Whether or not a car extended warranty, also referred to as a service contract, is worth it depends. It may or may not provide its money's worth, but it can also provide peace of mind some buyers are looking for. There are pros and cons to having an extended warranty, and we’re here to explain what they are so you can make a more informed decision.
What Is a Car Extended Warranty?
An extended warranty on a vehicle is a type of coverage that covers certain repairs. These are often purchased to cover used cars that are no longer protected by the manufacturer's original warranty.
Vehicle service contracts are available through many different providers and with varying levels of protection, so how comprehensive one is depends on who you get it through and how much you're willing to pay.
Whether or not buying one is going to be worth it depends on your car. If you’re buying new or certified pre-owned, your vehicle is likely already covered by some form of manufacturer-backed bumper-to-bumper and/or powertrain warranty.
Used cars, on the other hand, typically aren't covered. If your vehicle requires repairs that an extended warranty takes care of, the coverage could pay for itself many times over.
Or, your car may not experience any issues so your coverage goes unused. Even if this is the case, many buyers appreciate the peace of mind that comes with having some form of coverage, so it could still be argued that one is "worth it" in this instance.
Benefits of a Car Extended Warranty
Let’s take a look at three of the pros of an extended warranty:
- Peace of mind – A big benefit a service contract gives you is peace of mind that your vehicle is protected. If your car needs costly repairs, learning that your warranty covers the costs saves you both stress and money.
- It’s easy – You can typically purchase an extended warranty right from the dealership you're buying the vehicle from. Of course, there are many other service contract providers, but it's convenient to buy right from the dealer. They take care of all of the paperwork and generally let you roll the cost right into your loan contract. You can then take your car to that dealership to have it repaired. Even better? If the dealer is franchised and the coverage they offer is backed by the manufacturer, you can take your vehicle to any franchised dealership of that brand to have it fixed.
- Custom coverage – You may even be able to pick and choose your warranty type. It may cost more for warranties that go beyond the basic coverage, but it may be worth it to you depending on your car and your typical driving habits.
Disadvantages of an Extended Warranty
Extended warranties are great for your peace of mind. However, they come at a cost, and not all service contracts are equal. If you’re on the fence about getting a service contract, here are three cons for you to consider:
- Some repairs aren’t covered – Unfortunately, extended warranties don’t cover all repair costs. What's on the exclusion list depends on the level of coverage you purchase. You should know what is and isn't covered before you sign on the dotted line.
- Vehicles last longer – Cars aren’t made like they were 20 years ago, or even 10 years ago for that matter. Today's vehicles are built to last longer. If you’re in the market for a used car that has a great reliability rating, you may not need a service contract.
- Adding to the amount financed – Some people purchase an extended warranty from the dealer they're buying the vehicle from and roll it into the loan. This means you're paying interest on the service contract, which increases the total cost of the loan.
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The choice to purchase an extended warranty is up to you. It may be a great investment, or it may not provide its money's worth. Either way, the peace of mind it provides could make it worth it to you.
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