Is an Extended Car Warranty a Good Deal?

When shopping for a new car, be prepared for the dealer or seller to ask if you’d like an extended warranty. Think of this offer as essentially prepaying for maintenance down the road. An extended warranty is just that — it covers repairs to the car after the original warranty ends. It sounds like a good idea, right? But extended warranties aren’t for everyone. Here are the pros and cons.

Benefits of an Extended Warranty 

• Options. You can customize an extended warranty so it better fits your budget and driving habits. 
• Coverage. When your car needs to be repaired or undergo regular maintenance, you’re already covered. There’s no need to come up with the cash on short notice. 
• Longevity. An extended warranty can help you keep your car longer. Typically, repairs that grow more and more expensive over time are the driving force (no pun intended) in buying a new car. However, if you have an extended warranty, those costs are kept lower for longer, allowing you to delay a new car purchase.

Downsides of Extended Warranties

• Costs. Extended warranties go for about $750 per year on average. If your car has a history of being rather reliable, the cost of the warranty might be more than just paying out of pocket for maintenance needs.
• Paying for nothing. You can’t predict the future, so there’s a chance you buy the extended warranty and then never even use it. 
• Uncovered repairs. One of the biggest downsides of extended warranties is that they may not actually cover every type of repair that you might need.
  • Read the fine print. There’s a lot of legal terminology, addenda, etc., with warranties, so be sure to read it thoroughly.
  • Know your car. You don’t want to pay for a warranty that doesn’t cover things you might actually want to get fixed. Learn the common repairs and issues on your car so you can check the warranty for proper coverage before you sign.

Do One Thing: Think through an extended warranty. It might not be worth it.