What Are the Pros & Cons of Purchasing an Extended Car Warranty?


Extended warranty works like health insurance for the car. The owner pays up front to save on costly repairs later. Extended warranty covers the cost of replacement parts and labor charges. Dealers and financial institutions offer a variety of extended warranty options. You get a choice of coverage plans to better suit your needs.


New vehicles usually come with manufacturer warranties with coverage for at least three years or 36,000 miles. Beyond that the car is not protected. Breakdowns may start to occur after this warranty runs out. Extended warranty lets the car owner rest assured that in case of a breakdown the vehicle will be well taken care of. The owner usually gets a choice of minimum coverage that protect just the major components, or bumper-to-bumper plans that cover virtually every part in the car with very few exclusions. Some warranty plans offer additional services, such as 24-hour roadside assistance.


Depending on the year, make, model and the mileage of the vehicle at the time of the extended warranty purchase, plans can cost from several hundred to a couple of thousand dollars.

A plan bought from a dealer may require you to take the vehicle there for service. This may become a problem if you move away from that area. Some warranty plans may require out-of-pocket costs, such as a deductible.

Depending on a plan, you may need to pay for parts that the plan does not cover. If your vehicle doesn't need any repairs before the warranty runs out, you do not receive a reimbursement.


Shop around and research the plans and the costs available for your vehicle. When purchasing a plan, consider how long you will keep the car and how much you will be driving it. Some plans require that you pay money out-of-pocket for the repairs and reimburse you later. Extended warranty plans may include services, such as rental car coverage, while charging much more than plans without the "extra perks." Consider if you really need the additional services before buying a plan.


Read the fine print to find out what the extended warranty covers and what you will need to pay for. Look for a list of exclusions.

Ask if you can cancel the plan and receive reimbursement. Some warranty companies will prorate and issue reimbursement for the remaining term of the plan if you cancel it.

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