Should You Buy an Extended Warranty for Your Car?

Should You Buy an Extended Warranty for Your Car?

We hear it all the time after buying anything: “would you be interested in purchasing an extended warranty?” The questions comes up whenever you’re buying a TV, a cell-phone, even video games, but you’re certainly going to hear it when buying a new car.

Is an extended warranty a good choice? It’s a very open ended question, so we’ll do our best to guide you through the ins and outs of an extended warranty.

What is an Extended Warranty?

extwarranty-crosssectionAn extended warranty is a service that you pay for that provides extra “peace-of-mind” when it comes to costly car repairs. Extended warranty programs provide coverage of things that aren’t covered in the standard manufacturer’s warranty. Some things covered in the extended warranty include exhaust, electrical systems, engine and components, AC, heating as well as regular wear-and-tear. Coverage of wear-and-tear components is one of the best reasons to get an extended warranty, since that can cover things like brake pads, oil changes, filters and clutches, all of which are items that get changed quite often during the lifetime of a vehicle.

Additionally, an extended warranty can also provide 24-hour technical assistance and roadside assistance.

That all sounds great, but have you ever really read through what’s covered in the standard insurance? Before ever considering an extended warranty, make sure you know what the difference is between a manufacturer’s extended warranty, and it’s standard one.

Let’s take a look at the extended warranties that car manufacturers provide. Some automakers have different levels of coverage. For example, Ford has four different extended service plans that vary widely in what’s covered. The lowest of the range apparently only covers 29 key components like the engine, transmission, and your vehicle’s drive axles.

The next best plan covers the steering, brakes, suspension, AC and heating. Plans increase in covered components until the highest end plan which seems to cover just about everything.

SEE ALSO: Are American Cars Reliable, And Does it Even Matter?

These sound pretty reasonable, until you compare them to Ford’s new car warranty, which also covers everything up to three years, or 36,000 miles. Also, when you’ve reached that three years/36,000 miles mark, you still have some coverage: the powertrain and safety equipment is covered for an additional two years or until your vehicle reaches 50,000 miles. That powertrain coverage is pretty decent too, encompassing both your engine and transmission.

Are they worth it?


“Generally speaking, extended warranties are not worth it,” says Mike Quincy, the Automotive Analyst at Consumer Reports. Quincy says that based on Consumer Reports surveys, that the extra coverage is a waste of money, and sometimes buyers spend more on the extended warranty than they receive in repairs.

“Retailers push hard to get you to buy extended warranties or service plans because they’re cash cows for them: Stores keep 50 percent or more of what they charge for warranties,” says Quincy. “That’s much more than they can make selling actual products.”

Many standard new-car warranties seem to be more than adequate. Take a look at Hyundai’s warranty. Almost everything has some coverage for at least five years, or 60,000 miles. Items that are covered for less than that include the radio, sound and infotainment systems and paint, (all of which expires in 3 years or 36,000 miles) while powertrain equipment is covered for 10 years and 100,000 miles.

With coverage that deep it starts to become redundant to think about extended coverage. So when is it a good idea to get an extended warranty?

SEE ALSO: Are German Cars Reliable? The Myth of “German Engineering”

“You might want to consider an extended warranty for a repair-prone brand, say, Jaguar or Range Rover,” says Quincy, emphasizing that repairs for some of these European vehicles aren’t cheap and can come often. “A consumer should have his/her eyes wide open when buying a car from a brand that is so notoriously unreliable, but quite often love is blind,” says Quincy. His bottom line: “Don’t buy an extended warranty on a car with a good reliability history.”

What about pricey Hybrid vehicle repairs?

ToyotaHybridsWarranty copyWhat about hybrid vehicles, which use new technology to save you money at the pump? Those big batteries can be expensive to replace, making a strong case for buyers to purchase an extended warranty. Not so says Quincy.

“We’ve been told by the automakers that hybrid batteries are supposed to last “for the duration of the car’s life,” he says. Several automakers, like Toyota and Hyundai also include long lasting hybrid equipment warranties with new hybrid vehicles, giving extra peace of mind.

