BUYER’S GUIDE: When Does It Make Sense to Buy an Extended Warranty?

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You’re just buying a new — or new-to-you — car. Why are you worried about it breaking down now? Because mechanical failures in modern cars can be insanely expensive.

There was a time when the prevailing wisdom was that extended warranties were a sucker bet. Most everyone was driving around in Toyota Camrys and Honda Accords, and cars were pretty simple, despite the network of pollution controls.

Those days are over. Domestic and imported cars alike are incredibly complicated machines. Mechanical and electronic problems can instantly be in the thousands of dollars to repair. Even things like a full set of suspension bushings can add up to a week’s pay.

Perhaps the best possible case EVER for an extended warranty is Doug DeMuro’s story about his Range Rover that he purchased from a used car superstore. When he bought it, he spent extra money on the extended warranty, and it essentially bought him a new car:

The warranty covered the 2006 Range Rover — which had 60,000 miles — for a term of six years, and up to 125,000 miles. The total up-front cost for the six year, bumper-to-bumper coverage plan was $3,900.

The warranty DeMuro purchased was a “bumper-to-bumper” warranty in the very best sense of the word. With the exception of normal wear items like tires and wiper blades, this warranty covered everything contained between the aging Range Rover’s bumpers: Radiator, suspension bushings, tilt steering column motor (multiple times), air suspension, parking sensors, check engine lights, power folding mirrors, coolant tank, front control arms.

In the fourth year of ownership, DeMuro still had two years of coverage because he hadn’t gone over the 125,000 mile mark. At that point, the transfer case failed, and the warranty covered it, to the tune of about $5,000.

Over the course of his ownership, that extended warranty covered $9,104.16 in repairs. By the third year in, the extended warranty paid out more than the 2006 Range Rover — a six year old car by the time DeMuro had purchased it — was worth on the used market.

When Consumer Reports studied extended warranties though, it discovered that 55 percent of people who purchased one never used the coverage. Moreover, when they did use the coverage, their repairs only amounted to around $850, and the average price paid for the warranty was around $1,200.

But DeMuro’s experience shows that in certain cases, an extended warranty can be well worth the investment.

There’s a lot to learn from DeMuro’s experience, and it applies to both extended warranties and those offered as part of a certified preowned program.

Know Your Provider

Before you even consider an extended warranty, you need to quickly become an expert on what’s covered. The warranty DeMuro purchased was through a big box, nationwide used car retailer, and it was pretty iron-clad.

There’s a big difference between that, an extended warranty offered by a manufacturer on a new car, and warranties offered by third parties.

We’re not saying they’re not worth the money, but there are hundreds of companies that offer third party warranties, and it’s impossible to make a blanket statement about their worth.

Know Where You Can Have Repairs Made

Part of understanding who is providing the warranty is knowing where the repairs can be made. Warranties offered by the manufacturer mean that you can have repairs made at any dealership that sells that brand. Third-party warranties may restrict you to having repairs made at only one dealership.

Take Your Time

If you’re being pressured to make a decision on an extended warranty as you’re filling out your paperwork, take a breath and relax. You don’t have to make a decision at that time. The only reason to is if you’re rolling the cost of the warranty into the loan for the car, but generally that’s not a good idea.

Depending on what kind of a car you’re buying you could have weeks, months, even years to make a decision. We also guarantee that you’re going to get pestered with sales phone calls from now until the end of time to purchase an extended warranty after you buy a new car, so there’s literally no hurry to get it done.

Know the Specifics

In the fine print of the warranty, you’ll learn about exactly what’s covered, for how much time, and for how many miles.

Nissan offers leaf owners 5000

It gets a little tricky with extended warranties on used cars, because they’ll say they’re covering the car for — in this example — 125,000 miles. That’s not 125,000 miles from the mileage the car had when you bought it. That’s 125,000 miles TOTAL. Conversely, the TERM of the warranty begins the day you purchased the car.

So a six-year, 125,000 mile warranty like DeMuro bought for his Range Rover covered his SUV for six years from the date of purchase (until the car itself was 12 years old) and when the odometer hit 125,000 miles.

If you’re putting tons of miles on a car, you’ll run out of miles before you run out of time, and that may well be the deciding factor whether you should purchase the warranty or not.

Research Repair History

A 2006 Range Rover might be one of the world’s most unreliable vehicles. Spending $3,900 for a warranty was a wise financial decision.

If you’re purchasing a Honda Civic with a solid reputation for reliability, though, you might not want to buy the extended coverage, especially if it’s as costly as the one DeMuro purchased.

Our friends at Car Complaints have incredible research on reliability that you should consider before you purchase an extended warranty.

Research Repair Cost

Sometimes it’s not just down to reliability, but the cost of replacement for ordinary parts in some cars. For example, we’ve purchased entire cars for what it costs to replace a full set of suspension parts in a BMW station wagon. The air suspension alone can run into thousands of dollars.

Be sure to do your research on the car and on the warranty itself. Check reviews online for ratings if you’re considering a third-party extended warranty.

Craig Fitzgerald

Craig Fitzgerald

Writer, editor, lousy guitar player, dad. Content Marketing and Publication Manager at