An extended warranty is meant to kick in after a car’s manufacturer’s warranty has expired. It's designed to offset the cost of car repairs.
Typically, when damage or age necessitates a repair, the car owner will pay a
deductible, or a set dollar amount that he or she is responsible for, and if the repair costs more than the deductible, the warranty will pay the additional expense.
This is especially helpful for older cars or cars that come with a lot of expensive extra features and thus are more likely to require repairs, but it's not for everyone.
In fact, customers are often discouraged from buying extended warranties on a variety of products because it’s rare for the cost to equal the amount of a paid repair claim. Here's how to determine if you need an extra warranty, how to choose the right warranty, and how to get a deal, with a little help from
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Determining if you need an extended warranty
It’s important to balance your specific coverage needs with the costs of an added warranty. For some people, these costs are not justified.
Step 1: Consider your driving habits and plans. If you’re
leasing your carfor a couple of years, you might not need more than the original warranty.
Be sure to base your decision to buy an extended warranty on your specific habits and plans, meaning how often and how long you expect to drive the car.
Step 2: Review the base manufacturer’s warranty. Know the specifics of the manufacturer’s warranty that comes with your vehicle.
This includes what it does and does not cover and the mileage or time limit on that coverage. If this coverage adequately meets your needs, an extended warranty is not necessary. If you're worried that the coverage is too limited, you should then consider an extended warranty.
Deciding what kind of warranty you need
Step 1: Choose between limited and comprehensive coverage. There are usually two types of coverage plans: limited and comprehensive.
Limited coverage generally covers mechanical or powertrain repairs only. It is less expensive and thus ideal for more economical cars that don’t have special option packages. A comprehensive plan offers more in-depth coverage, including sensor, audio, and electrical repairs. This type of coverage is more expensive, but it is valuable for high-tech cars.
Step 2: Decide where to buy your warranty. When selecting an extended warranty, you can choose to buy from a manufacturer, such as Ford or BMW, or from an aftermarket supplier, such as
Manufacturers provide warranties for their specific brand of car, while aftermarket companies provide warranties for a wide range of different models and brands.
If you buy through the manufacturer, you will have specially-trained technicians at your disposal, but you will also be limited to the dealership for repairs. If you buy through an aftermarket supplier, you will have more freedom in choosing which repair shop to use, but the technicians will not necessarily be as familiar with your particular car.
Figure out the specifics of your warranty
Make your coverage decisions based on your car’s life expectancy. The longer and more often you plan to drive your car, the more likely you’ll need major repairs.
If your car is replaced before the extended warranty expires, a partial refund may be in order, but this isn’t the most cost-effective option. Warranties are most valuable as the car ages and you make more repairs.
Step 1: Choose your mileage limit. Depending on your driving habits—meaning where and how often you drive—choose a mileage limit for your warranty.
If you don’t drive very often, you won’t need as high of a mileage limit as someone who drives a
long commuteon the highway every day.
Step 2: Pick the length of coverage. Depending on how soon you plan to replace your car, decide how long of a term you want your warranty to cover.
Your warranty could cover just a few years between manufacturers’ warranties if you tend to change cars every five years or so, or it could cover as much as 15 years if you intend to drive your car for its full lifespan.
Step 3: Pick your deductible. When deciding on a deductible amount, consider the extra car options you have and how frequently you might submit a claim.
Lower deductibles are best if you have a lot of expensive options or you think you’ll make a lot of claims.
Step 4: Consider your budget throughout. The longer the term and the higher the mileage limit, the more expensive the warranty. Also think about what you can afford to pay out-of-pocket when choosing your deductible.
How to get the best deal on a car warranty
Step 1: Plan ahead. Be fully prepared by doing the research ahead of time. Know what you need and want from your warranty before you even buy your new car so that you won’t buy something you don’t need.
Step 2: Comparison shop. Call a few different dealerships to inquire about their extended warranty prices. Then, when you go to purchase the warranty, negotiate for a better price.
Choosing which extended warranty you should buy takes a bit of time and effort, but by following the steps outlined here, you’ll be able to do so with confidence.
Is an extended warranty worth it?
For most customers, no, an extended warranty isn't worth it. Extended warranties are usually overpriced, and you might not end up using it. However, if you're worried about repairs down the road, an extended warranty could help.
Unless you're sure that an extended warranty is right for you, you should consider setting aside money for repairs in advance. Instead of your warranty activating to make repairs, you can draw from those funds.
Do you need an extended warranty?
No, you don't need an extended warranty. If you're buying a car, it's a good idea to get some kind of warranty, but an extended warranty is probably overkill.
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