What to consider with an extended vehicle warranty
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Purchasing a vehicle often entails perusing the available stock, test driving one or two automobiles, negotiating price, and finalizing paperwork. Once buyers choose a vehicle, they may need to decide if they should purchase an extended warranty.
According to the financial resource Bankrate.com, an extended warranty is actually an extended service contract that covers the cost of certain repairs and problems after the factory warranty expires. Extended warranties can offer peace of mind to some car buyers, particularly those who may be purchasing a vehicle that does not score as highly as other makes with regard to reliability. Extended warranties begin after the manufacturer bumper-to-bumper warranties expire. Many extended warranties cover major breakdowns and are designed to help drivers offset the cost of repairs should they prove necessary.
Some dealerships like to push extended warranties because they are an additional source of profit. It’s key for buyers to note that an extended warranty can be purchased at any time before the manufacturer warranty expires and even after the initial warranty has expired. (Note: Buyers can expect to pay more when purchasing an extended warranty after the initial warranty has expired.) That means a person doesn’t have to make a knee-jerk decision about a warranty before driving off the lot with a new car. Instead, he or she can take more time before making a decision.
The automotive resource Edmunds.com advises drivers to ask themselves if they intend to keep the car for a long time. If you drive cars until they can no longer make it down the block, an extended warranty can make sense. If you plan to trade in a vehicle in three or four years and the manufacturer warranty has yet to expire, an extended warranty may be an unnecessary expense.
It’s also important to consider the cost of the extended warranty. The median price paid for extended warranty coverage is $1,200, according to Consumer Reports. A Consumer Reports survey of drivers who had purchased extended warranties found that 55 percent of owners hadn’t even used the warranty during the lifetime of the policy.
Check the reliability of your vehicle as well. Research breakdown rates and the general reliability of the vehicle make and model. New cars tend to be more reliable than pre-owned vehicles, so that’s another consideration. Consumer Reports, Edmunds.com, J.D. Power, and other consumer watchgroups can help you determine how your vehicle ranks with regard to reliability.