When purchasing a new or used vehicle many dealerships will encourage customers to purchase an extended warranty. Although an extended warranty can be right for some, it may not be the right choice for all. Let’s take a closer look and some of the pros and cons of an extended warranty.
Pros:
- Extended warranties can be helpful if you own a vehicle from an unreliable brand that tends to break down a lot.
- Just like the vehicle you just purchased, the price of an extended warranty typically can be negotiated.
Cons:
- Typically, these must be paid in full upfront. This can make it more difficult to get a refund if you decide to cancel at any time.
- Usually, there is a waiting period before an extended warranty will kick in, typically 30 days. If your vehicle needs repairs now you may be out of luck.
- While commonly referred to as a warranty, they are not defined as a warranty by federal law and do not come with the consumer protections other warranties do.
- A Consumer Reports survey showed that car owners usually paid more for the warranty than they got back in benefits. In another survey by Consumer Reports, 55% of people who purchased an extended warranty did not use it. Only a quarter of people surveyed said they would buy one again.
- The average cost of an extended warranty is about $1,500 while the average repair cost is only $180. As a customer, you may be better off creating an emergency repair fund instead of an extended warranty.
- Extended warranties have limitations on what repairs are covered and where work can be done. Make sure to read the fine print.
- Normal maintenance (oil change, brake pads, etc.) and wear and tear are not covered.
