Is an Extended Car Warranty Worth the Money?

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Next to a house, buying a motor vehicle is going to be one of the largest purchases you’re ever going to make—especially when the sales price keeps creeping up from the number displayed on the car window. Dealers use every opportunity to up-sell consumers on additional safety or entertainment features, rust-proofing, and extended warranties.

Whether an in-seat DVD player is worth it is subjective. But should you consider adding extra repair coverage to a brand-new car?

Most new vehicles are covered for their first 36,000 miles or three years miles on the road, with engine and transmission warranties extending up to 100,000 miles or 10 years. (These figures can vary depending on manufacturer: Always check the fine print.) At the point of sale, dealers will often offer to extend the life of the warranty under many of the same terms, or to tack on additional coverage for repairs not included under the manufacturer’s terms for hundreds or thousands of dollars more. Essentially, an extended warranty offers a longer peace-of-mind period than what comes with the car off the lot.

If you’re prone to worrying, it might be worthwhile. Otherwise, some statistics point to a very uncertain return on investment. A 2013 Consumer Reports survey of 12,000 readers found that 55 percent of respondents never had to use their coverage during the period their vehicle was protected. Those that did usually had repair bills that were less than the total sum of the warranty’s cost, meaning they still lost money.

Warranty terms can also be problematic: You might be restricted to certain locations, or stumble upon an issue that isn’t covered. When discussing a warranty with a dealer, it’s a good idea to get the terms in writing to read over when you’re out of the pressurized atmosphere of a showroom. If you like to tinker with or modify cars, then you may also void the coverage.

The warranty may also be worth it to you if you feel that an inflated car loan beats the risk of high repair bills, or if you enjoy certain towing, tire repair, or car loan perks. With more and more cars relying on electronic components, diagnosing problems can get expensive. But a better idea might simply be to look for makes and models that have a positive history of minimal repair problems, reducing the odds you’ll need the coverage in the first place.

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December 14, 2016 - 11:30am
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