Should I buy an extended warranty on my used car?

A typical auto warranty on a new car is 3 years or 36,000 miles, whichever comes first. Maybe 5 years and 60,000 miles if you’re lucky, but when you buy a used car, often the original warranty has expired or is in the process of expiring. Should I purchase an extended warranty at

For most people, buying a car is the second biggest purchase after a house. So it’s natural to worry about investing. In particular, it can be hit by unplanned repairs, which are much more common on used cars than new ones.

You should ponder whether it’s worth buying an extended warranty on a used car. A 2013 survey of Consumer Reports (CU) members found that car owners typically put more money into these plans than they get in reimbursement for repairs. Jake Fisher, senior director of automotive testing at CU, told US News.

Extended warranties that the automaker/dealer or third party can offer probably make sense to some buyers. If so) you will only pay Some policies also include great extras such as 24-hour roadside assistance and travel interruption coverage. Extended factory warranties from automakers generally offer the most reliable coverage, but there are no hard and fast rules.

However, extended warranties are not strictly regulated and may contain numerous limitations and loopholes. If you do decide to buy, you should read the policy carefully, including all the fine print that could end up paying for the work yourself, despite your coverage. , the provider may set limits on refunds. Or they may specify that the work will be done in a small group at a facility that is not convenient for you.

SOME WARRANTIES ARE INCLUSIVE EXCEPT FOR SERVICES EXPRESSLY EXCLUDED. Please read the “Exclusions” section carefully. This is because it may only include repairs that are likely to be needed. If you were only excluding typical consumables like brake pads and tires, that could be a reasonable policy.

The section under “Buyer Responsibilities” can be written in fairly dense legal language, so it can be difficult to work out what is covered and what is not.

Exclusion guarantees are generally better than alternative so-called inclusion policies. They are for specified parts and service only. Autotrader suggests staying away from such trading. “These warranties are less comprehensive than the exclusion warranties, which cover all parts with some exceptions,” he said. “Please read the policy carefully to see exactly what guarantees you get.”
Ideally all necessary work on the engine, transmission and drivetrain is covered. However, the work has an incidental cost. For example, will the cost of a rental car during work be covered? If my vehicle breaks down and needs to be towed, will it be covered?

Also, how are invoices processed? Some companies expect their customers to pay up front and then get a refund, but this can be a big problem if the provider is slow to send the check. It’s just one of many reasons why you should check a provider’s Better Business Bureau rating before signing.

The problem is the deductible amount. There is usually no deductible when you purchase an extended factory warranty from the car manufacturer. However, third-party warranties usually include them and can run into the hundreds of dollars.

An extended factory warranty may seem like a good deal with no deductions, but looks can be misleading.

Personal Finance Radio host Dave Ramsey reports: why? Because that’s how dealers make a lot of money. However, most cars already come with a manufacturer’s warranty. So if your vehicle has a defective part, it will usually be replaced free of charge within a certain period of time or mileage. But an extended warranty on a car costs thousands of dollars more. After all, adding an extended warranty to your car (especially if you owe money) isn’t worth it. Also remember that a car warranty does not cover everything car related. You still need good car insurance to protect you while you’re on the go. ”

Both Ramsey and CU’s Fisher suggest creating an emergency fund for repairs instead of purchasing an extended warranty. For example, from $2,000 he might cover repairs for the same period of time as the warranty for $3,000. And the upside is that even if no repairs were needed, the money would still be in the fund.

Extended warranties can be very expensive. MarketWatch asked the provider for his 5-year, 50,000-mile bumper-to-bumper coverage for his 30,000-mile 2020 Toyota Corolla, and he quoted prices between $2,854 and $3,024. Monthly payments varied from $80.22 to $168 per month.

The older the car and the more likely it is to break down, the more expensive it becomes. For the 2016 Chevrolet Equinox with 90,000 miles, the same coverage (with a slight difference) he was $2,952 to $3,915.

Many will drive one of these cars for years without needing major repairs. By the 1950s an engine had to be rebuilt after his 60,000 miles, but today it’s very common for him to go 200,000 miles without major problems. A very robust car with just 30,000 miles on it, the Toyota Corolla is unlikely to need major engine or transmission work under warranty. But of course something happens.

If all this is not convincing, there is another way to investigate model reliability. That information is readily available online. US News rates the best used cars here. Of course, you’ll have to ask or talk to other people who own the same model. If you still want to buy a car after hearing horror stories, consider an extended warranty.

AAA, an automotive service company, offers extended warranties with benefits such as transferable warranties. Zero liability policy; Battery replacement; Repairs at various licensed facilities. Direct payment to the repair shop. and car rental assistance. Approximately 30-40% of AAA extended warranty clients required repairs during the life of the policy.

Despite the issue of potential overlapping coverage, the AAA recommends obtaining extended policy on new used vehicles while they are still factory protected. The cost is cheaper that way. AAA also points out that the price rises sharply once the vehicle has about 80,000 miles on it.

An extended warranty may make sense for some used car owners, but in general, you can save money by simply withdrawing funds for a rainy day.