Extended Car Warranty: Is It Worth It?

According to Consumer Reports, 95% of car buyers rank “reliability” as one of the top factors that they look for when considering which new or used vehicle to buy. If you’re particularly concerned about the reliability of your vehicle, you may want to invest in an extended auto warranty.

A car warranty can help you cover the costs of regular repairs after your manufacturer’s warranty ends. However, this protection may be excessive in a number of circumstances, and an extended warranty might not be right for every driver. 

Is an extended car warranty worth it? Weigh the pros and cons with Benzinga’s guide.

What is an Extended Auto Warranty?

An extended auto warranty is a service contract that can help pay for the cost of certain auto repairs or replacements when your manufacturer’s warranty expires or doesn’t cover the full cost. 

The warranty lasts for a certain period of time or for a certain number of miles past what’s covered by the manufacturer’s warranty. Sometimes referred to as a vehicle service contract, extended auto warranties can be purchased upon getting a new vehicle or anytime before the car’s warranty expires.   

Different Types of Auto Warranties

There are multiple different types of auto warranties. Some of the most common types of car warranties you might see while shopping include the following. 

What Does an Auto Warranty Cover?

The coverage from an auto warranty varies greatly between contracts and warranty providers. Most auto warranties offer coverage for mechanical and electrical parts of the vehicle, such as a mechanical breakdown or engine damage. Coverage from an auto warranty usually covers things that the manufacturer's warranty does not. 

Auto warranties don’t usually cover routine maintenance. This means that they don’t cover things like oil changes, tire changes or new brakes. 

Roadside assistance is also not typically included with a standard warranty package, but you can often add it. You’ll want to read the fine print of the contract in order to determine what is covered and what isn’t. Some providers are specific about what is included in coverage, while others can be a bit more vague. 

Coverage is also based on the cause of the issue. Some warranty providers will only cover repairs and replacements with a specific cause, while others don’t rely on the specifics to determine coverage. As a general rule, you can expect your auto warranty to cover damage to the systems and components listed in your contract that result from normal use of the vehicle.   

Average Yearly Cost of an Extended Auto Warranty

The average cost of an auto warranty in the United States is around $1,800 annually. However, the specific price that you’ll pay for your warranty will vary depending on a number of factors, including the following.

• Make: Luxury vehicles are more expensive to repair, which increases the cost of your warranty.
• Age: If you drive an older vehicle, you can expect to pay more for your car warranty. This is because older vehicles tend to require more repairs than newer vehicles.
• Coverage inclusions: Auto warranties that include coverage for more systems and components of your vehicle will cost more than less general warranties.
• Vehicle condition: If you drive a less reliable vehicle or a vehicle with a history of damage, you’ll pay more for your warranty.

Be sure to shop around and compare warranty prices before signing a contract to be sure that you aren’t overpaying for your coverage. 

Who Needs an Auto Warranty?

There are a few reasons that you might want to consider purchasing an auto warranty, but this expense may not be worth it for every driver. An extended auto warranty is not legally required, so there is no law stating you need to get one in the same way that you must have car insurance to remain on the road legally. This means that whether or not you buy a warranty is entirely up to you. 

If you’ve purchased a used car from a dealer, an auto warranty could be useful as the car is likely no longer covered by the manufacturer’s warranty. However, you should first consider how long you intend to keep the vehicle. If you anticipate that you’ll only be driving the car for a few years, you should probably skip the warranty. If you’re in the process of buying a new car, you can skip on the added expense of an auto warranty, unless you’re worried about whether you’d be able to cover the cost of a repair or replacement that the warranty would cover.

If your car is on the older side, an extended warranty may be a good choice. As a car ages, it needs more service. Since auto warranties don’t typically cover routine maintenance, you’ll need to think beyond whether the car may need just these services. Like when buying a used car, consider how long you intend to keep the vehicle before you buy.  

How to Compare Car Warranties

There are plenty of companies that offer car warranties, but that doesn’t mean you should buy the first one you find. There are a few different considerations when looking for a car warranty, including the following.

• Coverage: Different warranty service providers will offer different coverages. Most companies that offer auto warranties include multiple levels of coverage within the same issuing provider. You’ll want to take a look at what’s covered in the contract and compare it to other warranties available to determine whether it has the right amount of coverage for you and what’s reasonable for your budget. 
• Discount availability: Similar to anything you buy, auto warranties may come with a variety of discounts — you just need to find them. Check into military discounts, government employee discounts, senior citizen discounts, student discounts and teacher discounts before you purchase a warranty.
• Additional benefits: The best auto warranties from third-party companies will often come along with additional benefits. Some benefits may include roadside assistance, which is generally not covered otherwise, or rental car service. Check into the perks included in each warranty to see if something is included that seems to be exceptionally useful to you. 

Speaking with a representative from the warranty provider that you decide to work with can help you compare packages and inclusions specifically tailored to the needs of your vehicle. 

Should You Get An Extended Auto Warranty?

Whether or not you need an extended auto warranty is highly dependent on the car you have or plan to purchase, the manufacturer’s warranty already in place (if there is one) and your financial situation. 

Some drivers pay for an extended auto warranty and never end up using it, but enjoy the peace-of-mind that comes with knowing that they’re protected. Getting a few quotes for different types of warranties can help you estimate what you can expect to pay for your warranty, which makes it easier to put the warranty’s value into perspective. 

Frequently Asked Questions