How to Determine an Extended Warranty's Worth

Some dealerships really pressure you to buy an extended warranty with your new car. You may be convinced you absolutely need it - that your car will implode at 36,001 miles. Manufacturers, insurance companies and private companies have joined the fray - and if the decision whether or not to extend your warranty was hard before, it seems impossible now.

Difficulty: Moderate

Instructions

Things You'll Need:

• Warranties

1. Think of an extended warranty as simply an insurance policy against repairs on your car.

2. Check out maintenance records for your make and model car. Consumer publications offer frequency-of-repair reports and will tell you what problems others have had with that car.

3. Consider how long you plan to own the car. If you're leasing a new Honda for 48 months and the manufacturer's warranty expires after 3 years, you probably won't have any problems - unless you put a lot of miles on the car.

4. Be aware that most policies require a deductible; rules governing those deductibles vary widely. A warranty that requires you to pay the deductible every time your car is worked on - regardless of whether this is the third time for the same repair - is not a good value.

5. Get quotes from several companies. Prices for similar coverage can differ by hundreds of dollars.

6. Ignore sales brochures and ask to read the actual policy so you can see what is (or isn't) covered. You want immediate and full coverage for potentially expensive problems.

7. Do your research, understand the protection being offered and compare prices. If you can afford a good policy, the peace of mind is probably worth the price.

Tips & Warnings

• There are three types of packages: Entry level covers the basics. Bumper-to-bumper with exclusions is recommended for cars with anti-lock brakes, power packages and on-board computers. Choose bumper-to-bumper with no exclusions for luxury and sports cars with lots of extras that could break or die. Read the exclusions list very carefully. All packages should include towing and rental car reimbursement.
• Be aware that extended warranties don't cover headlights, taillights, trim and molding, tires, the battery, upholstery, paint, rotors or drums, shocks, glass, air bags or exhaust systems.

on 8/24/2006 There are exceptions to every rule. I have found that BMW offers an extended warranty that includes darn near everything including full maintenance (wiper blades, oil changes, etc) brake pads, rotors, exhaust, air bags even shocks!

I believe it only excludes paint, upholstery, batteries, light bulbs and tires. I've never had a better car, better service or a better warranty.

on 8/24/2006 Warranties that come from an outside party (not from the car manufacturer themselves, such as Ford or Chevrolet ) usually require prior approval before repairs can be done. That means someone from their company must go to the dealer, or repair shop, and inspect the car themselves. Sometimes this takes several days and most of these outside policies do not cover a rental or loaner car! The company can also refuse to do the repairs if they feel that you did not keep up with proper maintenance or if you made the problem worse.

Example: continuing to drive the car until it would no longer run when it was obviously overheating so that you now also ruined the transmission by overheating it as well.

In my 14 years of working in the warranty department for different manufacturers, I never saw an outside policy that was better than the ones offered by the manufacturer.