Buying an Extended Warranty

Is Buying an Extended Warranty on a Used Car Worth It?

As a used car buyer, you may wonder whether buying one for your vehicle is a wise investment. Extended car warranties can offer protection against unexpected repairs. But they can also be costly and may not provide the coverage you need. In this article, we’ll explore the pros and cons of buying a warranty plan on a used car and help you make an informed decision.

What is an Extended Warranty?

It is a service contract that provides additional coverage for your vehicle after the manufacturer’s warranty has expired. The manufacturer’s warranty typically covers certain repairs and replacements for a set period of time. Usually three to five years. Once it has expired, an extended warranty can help cover the cost of major repairs and replacements that may occur.

It is also commonly known as vehicle service contracts. They are typically sold by car dealerships or third-party companies. They can be purchased for both new and used cars and the coverage can vary depending on the provider and plan selected.

It can offer car owners protection against unexpected repair costs. However, it’s important to carefully review the plan’s terms and conditions to ensure that it meets your specific needs and budget. Some plans may have exclusions or limitations on coverage. Others may require a deductible or co-pay for certain repairs.

Types of Extended Warranties for Used Cars

  • Powertrain. This type covers the engine, transmission, and other major components of the vehicle’s drivetrain.
  • Bumper-to-Bumper. This covers most of the vehicle’s mechanical and electrical components, excluding normal wear and tear items such as tires and brakes.
  • Component. This type covers specific components of the vehicle, such as the air conditioning or navigation system.
  • Certified Pre-Owned Cars. Some manufacturers offer warranties specifically for certified pre-owned vehicles. This typically provides more comprehensive coverage than the other types.

Benefits of Buying an Extended Warranty

One of the primary benefits of purchasing one is knowing that you won’t be hit with unexpected repair bills. This can help alleviate the stress and worry that can come with car ownership. With one, you can feel secure in the knowledge that you’re covered in the event that something goes wrong with your vehicle.

Another benefit is budget protection. With an extended warranty, you can budget for the cost of repairs in advance rather than being caught off guard by unexpected expenses. This can help you avoid financial strain and ensure that you’re able to keep your car in good condition without breaking the bank.

It can also help protect your vehicle’s resale value. If you decide to sell your car before the warranty expires, having a transferable warranty can increase its resale value. This makes it easier to sell your car and allows you to command a higher price.

Additionally, some plans offer additional benefits, such as roadside assistance. These benefits can provide added convenience and peace of mind when you’re on the road. It makes it easier to handle unexpected situations that may arise.

Drawbacks of Buying an Extended Warranty

One of the primary concerns is cost. Many extended car warranty options can be expensive, adding thousands of dollars to the overall cost of your vehicle. This additional expense may not be worth it for some people, especially if they have a reliable car that is not likely to require frequent repairs.

Another issue to consider is limited coverage. Some have exclusions or limitations on coverage, which may not cover all of the repairs you need. This can be frustrating and may result in unexpected out-of-pocket expenses.

In addition, if your vehicle is still covered by the original warranty or a certified pre-owned warranty, you may be paying for overlapping coverage with an extended warranty. This means you’re essentially paying twice for the same coverage, which can be a waste of money.

As with any financial decision, weighing the costs and benefits of purchasing one for your used car is important. Consider factors such as your vehicle’s age and condition, driving habits, and finances.

Factors to Consider Before Buying 

  • Age and Mileage of the Vehicle. Older vehicles with higher mileage may be more likely to need repairs, making an extended warranty more necessary.
  • Cost of the Warranty. Make sure you understand the cost of the plan and whether it fits into your budget.
  • The reputation of the Warranty Provider. Do your research to find a reputable company and read their reliability rating from other customers.
  • Coverage and Exclusions. Review the terms and conditions to make sure it covers the major repairs you’ll need.

How to Choose the Right Extended Warranty

It’s essential to choose the right plan that meets your specific needs. Here are a few factors to consider when selecting one for your used car:

First, consider the length of coverage. Choose a warranty that covers your vehicle for the time you plan to own it. This will ensure you have coverage for the entire time you’re driving the car and can give you peace of mind.

Next, think about the level of coverage you need. Choose a warranty that covers your vehicle’s specific components or systems that are most likely to require repairs. For example, if you have an older car with high mileage, you may want a warranty covering the engine and transmission, which are more likely to experience problems than other parts.

It’s also important to consider the deductible or the amount you’ll need to pay out of pocket before the warranty begins. Some warranties are low deductible, while others may require you to pay more before coverage begins. Make sure you choose a deductible that you’re comfortable with and that fits within your budget.

Finally, choose a reputable provider and read the fine print carefully. Look for a provider with a good reputation and a history of providing quality coverage and customer service. And don’t be afraid to ask questions or seek out reviews from other customers to ensure you’re getting the best possible extended warranty for your used car.

Alternatives to Extended Warranties

  • Service Contracts. Some manufacturers offer service contracts that provide coverage for repairs and maintenance beyond the manufacturer’s warranty.
  • Savings Account. Create a savings account specifically for car repairs and maintenance, so you can budget for these expenses as they arise.
  • Credit Card Benefits. Some credit cards offer extended warranties or purchase protection for items bought with the card, including cars.



Are extended warranties worth it for used cars?

It depends on the individual circumstances of the vehicle and the buyer. Consider the age, mileage, and potential repair costs before making a decision.

Can I negotiate the cost of an extended warranty?

Yes, it’s possible to negotiate the cost of an extended warranty. Shop around and compare prices from different providers.

Can I cancel an extended warranty if I change my mind?

Yes, most plans can be canceled for a refund within a certain timeframe, typically 30 days.

Do I need an extended warranty if I have a reliable car?

Even reliable cars can require unexpected repairs, so it’s a personal decision based on individual circumstances.

What happens if the warranty company goes out of business?

If the warranty company goes out of business, you may lose coverage for repairs. Research the reputation and financial stability of the company before purchasing.