For a little peace of mind, car owners will often consider an extended warranty when purchasing a new or used car. There’s no doubt that vehicle repairs can be expensive, often times running into thousands of dollars for major repairs. Is an extended vehicle warranty a good value or an unneeded expense? This article looks at the car owner’s perception of an extended warranty and the reality when a vehicle’s taken in for repairs.
The Value of an Extended Auto Warranty
An extended warranty on a vehicle is like an insurance policy for auto repair. Like an insurance policy, the car owner is gambling that future vehicle repairs will cost more than the warranty they purchased. In actuality, the odds are not in the favor of the car owner.
With the exception of factory extended warranties, independent warranty companies usually pay full retail price for repairs. If repairs exceed the cost of the policy in the majority of cases, the warranty companies wouldn’t realize a profit. Since vehicle repairs don’t usually exceed the cost of a policy, in the majority of cases an extended vehicle warranty is not a good value.
Myths of an Extended Auto Warranty
- the extended warranty covers the vehicle from bumper to bumper
- rental coverage includes a like vehicle replacement
- towing is covered
If a salesperson states that the extended warranty is bumper to bumper, don’t believe it. Most policies spell out in the contract what’s covered. If it’s not listed in the contract, chances are it’s not covered.
Many times a policy will include rental coverage while the vehicle’s is being repaired. In most cases it’s a set dollar amount per day and there’s a good chance that the dollar limit will be an inferior vehicle replacement. Some polices will only pay for a rental if the repair time is over 8 hours, regardless of backordered parts delays, overbooked service departments and other delaying factors
Often times towing charges have a maximum dollar limit. If the vehicle breaks down in a remote area, there could be extra charges to get the car to nearest repair shop. If it turns out the vehicle breakdown was caused by a part that was not covered under the policy, the charges for the tow won’t be covered either.
Tips for Buying an Extended Car Warranty
If the car owner of a new vehicle wants to purchase an extended warranty, they should compare the time and mileage with the new vehicle warranty. Most new cars come with at least a 3-year or 36,000 comprehensive factory warranty. Many also come with powertrain coverage that may go up to 6 years or 100,000 miles. There may also be other covered repairs by the manufacturer after the standard factory warranty expires.
Never take a salespersons word on what components are covered. Always read the fine print as to what’s covered on an extended car warranty. Most polices also have a deductable for repairs. It’s always best to look at a few different polices. Compare component coverage, towing, rental coverage and deductable amounts.
