At some point during the car-buying process, you’ll likely be offered an extended warranty on your used vehicle. Also known as a service contract, mechanical breakdown insurance, or vehicle protection plan, these warranties promise to pay for costly mechanical repairs after your standard manufacturer’s warranty has expired.
Typically, an extended warranty on used cars costs over $1,500 and comes with a wide range of coverage options. Among them are roadside assistance, rental car coverage, and trip interruption reimbursement. However, it’s important to note that warranties won’t cover damage caused by accidents or bad weather, and they usually exclude routine maintenance or wear-and-tear items like brake pads and tires.
The bottom line is that you can get a better deal on an extended warranty if you shop around. Many providers offer multiple plans, with different terms and conditions, and varying deductible levels. A good place to start is by checking out the warranties offered by your auto insurer and any local dealer. Then, you can make a more informed decision about whether a dealer-offered extended warranty is right for you.
There are a few situations in which an extended warranty on your used vehicle may be worth the extra expense:
You’ve found a great car deal, but it isn’t from a highly reputable brand.
In general, you’ll want to avoid extended warranties if the car’s brand has a reputation for poor quality. You can check a vehicle’s reliability ratings and reviews by searching online or asking other drivers for opinions. In addition, you’ll want to consider how much the vehicle has been driven. Vehicles with more miles on the odometer tend to need more expensive repairs than those with less mileage.
You’re on a budget and you don’t have money saved to pay for a major repair bill if something goes wrong.
If you’re on a tight budget and don’t have money set aside in case of an emergency, an extended warranty on a used vehicle might be worth the extra cost to give you peace of mind. However, it’s usually more financially responsible to save the money you would have spent on a warranty and put it toward your emergency fund or towards future repairs.
You’re on a tight budget and you have a vehicle with lots of expensive tech features that might break or malfunction in the first few years of ownership.
Most warranty plans come with a few stipulations, such as a maximum repair amount per year or the fact that diagnostic fees aren’t covered. This is a normal part of the car-buying process, so it’s important to read these details carefully.
If you’re buying a used vehicle that’s loaded with expensive-to-fix tech features, an extended warranty might be worth the extra expense to give you peace of mind. But, it’s probably more financially responsible to save the money you would spend on a warranty and put it toward your family’s emergency fund or into a savings account for future car repairs.