Is Auto Repair Maintenance Insurance Worth the Cost?

In this article: We explore the pros and cons of auto repair insurance and some alternate options that might be most cost-effective. We also share feedback from readers who have carried this type of insurance and whether it was worth it for them.

Dear Dollar Stretcher,
I recently found out that my retired mother is paying for auto repair maintenance insurance for her car, and it is costing her close to a few hundred dollars per month. The car is starting to have more and more mechanical issues, most of which have been covered by her insurance, but some not. The problem is that she lives pretty much Social Security check to Social Security check and has no extra cash to save for another car, but she would if she dropped this additional insurance coverage. Her thought is that she does not have to worry about a car payment, but for what she is paying for this insurance, she might as well have a small car payment.

I’d appreciate advice from anyone who has paid for and used this type of insurance. Is it worth the cost to keep a not-so-reliable vehicle with this coverage, or is it more cost-effective to get into a newer car that does not require as many repairs, even if it means having a car payment for the next few years? I just would like to help my mom make the best decision for her finances.
Bill

What Is Auto Repair Insurance?

Auto repair insurance, often known as mechanical breakdown insurance (MBI), is a type of protection that covers non-accident-related auto repairs. People who own vehicles no longer covered by warranties or wish to be safe from future expensive repairs may find this insurance beneficial in keeping a car running.

However, it isn’t always helpful to your finances.

Is a Car Warranty the Same as Auto Repair Insurance?

No, a car warranty is not auto repair insurance. An auto manufacturer’s warranty covers repairs and parts replacement for a predetermined time after purchasing a new car. Contrarily, auto repair insurance is a policy obtained from an insurance provider to pay for expenses associated with repairs that occur after the manufacturer’s warranty has expired.

This insurance doesn’t cover repairs that result from an auto accident or those from regular wear and tear of the vehicle. Also, some auto repair insurers drop vehicles once they have reached a certain age.

Pros and Cons of Auto Repair Insurance

Here are some potential pros and cons of auto repair insurance to carefully consider before purchasing a policy:

Pros

• Financial Security: The main advantage is the financial protection it offers. Car repairs can be expensive, and having MBI means you won’t face hefty repair bills all at once.
• Extended Coverage: MBI can cover repairs after your manufacturer’s warranty expires, providing extended protection for your vehicle.
• Comprehensive Coverage: MBI often covers a wide range of repairs and parts that may not be covered under a standard warranty, including the engine, transmission, and electrical systems.
• Flexibility: Some MBI policies allow you to choose your own repair shop, giving you more flexibility than a manufacturer’s warranty, which often requires using specific dealerships or repair centers.

Cons

• Cost: The cost of MBI can be a significant addition to your regular car expenses, especially if you never end up using it.
• Overlap with Warranty: If your car is new and under a manufacturer’s warranty, MBI might overlap with the coverage you already have.
• Coverage Limitations: Not all repairs or parts may be covered, and there can be stipulations such as regular maintenance or servicing at certain intervals to keep the coverage valid.
• Wear and Tear Exclusions: MBI often doesn’t cover “wear and tear” items like brakes, tires, or maintenance services like oil changes.
• Deductibles: Just like other insurance policies, MBI policies often have deductibles. This means you’ll have to pay a certain amount out of pocket before the insurance kicks in.
• Waiting Periods: Some MBI policies have waiting periods before coverage begins to prevent people from buying a policy just because they need a big repair.

When Might Auto Repair Insurance Make Sense?

Before buying mechanical breakdown insurance, consider your car’s age and the dependability of its make and model. Also, compare the insurance to probable repair costs. If you think repairs will be significantly more than the insurance cost, then getting the insurance short-term might make sense.

However, for some, setting aside the money for future repairs can be more cost-effective than paying for repair insurance each month. For others, buying a newer car may be the most cost-effective option.

If your car needs a mechanic’s help more and more frequently, we have another article that can help you decide when it might be time to stop throwing good money after bad: 13 Questions To Determine If Your Car Is Worth Repairing.

If you decide to purchase a policy, carefully study the terms and conditions to determine what is and is not covered. As you’ll see from the readers’ experiences below, these policies can sometimes be tricky to understand.

Is Auto Repair Maintenance Insurance Worth the Cost?

We reached out to our readers for advice from anyone who has carried this type of insurance. Very few people responded. It seems frugal folks don’t find value in this type of insurance. You can see some of the responses below.

Love This Insurance!

Yes, I did my research and the manufacturer’s warranty and others were so very expensive. Then my son told me about this insurance.

My deductible was very affordable. Over the first four years I had it, they paid far more than $6,000 on my behalf for my car’s repairs. The insurance cost was minimal compared to my unexpected repairs and they let me make low monthly payments.
KB

Save the Money

I would drop the insurance and put the money into savings instead. That way, she can afford repairs as needed or save up for another vehicle. Unless the engine or transmission goes out, other repairs should be manageable, as long as the car is well-maintained and not rusting out.
Sheryl

Replace With a More Reliable Car

It would make more sense to buy a two- or three-year-old low-mileage, fuel-efficient car. Not only would the car be more reliable, but also it would likely be safer as newer cars have more airbags, backup cameras, side collision warning systems, and other safety features.

It also sounds like your mother would have money left over if the car payment is lower than the insurance cost. She could save the difference for maintenance for the newer car.

She may want to sell the car herself to get more money from the sale than she is likely to get on a trade-in.

I just replaced a well-running 16-year-old car with a new car for the reasons above. It’s safer, more fuel-efficient, and more comfortable to drive.
Barbara

Related: Buying a Cheap, Reliable Used Car

Auto Repair Insurance Can Save You Money Short Term

When my daughter went off to college, we paid for repair insurance on her car. The car was no longer under warranty, but not having enough problems that we felt she needed to replace it.

We covered her car for about two years and it did save us a good chunk of money in repair costs. But while we were paying for this insurance, she was saving as much money as she could from her part-time job so she could get into another car, which she did once we decided her current car was no longer worth repairing.

On her own, our daughter would not have been able to cover the cost of repairs and save for a more reliable car. Sounds like your mother is in the same position with her car. I would recommend that she drop the insurance and start saving for the next car.

At some point, she will no longer be able to get repair insurance for her car. Then what will she do?
A.

Related:

• Choosing the Right Auto Repair Center
• Insider Report: Finding An Honest Auto Mechanic
• 4 Ways To Extend the Life of Your Car
• Smart Ways To Drive Down Car Costs

Reviewed November 2023