For reference, Hyundai offers a lifetime, unlimited warranty on the hybrid battery in its hybrid vehicles, and a 10 year/100,000 mile warranty on other hybrid specific components. Toyota also offers an above average hybrid warranty, covering hybrid components including the battery for 8 years/100,000 miles.

SEE ALSO: Consumer Reports Blasts Honda Civic Hybrid Reliability

“According to CR’s reliability survey, many hybrids have proven to be very reliable, especially from those built by Toyota,” says Quincy. “However, we noticed some issues with Honda.” According to Consumer reports, the Honda Civic Hybrid has some serious reliability concerns, which if aren’t covered by warranty, cost upwards of $2,000. “Deciding on whether or not to get an extended warranty for your hybrid comes down to the track record for the company that makes it,” warns Quincy, hinting that maybe you can get away without an extended warranty with a Toyota Prius, but likely not a Honda Civic Hybrid.

Warranties for Used Cars

buying-selling-used-vehicleIn the case of buying an extended warranty for a used car, it’s important to understand that an extended warranty is not insurance.

Third party organizations can offer extended warranties called “Extended Service Plans.” Once again, look over these companies with discretion.

Third party extended warranties work when a car needs repairs, you have to tell the shop you have an extended warranty. They will then contact your warranty provider to explain what work needs to be done, kind of like how collision shops and rental companies coordinate with insurance companies.

Some warranty contracts may impose a deductible. There are per-visit deductibles and per-repair deductible. These are detailed in the contract.

Quincy believes that automaker-backed extended warranties are a far safer bet than those offered by third party organizations. “So-called “mom and pop” warranty companies can be fly-by-night scams,” says Quincy, “leaving you no recourse if you try to put in a claim and their phone is magically disconnected.”

The Verdict

Truthfully, issues can arise with any vehicle, even the most reliable. That’s a fact that all car owners should come to terms with. However, if a car is properly maintained, you run a greater chance of not having to encounter an expensive issue, and not needing an extended warranty. Examine your driving habits and maintenance history. Also consider how long you intend to keep your vehicle for before deciding whether to take the jump with an extended warranty.

  • eechaze101

    Very informative article. I have a 2013 elantra and considering that I have a 10 year 100000 mile warranty I didnt bother buying the extended warranty.

  • Bow

    Please read the following on the 10 years 100,000 mile warranty.

    One day after visiting a friend, I
    was driving on the highway when the car started to rapidly decelerate. I
    quickly pulled off to the side of the road, and smoke began to billow out from
    underneath the hood. The issue seemed to come out of nowhere, as the car
    had given no indications of trouble. There had been no service engine
    lights, no leaks in the driveway, and I had actually had my fluids checked just
    a few weeks before. Regardless, the car wasn’t driveable, and I had it
    towed to the nearest dealership.

    Hyundai Responds

    Later that day, the Hyundai service
    department called me with the skinny. The temperature gauge that
    determines when anti-freeze needs to be injected into the engine had
    malfunctioned and stopped injecting coolant. Without any way to cool itself,
    the engine block had massively overheated, and was a total loss. When I
    asked about why there hadn’t been a service engine light, and they told me that
    the monitors also had apparently failed, and didn’t detect the issue. At
    this point, I was grateful that I had bought a Hyundai. If I had gone
    with a different brand without such a great warranty, I would be in trouble.
    I mentioned this to the service manager, and asked how long it would take
    them to fix the engine. He told me that he would get back with me later
    that day with an answer.

    The call that I received that
    evening knocked my socks off. It wasn’t from the Hyundai dealership’s service
    department, but instead was a regional Hyundai corporate representative.
    He said that while the 100,000 mile warranty did cover the engine
    and all its components, the coolant temperature gauge was not
    considered part of this assembly. Since my vehicle’s engine issues
    were caused by a failure in this gauge, none of the
    repairs would be covered by the warranty.

  • grtnavy

    Time to contact an attorney

  • Jeannie

    What model was your Hyundai? Our 2011 Genesis had the same thing happen….pulling off the road, billowing smoke, no warning, rattling sounds right before the failure. The coolant temperature gauge was not blamed for the failure though, in fact I think the cause was not determined. It was covered under the warranty, all of it with all the other parts and systems that had to be replaced as well. This occurred in 2012 with only about 10,000 miles on the car. We insisted they add another extended warranty on the car as well.

