmission in that is going to fail any day.

First, you can get extended warranty policies on most cars up to the date the original manufacturer warranty goes out from either mileage or age, so you don’t have to buy them when you get the car. That’s where they make the money. By selling you something you are not even going to use for three to five years. However, they don’t ever get any cheaper so the price of a given warranty policy may go up a few hundred bucks if you buy it later.

Another thing, if you buy an extended warranty and cancel it or never use it for any reason you may be entitled to some or even most of the money back when you cancel it or it expires. This is only on some and they won’t tell you about it.

I know an average break down runs $500 to $600. If you have a major breakdown, $1,000 to $4,000 can be right in the ball park. But your policy may or may not cover it.

I recommend factory policies that have low deductibles and rental car coverage. But make sure you can buy them up till the last day of normal coverage and that they do cover most if not all types of failures: wiring, electrical, power train, leakage and failure of parts, cracked head, block, etc. They are not cheap so expect the warranty to cost ten to fifteen percent of the cost of the car. And then use it.

For example, my mother-in-law had a van that had some minor power steering problems didn’t think it was a big deal, didn’t want the inconvenience of taking it in. The warranty expired and then the rack and pump went out to the sum of a $1,000 bill eight months later.
Andy

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Warranty Was An Advantage

When we bought our van over four years ago, we knew that we would have it well past the 36,000-mile warranty. I would probably not buy a 5/50,000 warranty unless I knew I was only keeping the car for at least four years. With ours, we bought the 100,000-mile extended warranty.

Right now we are at over 60,000 and have had repairs enough to cover the cost of the additional warranty already. And most of those repairs came after the 36,000-mile mark was reached. So, as always, it depends on how you are planning to use the vehicle and for how long. For us, it has paid off. Spending a little extra up front has saved us on the back end.
Sunny

Extended Car Warranties: Weigh the Pros and Cons

If you are buying a brand new car, the extended warranty is usually not worth it. It’s a way for the dealership to make some extra profit. I used to work for a car dealership; this is how I know.

As you have already found out, you have a factory warranty that covers to 36,000 miles, so if you were to purchase the 50,000 mile extended warranty, basically you would be paying all that money for only the 14,000 miles after your factory warranty runs out. In this case, you would be better off putting some aside in savings for car repairs.

If you are buying a used car, it depends on the miles on the vehicle and its track record. Check Consumer Reports or better yet, find a few people who have owned that type of vehicle and ask them what breaks and when. Or if you have a trusted mechanic, ask him about reliability before you buy.

For instance, I had a friend that owned a van that had all kinds of very expensive front-end trouble. When she asked her mechanic about it, he assured her that all of that type of van had the same trouble. An extended warranty could have saved her some money.
Lois

Do the Homework

First thing is to figure out how long your factory warranty lasts. Don’t overlap coverage, it just makes the dealership money since they then choose to bill the warranty provider instead of taking the cost of repairs out of their own bottom line.

Then keep a log of repairs on your car. How often has it needed a repair? Have the repairs been expensive and major, or minor and inexpensive, without the factory warranty?

Check out car sites where other owners make comments on the problems or lack thereof they have experienced with the same make and model you own. This will give you some idea of what to expect in future repairs. Edmunds.com is a good place to start.

I once bought a two-year-old car with 36,000 miles on it. It had the dealer warranty on it for three months after purchase. I had two major repairs on it in those three months; each repair would have cost me over $500 without the warranty in place. Not having a lot of extra cash in the budget for a constant steam of expensive repairs to a newish car, I bought a 3 year/36,000 warranty with a $50 deductible. I’m so glad I did.

The car has experienced an obscure brake light problem that threw the transmission into neutral, had needed a complete brake job and has developed a coolant leak that would have cracked the engine block if not addressed in a timely manner. The brake job and coolant leak cost nearly a $1,000 in discounted work at the dealership. I paid $50 for the work because of my warranty.

I’d suggest you ask the dealer what other warranty options are available. Also, dealers figure in a huge markup in these warranties. I didn’t find this out until months after I bought the warranty from the dealer. Go online and check out the GM warranties direct from General Motors. If GM doesn’t cover your car, find out who provides the dealership with the warranties and go research the prices directly from them.

Warranties can be of significant benefit, but don’t buy it from the dealer. He will make major money on it even if you never use it. Go shopping from the folks who provide the warranty to the dealer in the first place.

Though it sounds horribly sexist, it works so if you feel uncomfortable dealing with the dealer recruit a male friend or family member to go in with you. You do the talking; they look impressive and make noise if needed.
Hammurabi

Extended Car Warranties: No, Yes, Sometimes

I think of myself as a very savvy consumer, subscribing to Consumer Reports, researching and reading all I can on being a frugal, but smart consumer. The issue this individual writes about is “Are extended warranties on new cars worth it?” According to Consumer Reports, it is not worth it. My personal opinion is that sometimes it is worth it. Let me explain. I think buying an extended warranty depends upon what kind of vehicle you have purchased and its reliability (repair) record.

The first four cars I owned, I did not purchase an extended warranty from the dealer. The first three cars I had normal repair bills that were within “tolerance” range for repairs (meaning it didn’t really break the bank for me to make the repairs).

My most recent vehicle, however, is a conversion van. The dealer usually gives you a 3-year/36,000 miles original factory warranty. Because this vehicle was the most expensive vehicle I’ve ever owned, I decided that it was worth the extra money to get an extended warranty (this extended the warranty another 3 years/and another 36,000 miles). Sure enough, after the 36,000 miles were up, there was a funny sound in the engine. It ended up that the whole engine had to be replaced which would have cost me thousands of dollars had I not bought the extended warranty. I feel the money I paid for the extended warranty was definitely “worth it.”

But everyone has to decide for themselves with various questions: Are you an average driver? Only driving back and forth to work? Do you drive in stop and go traffic all day (which puts a lot of wear and tear on the engine)? Are you “hard” on your vehicle? Is it a “foreign” made car (for which replacement parts are more expensive)? These are just some of the questions to ask yourself. My advice is to do a lot of research on the particular vehicle you are purchasing, especially their repair/reliability statistics. That could help you make the “extended warranty” decision.
Patty

Reviewed May 2023

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