There are more and more advertisements these days telling us to extend our car warranty. The marketing pitches make it sound like we’ll never have to pay for car repair again. While extending a car warranty may make one feel better, it is, in many cases, a waste of money. Here are a few things to consider.
Extend Car Warranty – 3 Points to Consider:
1) The first and most important point to consider is money. Auto warranty advertisements state “we’ll never have to pay for car repairs again.” Yet, we will have to pay a significant dollar amount up front for the warranty. A transmission repair may indeed cost $3,000, but many extended warranties cost significantly more than this. In other words, we are paying for auto repairs. In fact, they’re asking us to pay now, rather than keep our money in the bank.
2) Although many extended warranties list off an impressive amount of items covered, many expensive and very common auto repairs and maintenance are not covered. This would include items such as tires, brakes, and maintenance services. Also, repair shops often charge above and beyond what our warranty company suggests, leaving us to pay the balance.
3) Even though a particular car repair is covered under an agreement, it may still cost us money. For example, most of these extended warranties have deductibles. Some will not cover what’s known as “tear down” charges. This is when a shop has to disassemble our vehicle in order to determine the root cause. Also, many car warranties have caps on the hourly labor charge, which again, leave us to pay the difference.
Extended Auto Warranty – Additional Thoughts:
If the above doesn’t deter us, consider too that an extended auto warranty is time and mileage sensitive. It’s a race against the clock to get any actual monetary value from an auto warranty. Put another way, if we spend $3,500 for a warranty, our car needs to have at least $3,500 worth of “covered repairs” during the coverage period to break even. Not sure we want to even be driving a vehicle that needs this amount of work in such a short period of time.
Are there times when extending a car warranty makes sense? Yes – when it’s included with a certified used vehicle one is considering purchasing. If we can get a significant discount, as these warranties are heavily marked up. Or, if it can be rolled into low finance rates. Finally, if money is not an issue, and it makes you feel protected, go for it. Personally, I’d prefer to keep my money.
Click Extended Auto Warranty for a comprehensive discussion of the pros and cons of car warranties.
What do you think? Should we be extending our car warranties?