Some people buy cars with the intention of upgrading every couple of years, while others plan to keep it until it’s no longer operational. Neither decision is wrong, but your path to car ownership can help you decide if an extended car warranty is worth it. Learning what an extended car warranty is, what it covers, and how much it costs can help you decide on if you should buy an extended car warranty. If you wish to proceed, we offer a few options to consider.
What is an extended car warranty?
An extended car warranty, also called a vehicle service contract, pays for specific car repairs once the factory warranty expires. Some dealerships or car manufacturers offer the option to extend the warranty when the initial warranty expires, but there are also third-party companies that offer them, too.
Car warranties provide coverage for things an auto insurance policy typically doesn’t cover, like electrical or mechanical failures. Neither car insurance nor warranties cover wear and tear items, including:
- Brake pads
- Tires
- Clutch (manual transmission)
- Windshield wipers
Although new cars come with a manufacturer car warranty, used cars usually only come with a manufacturer warranty if the vehicle is under a certain mileage and model year. Without an original or extended car warranty, breakdowns and repairs are the full financial responsibility of the owner. Even if the manufacturer warranty has long since expired, you can still buy a third-party aftermarket warranty or used car warranty.
What do extended car warranties cover?
What extended car warranties cover depends on the company and the coverage plan you select. There are generally two types of extended car warranties to choose from.
Bumper-to-bumper extended car warranty
This warranty is sometimes called a comprehensive warranty because it offers the most comprehensive list of repair coverage. Although body panels, trim, and glass aren’t covered, the name bumper-to-bumper means that just about everything in between the bumpers is covered.
This can include:
- Electrical system (sensors, control modules, switches, etc.)
- Audio system
- Suspension
- Air conditioning and heating
- Engine
- Transmission
- Axles
- Drivetrain
- Steering system (power steering pump, hoses, steering linkage, etc.)
- Anti-lock braking system (ABS) electrical components
Powertrain extended car warranty
The powertrain warranty covers items that supply the car with power to move the vehicle, which can include:
- Engine
- Transmission
- Driveshaft
- Axles
Some powertrain items that get normal wear and tear are not included, such as batteries, drive belts, and clutches. Since it is limited only to the powertrain and does not provide bumper-to-bumper coverage, powertrain warranties can be less expensive than bumper-to-bumper warranties.
How much do extended car warranties cost?
How much extended car warranties cost depends on a few factors:
- Age and mileage of the car: The older and higher mileage your car is, the more expensive an extended car warranty can be.
- Coverage type: The more coverage your extended car warranty provides, the more you’ll pay.
- Deductible: If the plan includes a deductible, you might be able to save on the car warranty premium. The higher the deductible, the less you’ll pay for coverage, but the more you’ll be out of pocket if you use the warranty.
- Vehicle type: Higher end vehicles, like luxury and sports cars, typically require more expensive parts and labor costs to repair. This is reflected in higher car warranty prices compared to less expensive manufacturers.
- Warranty company: Like auto insurance, the warranty company you choose will make a difference in your car warranty cost.
Extended car warranties have an average cost of around $1,500, but could cost upwards of $3,000 or more when the warranty company considers all factors. Getting several quotes from different warranty companies and comparing the coverage details and price can help you narrow down the right fit for your needs.
Should you buy an extended car warranty?
Only you can decide if you should buy an extended car warranty. When you buy a new car, it comes with a manufacturer warranty, so you won’t need an extended car warranty until the factory warranty expires, either by time or miles. For instance, if you have a 10 year/100,000 mile warranty, it will expire when your car reaches 100,000 miles or 10 years old, whichever happens first.
But if you buy a used car, the factory warranty may already have expired, or nearing its expiration date. At this point, you may wonder if an extended car warranty is worth it, and where you should buy it from.
Is an extended car warranty worth it?
According to a survey from Consumer Reports, as much as 55 percent of car owners bought, but did not use, the extended car warranty before it expired. Those who did use it found the cost not worth the savings.
For example, the median price paid for the extended warranty was around $1,200. The median out-of-pocket costs for repairs was $837. In this survey, the average warranty purchaser actually lost money, with around a quarter of the respondents saying they would buy the warranty again.
When you buy a used car, you may not get the full picture of its history, even if you buy a vehicle history check from firms like Carfax or AutoCheck. Unless the damage was reported to an insurance company or the service done at a participating dealership, accidents and routine maintenance could be missing from these reports.
Service Contract Industry Council (SCIS) also conducted a survey on used car owners who purchased extended car warranties. About half of respondents used the coverage in the five years they had, with many filing multiple claims for different repairs.
