Are you considering an Extended Car Warranty? You’re not alone. Many car owners grapple with the decision of whether to purchase this extra protection. Financial experts like Dave Ramsey are quite clear on the matter: “I don’t recommend buying extended warranties, ever.” He argues they are overpriced and a significant source of profit for those who sell them. Ramsey suggests that instead of investing in an extended car warranty, car owners should prioritize building an emergency fund to cover unexpected repair costs.
However, the landscape of extended car warranties is nuanced, and for some car owners, they might offer a sense of financial security. These warranties, also sometimes referred to as vehicle service contracts or mechanical breakdown insurance, are available from various sources, including dealerships, auto clubs, and insurance companies. It’s crucial to understand that these plans differ significantly in terms of duration, coverage, and price. The fine print is especially important, as aftermarket warranties often come with limitations on what repairs are covered and where you can get your car serviced.
For those leaning towards purchasing extended car warranty coverage, remember that, like the price of the car itself, the warranty cost is often negotiable. This means you have the opportunity to potentially lower the price and secure a more favorable deal.
Extended warranties can be particularly appealing for owners of vehicles from brands known for less-than-stellar reliability. The peace of mind that comes with knowing potential major repairs are covered can reduce financial anxiety. AAA, a well-known auto club, recommends that for newer vehicles, the optimal time to consider extended protection is while the original factory warranty is still in effect. Purchasing coverage at this stage can often result in lower costs and a wider selection of coverage term options.
If you’re driving a used car, extended car warranty options are generally most available for vehicles with less than 80,000 miles. AAA advises used car buyers to consider their ownership timeline, annual mileage, and capacity to handle out-of-pocket repair expenses when deciding about an extended warranty. (It’s worth noting that AAA itself offers extended warranty plans for vehicles up to 12 years old with up to 175,000 miles, including options for key/battery and tire/wheel protection add-ons).
From a purely financial perspective, many argue that the wisest approach is to forgo the extended car warranty altogether. Instead, focus on choosing a vehicle with a strong predicted reliability rating and diligently maintaining it. Consumer Reports offers reliability ratings to assist in making informed car purchasing decisions.
Check out car reliability ratings before making your next vehicle purchase.
If you are considering an extended warranty, it is crucial to choose a reputable provider with a proven track record, such as those backed by automakers. Always thoroughly understand the terms and conditions, paying close attention to what is covered and where you can have your vehicle serviced.
Be wary of unsolicited robocalls pitching extended car warranty services. Skepticism is your best defense against potentially dubious offers. Approach any cold call offering vehicle protection with caution.
