Updated March 2019
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?
An 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.
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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 the 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.
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?
“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?
What 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.
“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
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.
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Quincy believes that automaker-backed extended warranties are a far safer bet than those offered by tthird-partyorganizations. “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.”
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.