Purchasing an extended warranty is much like purchasing car insurance; you never know if you'll need the coverage. If you do use the coverage, your out-of-pocket costs for potentially expensive vehicle repairs are greatly reduced. Consider the benefits and disadvantages of purchasing a new car extended warranty to decide if the purchase is right for you.
Extended warranties are cheaper to purchase while a vehicle is brand new with minimal mileage. As the mileage and age of your vehicle increases, so will your warranty price. All new vehicles come with a standard bumper-to-bumper warranty, which covers most repairs for your vehicle that aren't maintenance or body repair related. When your vehicle is new, a warranty purchase is cheaper because while a factory warranty is already in place, the warranty company assumes less risk. You may be able to purchase an extended warranty later on, but expect to pay more than your original quote.
While you’re under factory warranty, repairs are covered for free by the car's manufacturer. Extended warranties may differ from factory coverage. You can choose from a variety of different warranty companies. If you choose a warranty offered by the vehicle's manufacturer, your factory warranty continues. Many dealers offer aftermarket options, which are cheaper, but may not cover as much. Aftermarket warranties offer a deductible option, or the amount you pay out-of-pocket for either each repair visit or each individual repair. You can also take the vehicle to a certified repair shop instead of a dealership.
You may never use your warranty, but you don't have to lose the total cost of the warranty. Many companies offer a cancel option, which allows you to receive a prorated amount of the warranty’s cost in return. This way, if you decide to sell your vehicle or it becomes a total loss, you can get some of your money back from the warranty company. Many warranties are also transferable. Rather than cancel your extended warranty, you can transfer it to the person you sell your vehicle to later on. Vehicles with extended warranties warrant a higher private sale value.
Purchasing an extended warranty for your new car is not worthwhile if you don’t plan to keep the car longer than its factory coverage term. If you consistently trade your vehicle toward another trade while it’s still under factory warranty, you don't need the extended coverage. If your vehicle is a lease, be sure to lease for a term that's equal to or less than the manufacturer's coverage; some factory warranties offer coverage until 50,000 or 100,000 miles, which often exceeds lease mileage options.