When you think about protecting your investment, car warranty seems like a good idea. The problem is that they end to be expensive, plus they rarely cover every potential vehicle issue.
History has shown that people who invest in extended warranties seldom if ever use them, which is the equivalent of flushing money down the toilet. A trusted Consumer Reports survey showed that about 55% of extended warranty buyers never ended up using it, with just 25% saying they would repurchase one.
Furthermore, the average cost of repairs covered ended up being less than the average price of an extended warranty.
An extended car warranty explained
Sometimes referred to as a vehicle service contract, an extended warranty is sold as an option that will help you cover the costs of certain vehicle repairs required during ownership. Generally speaking, the extended warranty kicks in when the manufacturer’s warranty expires, although there is sometimes an over.
Be warned, though; and extended warranty does not cover everything!!
Where the original factory warranty covers a large variety of different parts, the same cannot be said for an extended warranty, which may only cover a fraction of them. That means that you could still potentially be left out of pocket.
In most cases, routine maintenance, which includes things like new tires and brakes, oil changes, and more, are not covered with an extended warranty. The same is generally true of roadside assistance.
Before you sign on the dotted line of an extended warranty, read the small print to find out everything that you are getting for your money.
What’s the average price of an extended warranty?
Any time you purchase a vehicle from a dealership, you can almost guarantee that they will try to sell you an extended warranty. Like most of the other options they offer, you usually end up paying way above the odds.
If you are intent on getting an extended warranty, either negotiate a better price with the dealer or do some price shopping with independent providers.
You are going to quickly discover that the cost of a warranty differs wildly from place to place, with make and model of your vehicle and the number of items covered all contributing to the price. In general, your upfront cost will be between $1,000 and $3,000. Keep in mind that if you add that price to the total cost of your financing, you will also pay interest on that amount.
It’s also worth noting that you will be on the hook for a deductible every time you go with a repair covered by the extended warranty. This is another time when you need to read the small print, as you may be dinged with multiple deductible fees if your repair requires more than one visit to the mechanic.