Should I Buy an Extended Warranty?

by Tim O'Sullivan

You’ve spent hours, days, or maybe weeks researching, shopping, and negotiating for your next vehicle. Finally, you’ve picked out the right car, worked out a reasonable price, and pulled the trigger on a deal. It feels like all the big decisions have already been made as the salesperson shows you to the Finance and Insurance office… and then the F&I manager drops another choice at your feet: Do you want to buy an extended warranty?

This question can be daunting if you haven’t planned for it, especially if you’re at the dealership and worn down from the car-buying process. But doing some research beforehand will be a major help, just like it was when you were deciding which vehicle was right for you.

Should I Buy an Extended Warranty?

What is an Extended Warranty?
The Pros of Buying an Extended Warranty
The Cons of Buying an Extended Warranty
Factors to Consider When Deciding on an Extended Warranty
Frequently Asked Questions

What Is an Extended Warranty?

The Basic Definition of "Extended Warranty"

An extended warranty, also known as a vehicle service contract, provides additional coverage for repairs beyond the scope of the factory warranty at extra cost. Like a factory warranty, extended warranties cover repairs to major vehicle components like engines, transmissions, axles, and other drivetrain components, but do not cover regular maintenance, such as oil changes, or wear and tear. Extended warranties generally include bumper-to-bumper warranty and powertrain warranty coverage, similar to the manufacturer’s warranty.

How Extended Warranties Work

Because you’re paying for coverage upfront, you can think of an extended warranty like an insurance policy. Only instead of covering damage from collisions or other calamities, the coverage here is limited to mechanical issues. Some extended warranties also include similar services to car insurance, such as roadside assistance, towing, and rental car reimbursement.

The Pros of Buying an Extended Warranty

Extended Coverage

The basic function of an extended auto warranty is to provide coverage beyond the time period or mileage limit of the original warranty so that repairs are still covered even after that warranty expires. An extended warranty can provide added peace of mind about unexpected repair bills. That can be especially helpful if you have a vehicle known for unreliability, but may be less relevant if you drive a Honda or Toyota, which usually don’t spend as much time at the repair shop.

Higher Resale Value

An extended warranty can inspire more confidence in shoppers looking at your used car, especially if it’s a high-mileage vehicle, or from a brand known to have reliability issues.

The Cons of Buying an Extended Warranty

High Costs

Unlike a conventional warranty, which is included with the purchase price of a vehicle, an extended warranty plan costs extra. So if you’re considering one of these protection plans, it’s important to factor that into your total vehicle budget. Note that many auto insurance companies also offer mechanical breakdown insurance, which covers many of the same things as an extended warranty, but you’d already be paying for it as part of your car insurance policy.

Not All Repairs are Covered

Just as the vehicle warranty provided by the car’s manufacturer may not cover all car repairs, an extended warranty may still leave you footing the bill—even with bumper-to-bumper coverage. Depending on the level of coverage, it may not make financial sense for purchase an extended warranty. It’s important to read the fine print and find out what exclusions apply.


Factors to Consider When Deciding on an Extended Warranty

Vehicle Dependability

Vehicles are becoming more reliable every year, which means that extended warranties are becoming less necessary. This is especially true if you don’t plan to keep the vehicle a long time. If you want to buy a new car every three or four years, skipping the extended warranty is a no-brainer. On the other hand, if you plan to drive your vehicle for hundreds of thousands of miles, and anticipate the expensive repairs that often come with an older vehicle, the extended warranty makes more sense.

Length of Ownership

Most consumer advocates advise against buying extended warranties, largely because they often provide more coverage than the typical driver needs. In a 2013 survey, the Consumer Reports National Research Center found that 55 percent of people who purchased an extended warranty never used it. And for those who did use it, the average cost of repairs was hundreds of dollars less than the price of the extended warranty. That survey, which polled 12,000 people, also found that less than one-quarter of respondents said they would buy another extended warranty.

Personal Financial Situation

You can also prepare for uncovered repair costs by saving the money yourself. If something does go wrong, tucking away half of the money you would have spent on an extended warranty payment in an account that’s earmarked for potential repairs will help you cover the cost of whatever needs to be fixed. And if no repairs are needed, you’ll end up with a chunk of savings to invest elsewhere.


Frequently Asked Questions

How much do extended warranties cost?

Extended warranties for used vehicles generally cost between $1,000 and $4,000, depending on the coverage options, the warranty term, and the warranty provider. You may be required to pay the entire amount upfront, or make monthly payments of between $100 and $200, with a down payment.

Where can I buy an extended warranty?

Automakers often sell extended warranties for used cars, (these are different from the used car warranties offered with certified pre-owned cars) but it’s also possible to buy one from third party car warranty companies like Endurance, Carchex, or CarShield. These extended warranty providers offer different vehicle protection coverage plans, so there will be a bit of information to sift through to find the best coverage for your vehicle.

Can I buy an extended warranty after purchase of a car?

You do not have to buy an extended car warranty at the same time you purchase a new vehicle. The extended warranty can be bought at any time, although buying one after the manufacturer warranty expires will be significantly more expensive than buying one while the manufacturer’s warranty is still good. Does an extended warranty cover wear and tear?

Chances are that an extended warranty won’t cover most items that tend to wear out quickly, things like brake pads and calipers. It also won’t cover items that need to be replaced as part of routine maintenance, such as belts, wheel cylinders, fuel pumps and water pumps.

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Stephen is a freelance automotive journalist covering everything on four wheels. Whether it's a new EV or a full-size pickup truck, he's eager to drive it and tell you all about it in a CarGurus Test Drive Review. Besides contributing to CarGurus, Stephen currently has bylines at Digital Trends, Green Car Reports, and Motor Authority.

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