  • eechaze101

    I must also add that I got ripped off on the extended warranty that I bought for my old vehicle. Their staff consisted of two people who were very unfriendly and refused and disputed every claim I brought . It was a bad experience that I had and I threatened to sue them after paying $1800 for an extended warranty.

  • Neighsayer

    I bought a 2011 Sonata with 9,000 so only got a 60,000 mile factory warranty. The car has had quirky issues since the get-go; sometimes the driver window won’t go up, knock in the dash on the passenger side when the AC’s on low, rattle in the dash on the driver’s side on my gravel road – none of which the dealer can replicate. I don’t have a lot of confidence in this car. So, do I buy an extended warranty or not?

  • Neighsayer

    Forgot to mention that I now I only have about 12,000 miles left on the factory warranty.

  • Okdave

    Hyundai warranties are useless. I bought a new 2013 Santa Fe in the first year of ownership the clear coat started peeling and the paint began to crater and corrode. The Dealership Colonial Hyundai of Downingtown, Pa was evasive and did not advocate or assist. I had to persuade them to call a regional company rep to look at it. The rep said it was environmental , perhaps acid rain or bird droppings and was no covered under Hyundai’s three year ner car paint warranty. Dealership owner John Ashdale said that if Hyundai would honor the warranty for my claim they would be out of business because he sees this all the time on his cars. Bottom line is their paint is inferior and their best warranty in the business is indeed a scam.

  • Dean

    I bought a ford warranty on a 2008 f150 and had over $6800 worth of repairs covered by ford with $100 deductible so I think I made out okay. I am wondering if I followed your advice would you reimburse me the amount I would have lost? It’s insurance just like driving on the road and if everybody used it they couldn’t afford to offer it. Get off your wallet and accept that there is a cost of driving and accept the fact some people would rather have coverage the pay the massive cost of repair. I bought a newer truck because I wanted to travel without the worry and was glad I had some protection. People are always willing to complain when they have to pay but don’t often say thanks when the get better service or more then they expect.

  • scarhill

    The thing people need to understand about these extended service contract is how they are priced.

    The provider of the contract has experts who determine the amount which will be paid for each car. They then add a profit layer to this amount. So, the expected payout may be $700. The provider will sell the contract to the dealer for $1,200.

    The dealer employs a group of its top sales people disguised as F&I managers. They are really sales people who do some paper work. They earn far more than the sales people because they get to sell many products such as the extended service contract, each of which is a profit maker for both the dealer and the F&I sales person.

    The F&I position is a goal for almost every auto sales person. Why? Because that is where the money is.

    The F&I sales person will offer to sell the buyer the service contract for $2,400, a nice $1,200 profit the dealer and F&I person will split. The F&I person will have a plethora of props, service orders, and word tracks all designed to get the buyer to say yes.

    One thing a sales person knows is if the buyer leaves without buying they will never buy. That is why they work so hard when they have the buyer sitting in their office.

    So, for a product the experts know will provide $700 of repairs, the buyer will be asked to pay as much as $2,400. In what financial universe does that make sense?

    The best approach, if the buyer fears repairs, is to take the $2,400 and put it in an interest bearing account. Should a repair happen, the cash is available. If no repair should happen, the buyer has the $2,400 and not the F&I sales person.

    Of course, not buying an extended service contract is a gamble as is buying one. There are always some people who will benefit from such a contract, like Dean below. However, as the service contract provider knows, the majority of folks will not recover the money they spent on such a contract.

    One final caveat, the small print in every service contract is designed for one thing. Designed to minimize the actual payouts. Never, ever buy without understanding the small print. Do not rely on the nice brochure the F&I person will give you. As with everything in the F&I office, that brochure is written to get the buyer to buy.

    Personally, the only word I say in the F&I office is version of NO.

    But, while always knowing your finance rate, it is wise to give the F&I sales person an opportunity to beat that rate. They often can. This is about the only positive thing an F&I sales person will do for a buyer.

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