Paying for repair costs is a necessary and sometimes pricey part of car ownership. One way to lessen the financial strain of these costs is to buy an extended auto warranty, a sort of insurance plan that goes beyond the original warranty to help cover future repairs.
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 is not for everyone. In fact, Consumer Reports often discourages customers from buying extended warranties on a variety of products, cars included, 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.
How to determine whether you actually need another 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 car for 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 may not be necessary.
How to decide 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 Endurance.
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.
How to determine 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 commute on 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.