Written by Alice Stevens | Last Updated February 24th, 2020Alice Stevens has managed the health and life insurance content for Best Company since 2018. She’s passionate about conducting good research and understanding the details you need to know about insurance. When she's not writing and researching, she enjoys good food and travel.
Car salespeople and car warranty companies always talk about the value brought by purchasing an extended car warranty.
Are they trying to make a sale or are car warranties really worth it?
Before you purchase a car warranty for your new car or new-to-you car, you should ask yourself the following questions:
- What is your car’s service and repair history?
- What is the year, make, model, and mileage of your car?
- Do you have savings?
- How frequently do you roadtrip?
- What kind of coverage do you actually need?
What is your car’s service and repair history?
If you bought a new car, then your car should have a clean slate and be reliable.
If you bought a used car, it’s a good idea to review the CarFax to learn about any difficulties experienced by previous owners. In addition to accidents and damage reports, look for notes about systems malfunctioning or not working properly. These notes can indicate the potential for future problems.
If you’re considering purchasing a car warranty, be sure to understand if any modifications have been made and if the car has been well-maintained. If there have been modifications or if the car has not had regular oil changes, it may not qualify for an extended warranty.
It’s also a good idea to have a trusted mechanic take a look at your car. Your mechanic can tell you if the car is in good shape and what repairs to anticipate in the future.
Car warranties only provide coverage for some car parts when they fail. If your car is pretty reliable, an extended warranty may not be worth the expense.
What’s the year, make, model, and mileage of your car?
"If you are shopping for an extended warranty, look into the reliability of the car make and model purchased to know what the likely damage will be and how long into the car life they tend to break," says Jared Weitz, United Capital Source Inc. CEO and Founder.
Car warranty companies have certain requirements associated with each of their plans. For example, some car warranty companies do not offer warranties for foreign cars.
It’s also fairly common for car warranty companies to offer several vehicle protection plans with different levels of coverage at different price points.
Most plans have mileage restrictions. The plans with the most comprehensive coverage often have the lowest maximum mileage covered. The plans with the least coverage are cheaper and have more flexible mileage restrictions.
View autopom!’s plans and mileage requirements.
How frequently do you roadtrip?
Many car warranty companies include additional benefits in their plans, like roadside assistance, trip interruption, and car rental reimbursement.
These benefits add value to a car warranty. Roadside assistance is very useful for emergencies like running out of gas, local towing, and jumpstarts.
If you live in a rural area or away from family and friends, roadside assistance is valuable because you have someone you can call for help.
If you’re on the road a lot and roadtrip through remote areas, trip interruption benefits are great. Trip interruption benefits reimburse hotel and meal expenses while your car is having covered repairs.
For people who have long commutes or rely heavily on their car for daily tasks, the rental car benefit is great. You won’t have to bother with public transportation, figure out rides, or change your routine.
Do you have savings?
It’s good practice to have savings set aside for unexpected expenses. If you don’t have a lot of savings set aside and aren’t actively saving, it’s a good idea to start making that a priority in your budget.
The major benefit that a car warranty offers is reducing repair costs and other associated costs for covered parts that stop functioning properly.
Be cautious when choosing between savings and an extended warranty.
"Extended car warranties are often costlier than the typical repairs themselves tend to cost. Instead of a car warranty, consider dedicating the money that would go to the warranty into an emergency fund for any potential damages that may come up," says Weitz.
While car repairs can be quite expensive, but how likely is your car going to need these repairs? Is your money better spent on an extended warranty or put in your savings?
What kind of coverage do you actually need?
The three main kinds of extended car warranty include the following:
Exclusionary extended warranties are typically for newer cars whose factory warranties have expired. Exclusionary coverage is very similar to factory warranty coverage. It covers everything in the car except those listed in the service agreement. They are also known as bumper-to-bumper warranties. These are ideal for people looking for coverage to replace the factory warranty.
Stated-component warranties offer a mid-level of coverage. These service agreements only cover the parts listed in the agreement. These extended service agreements are ideal for car owners looking for comprehensive coverage but not the same kind of coverage as a bumper-to-bumper warranty.
Powertrain warranties cover a car’s powertrain. These parts typically include the engine, drivetrain, and transmission. These are the most essential components of a car.
"Before making the purchase, look at your standard car insurance to see if it covers any mechanical damages prior to investing in additional warranties," says Weitz.
To buy or not to buy
"An extended warranty is always a gamble and, in most cases, what you’re actually paying for is peace of mind. A 2013 survey from Consumer Reports showed that 55 percent of extended warranty holders never ended up using the warranty at all. Of the 45 percent that did take advantage of extended warranty coverage, most survey takers still saw a net loss when comparing the cost of repairs versus the cost of the warranty," says Jake McKenzie, Auto Accessories Garage Content Manager.
If you found a great car that’s reliable, purchasing an extended service agreement may not be the best investment.
If you’re on the road a lot or would benefit from a car warranty’s included features like roadside assistance, car rental reimbursement, or trip interruption, an extended service agreement may also be worthwhile.
However, it’s worth comparing pricing of an auto warranty with the pricing of roadside assistance service subscriptions. You may be able to find a better deal.
An extended auto warranty may be a worthwhile investment if you’re worried about your car’s reliability.
View Best Car Warranty Companies