Extended Repair Warranties- Are They Worth It?

Driving out of the dealership with a brand-new car is a lovely feeling. Everything feels safe and comforting- the new car smell, the shiny new features, and the 3-year/36,000-mile bumper to bumper factory warranty.

Black SUV with a red bow

Most vehicles on the road today are very reliable and come equipped with Advanced Driver Assist System features to keep you and your family (especially those new drivers!) safer than ever.

Unfortunately, these features are expensive to repair. So, what options are there when the warranty runs out or if the vehicle was purchased used and didn’t come with a factory warranty at all?

1.     Squirrel away an emergency repair fund.

2.     Consider an extended repair warranty.

What is an Extended Repair Warranty?

An extended repair warranty is a contract between the owner and either the manufacturer or a third-party company that says that the company will pay for some repairs to the vehicle during a set amount of time.

For a monthly fee + deductible, the company will cover repairs up to the agreed upon dollar amount. This could save a lot of money, especially with older or luxury vehicles.

Types:

• Comprehensive/Bumper to bumper: The highest level of protection and covers almost everything. There will be a specific list of items that are excluded. Be sure to read the fine print.

• Powertrain: Covers the engine, transmission, differential, and drive axels.

• Drivetrain: Covers only the transmission, differential, and axels- no engine coverage.

Depending on age and make of the vehicle, annual costs are usually from $900 to $2,400 for most extended repair warranties.

Stick figure with question marks

Pros of an Extended Warranty

• Better budget planning. A monthly premium is easier to plan for than a surprise $2,500 the week after the holidays.

• Many components that fail are expensive. Sensors, computer systems, cameras are all costly to calibrate and replace.

• Some warranties come with added benefits like free towing, roadside assistance, rental car reimbursement, etc.

• Many warranty plans are transferrable, which is a nice perk when selling the vehicle.

• Repairs can be done at any authorized independent repair facility, not just at dealerships.

  
  

Cons of an Extended Warranty

• Regular maintenance items like oil changes are not covered.

• High wear and tear items like windshield wipers, tires, and brake pads are almost never covered.

• Pre-existing conditions are not covered.

• Adding some aftermarket parts can void the warranty. If the company can prove that the defective part caused the issue, they may not have to cover the repair to that system.

• Hauling or towing more than the vehicle was designed for may void the warranty.

• Some plans have a high deductible rate.

• Most plans have maintenance requirements. If you skip an oil change or other scheduled maintenance the warranty is void.

• Extended warranties do not provide accident, theft, or weather coverage. You will need auto insurance for that.

  
  

  

  Mechanic working on a car on a lift

Things to Consider Before Purchasing an Extended Warranty

1. What is the monthly premium? Does this fit into the budget?

2. What is covered?

3. What is the deductible?

4. Does the company require you to pay for repairs up front and then submit for reimbursement?

5. Some companies use average labor rates, so you may have to pay out of pocket to cover the difference if the shop you use has a higher rate than the company will cover.

6. Some companies only provide coverage amounts for the least expensive part. If you elect to use premium or manufacturer parts, you will need to pay the difference.

7. Does having an emergency car repair fund make more sense?

Pro Tips

Don’t forget that recall repairs are always free, with or without a warranty. Once a recall has been issued, it never expires.

Phone calls offering to extend your vehicle’s warranty are almost always a scam. Don’t respond to a phone inquiry unless you placed the call initially and have researched the company.

Our service advisors at Schoen Auto are more than happy to discuss extended warranties for your specific vehicle and help you make a more informed decision.