Are Extended Car Warranties Worth It?

When your factory warranty is about to expire, an extended car warranty might give you peace of mind. It covers costly repairs on major car components like the engine or transmission, helping you avoid surprise expenses.

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But are auto-extended warranties worth it? Between high costs, exclusions and fine print, extended warranties don’t always deliver the value you expect. Let’s break down the pros and cons — and when it might make sense to buy one or roll it into your auto refinance.

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What is an extended car warranty?

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An extended car warranty, or extended service contract, is optional coverage that helps pay for repairs to major vehicle components, like the engine, transmission, or electrical systems. It’s useful for offsetting the cost of unexpected repairs, which can be pricey to pay for out-of-pocket.

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Unlike factory warranties, which are usually included automatically for new cars, extended car warranties are optional. You can use them to supplement your new-car warranty or to extend a warranty that is about to expire. 

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Extended car warranties can be useful for owners of used cars or anyone looking to avoid surprise repair bills. However, they don’t cover everything and expire after a specific time period or number of miles. Most exclude routine maintenance tasks like oil changes and tire rotations. They also don’t cover the cost of parts that wear out over time with normal use, like windshield wipers.

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Pros and cons of extended car warranties

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One of the best ways to decide if an extended warranty is worth it is to take a look at the advantages and disadvantages and see if the coverage makes sense for you.

Pros

• Save money on repairs: Extended warranties cover the kind of big-ticket services that can ruin a budget, like replacing an engine.
• Choose how much coverage you need: Because extended warranties are optional, you can choose a plan that suits your vehicle and your budget. You might opt to save some money by selecting a basic warranty, or go for one that covers the whole car, bumper to bumper, with additional perks and features.
• You pick the warranty provider: You can purchase it from the dealer when you buy a new car, or from a third-party provider. That lets you shop around for a good price and negotiate for a better deal. You can also bundle coverage into your auto loan refinance

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Cons

• They can be expensive: The price depends on the vehicle and the level of coverage, but you can expect to pay at least $1,000 a year. You’ll usually have to pay a deductible before the plan’s coverage kicks in, too.
• Your problem might not be covered: Just because you have a warranty, it doesn’t mean every repair is covered. Extended warranty contracts contain pages of fine print that include detailed exclusions.
• There’s a waiting period: Extended warranties aren’t effective immediately. You’ll have to wait a certain number of months or miles before you can use the plan. If a problem springs up before then, you’re out of luck.

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When does an extended warranty make sense?

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So, are extended car warranties worth it or not? In some cases, an extended warranty might be a good investment. Let’s take a look at a few examples:

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You plan to keep your car for the long haul. If you’re the type of car owner who drives their car “until the wheels fall off,” an extended warranty might make sense. The older the vehicle, the more likely it is that it will eventually need repairs. 

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You love your car, but it’s unreliable. If your car is a make or model that’s more prone to problems, you may want to consider extra protection.

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You don‘t have savings for unexpected repairs. Sometimes, you can roll the cost of an extended warranty into your auto loan or auto refinance. That way, you can split the cost into more manageable monthly payments.

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You’ve found a great plan that lines up with your needs. If a plan comes along with all the features you want at a good price, it could be worth the cost.

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When they don’t make sense

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Sometimes, an extended car warranty just isn’t worth the cost. For example:

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• If you trade in your car often
• If you can’t keep to the company’s required maintenance schedule
• If the plan has too many limits and exclusions
• If the plan is too pricey for your budget

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Adding an extended service contract to your refinance

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If you’re looking for peace of mind, RefiJet offers an extended car service contract that can reduce what you pay out-of-pocket for covered repairs. It can also include added perks, like towing, electronics coverage, or even money for lodging if you break down far from home.

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Rolling a service plan into your refinanced auto loan keeps repair costs predictable while keeping your monthly payments affordable. Plus, it helps you keep your vehicle in top shape for the long haul.

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FAQ

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Here are some frequently asked questions about whether extended car warranties are worth it.

Is it worth paying for an extended warranty on a car?

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If your vehicle is unreliable or if you plan to hang onto it for many years, you might find an extended warranty worth it. Just make sure you aren’t paying for coverage that’s already included in your manufacturer’s warranty.

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What is the downside to purchasing an extended warranty?

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Extended warranties typically have many exclusions and limitations that could mean your repair isn’t covered. They usually require proof that you’ve stuck to a maintenance schedule and may deny coverage if you don’t get authorization first. Some can also be expensive relative to the value they provide.

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Does an extended warranty add value to your car?

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If the warranty is transferable, it could add value to your used car. That’s because you can transfer the rights granted by the warranty to the new owner. If your warranty isn’t transferable, your car could still maintain good value thanks to the regular routine maintenance required by an extended warranty.

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Can you negotiate the price of an extended warranty?

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You can (and should) negotiate the price of an extended warranty. The Consumer Financial Protection Bureau recommends that you negotiate the cost of optional add-ons, including extended warranties, when buying a new car.

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What does an extended warranty not cover?

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The details of what’s covered vary from provider to provider. In general, most extended warranties do not cover regular wear and tear, routine maintenance, or conditions that occur prior to end of the warranty waiting period.

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