What Are the Pros & Cons of Purchasing an Extended New Car Warranty?
Extended warranties, or service contracts, are available for new and used vehicles and help to cut the risk of large bills for unexpected repairs. They also are a large profit center for warranty companies, so consider your purchase decision carefully.
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Financial Solvency of the Company
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Many extended warranty companies had financial problems during the first decade of the 2000s and have gone out of business. This can leave you without your initial investment,and with no coverage.
Expensive Repairs
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An extended warranty takes much of the risk of expensive car repairs away from the car owner. It is comforting to know that you will not have to pay anything but the deductible if a major part of your vehicle fails.
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Overlap of Manufacturer's Coverage
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If your new vehicle has a three-year, 36,000-mile warranty, and you are only planning to keep it for three years and drive 11,000 miles per year, there is no reason to buy an extended warranty. You will be under manufacturer's coverage for that time.
Financial Means
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If you do not have emergency savings in place, you might want to buy an extended service contract. If you have savings, you might be comfortable assuming the risk yourself.
Coverage
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If you purchase an extended warranty, be careful of the coverage. Some warranties pay for more repairs than others. Be certain that you are buying the right coverage for you, with the right deductible. You will be responsible for the deductible amount when you need repairs.
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