Around 30 percent of owners used their warranty in the first year, but two-thirds used it during the second through fifth years of warranty availability. Of those surveyed, 84 percent said the company honored their claims and 82 percent said they would buy an extended warranty again.
Average car repair costs
Another factor to consider when deciding if you should buy an extended car warranty is the cost of car repairs. Though this figure can vary widely by location, car condition, manufacturer, availability of parts, and other factors, the average car repair costs usually increase as the vehicle ages:
- Year 1: $808
- Year 2: $403
- Year 3: 686
- Year 4: $2,101
- Year 5: $1,118
- Year 6: $1,939
- Year 7: $2,657
- Year 8: $2,525
The cost of repairs can also increase the longer you wait to address warning indicators, like a check engine light. Waiting just two months can increase the cost of repairs by $600 or more. And the less you pay for the car initially, the more likely you are to wait to address warning signs.
An alternative solution to extended car warranties
If you decide an extended car warranty isn’t worth it, then there is an alternative solution to consider. Common repairs average about $600 per year, with some years requiring more and others requiring less. Brake, alternator, or starter replacement can cost around $500, while a new timing belt can set you back up to $900.
Rather than spend money on an extended car warranty, you can save that money in a savings account dedicated to your car instead. At $600 annually, saving at least $50 for routine maintenance and repair costs can prevent you from having to put the repairs on a credit card with high interest or taking out a loan, which will also accrue interest. You can also make a few pennies in interest on the savings account for your car repairs.
Where Can You Get An Extended Warranty?
You can get an extended warranty from the dealership, manufacturer, or a third-party.
Dealership extended car warranty
When you buy a new or used car, the dealership may try to sell you an extended car warranty at purchase, even if it’s still covered by the manufacturer’s warranty.
If you buy the extended warranty from the dealer, you’ll likely be limited to going only to that dealer to have repairs covered. Taking the car to another mechanic or repair shop can not only mean the repairs aren’t covered, but it can also void the warranty completely.
An extended car warranty from the dealership can also be more expensive with fewer features than a warranty from the factory or third party. If you choose to go this route, read the fine print closely, especially for exclusions and out-of-pocket costs, like deductibles.
Manufacturer extended car warranty
You may also get an offer from the manufacturer to extend your car’s warranty if it is nearing its expiration date. A factory extended car warranty will extend the existing warranty for more miles and years, and can depend on your current mileage and vehicle condition.
Like an extended car warranty from the dealership, be aware of the fine print and compare it to the potential costs of repairing covered items on your own. You may also have to have the car inspected before the manufacturer or dealer will agree to the extended service contract.
Third-party extended car warranty
There are a few advantages to buying a third-party extended car warranty over the factory or dealership warranty.
- You don’t have to make a decision right away. As long as you meet the age, mileage, and condition requirements, you can buy an extended warranty from a third-party at any time.
- Flexible coverage options. With a third-party extended warranty, you usually get several levels of coverage to choose from. The more comprehensive the coverage, the more you’ll pay.
- It can be cheaper. Buying an extended car warranty from a dealer or manufacturer can come with a markup so they can make a profit from the service contract. Third-parties compete with each other for your business, so they have an incentive to offer you a competitive rate so you’ll buy from them rather than someone else.
Here are a few third-party extended warranty companies available that might fit your needs.
Olive
If you want a policy with no waiting period, a completely online process, and monthly payments, consider Olive. Offering vehicle service contracts nationwide (mechanical breakdown insurance in California), Olive has no annual mileage restrictions.
You can get coverage as long as your car is under 140,000 miles, and the car will be covered up to 185,000 miles. There are three plan options with olive: powertrain, powertrain plus, or complete care, which is similar to a bumper-to-bumper warranty.
CARCHEX
One of the oldest extended car warranty companies around, CARCHEX is one choice for higher mileage used cars. You can get an extended warranty for up to 10 years or 250,000 miles.
You can choose from up to five different plans, with your choice of repair shop. The repair shop submits the claim to CARCHEX, who then pays directly to the shop once the claim is approved. You’re only responsible for the deductible, if one applies.
CARCHEX also comes with 24/7 roadside assistance, which includes towing, gas delivery, rental car, and trip interruption.
Endurance
Endurance offers warranty coverage for cars up to 20 years old with no mileage cap. There are six different plans to choose from, including coverage for maintenance. Endurance has an app for mobile users and an easy claims process, with approvals provided in as little as 48 hours.
Every Endurance service contract comes with a free year of Elite Benefits, which includes key fob replacement, 24/7 roadside assistance, up to two tires per year, and deductible assistance if your car is damaged in an accident.