Every car you buy comes with a manufacturer’s warranty, which is a guarantee from the automaker that it will make certain repairs or replace certain defective parts for free during a stated period of time. And then there’s the extended warranty. Unlike the manufacturer’s warranty, which is included with the purchase of the car, the extended warranty is offered at an additional charge. That’s because it covers vehicular components that are not covered under the manufacturer’s warranty.
An extended warranty typically kicks in when the manufacturer’s warranty period runs out. And in some cases, it can be accompanied by or include a service contract, which extends to routine maintenance like oil changes and tire replacements.
Although an extended warranty can be a valuable add-on, it can also be something that’s not worth the price. To help you make your decision when confronted with the choice, here are five questions worth considering:
1. Do you expect to have the car for a long time?
That depends on the intended length of ownership. If you’re the type of person who likes to change up a car every few years, then buying an extended warranty might not be the wisest decision. Chances are that the vehicle will still be covered by the manufacturer’s warranty. On the other hand, if you’re the type of person who holds on to your ride for decades—provided it lasts that long—you just might want to get the extended warranty, especially considering that repairs and replacements tend to pile up (both in number and cost) as time passes.
2. Is the car likely to need repairs?
All vehicles are not created equal. Some are less likely to pose issues during the time of ownership than others. You can check websites like the one for J.D. Power, a renowned car research information company that evaluates each vehicle based on reported issues and assigns ratings to multiple categories, some of which concern mechanical components. In fact, check J.D. Power anyway to ensure that you’re not about to buy a dud. But if the car is considered of average quality or projected reliability, you might seriously want to consider getting the extended warranty.
3. What exactly is covered?
Like vehicles, all extended warranties are not created equal. Indeed, most of them do not cover parts that commonly experience wear-and-tear at a faster or higher rate. Also, some extended warranties are sold in tiers; the higher you go, the more expensive it is and the more components that are covered. Conversely, the lower you go, the more you’d have to pay out of pocket for repairs or replacements. The key is to read the fine print to find out the components that are indeed covered. That way, you can avoid buying a guarantee that would be virtually useless to you and for your car.
4. Who is the party responsible for the warranty?
It’s ideal to consider an extended warranty directly from the automaker. However, if the extended warranty is from a third party, make sure you do your research: read online reviews, look into complaints (if any), and call your state consumer protection office if need be. Determine whether the company offering the extended warranty has a healthy financial history and a great customer service reputation. Some companies are not the easiest or most understanding to deal with. And in some cases, unfortunately, they close shop and costumers lose out on being paid for their claims.
This really is more of an emotional question. The truth is, no matter how well-manufactured a car is, it is likely to develop an issue or two—just like any other product. So, if getting an extended warranty gives you a piece of mind, then go ahead and get it. Otherwise, you can always save a little extra every month in your bank account to anticipate any repairs or replacements your car may need in the future.