Typical bumper-to-bumper automotive warranties on new cars are three years or 36,000 miles, whichever comes first. If you’re lucky it might be five years and 60,000 miles, but in many cases when you buy a used car the original warranty will either be expired or expiring. . So should you sail without any protection, or buy an extended warranty at your own expense?
For most people, the car you buy is your second purchase after your house. It is therefore natural to worry about your investment, especially the possibility of being affected by unscheduled repairs which occur much more often in used cars than in new cars.
You will need to consider whether it is worth buying an extended warranty on your used car. A 2013 Consumer Reports (CU) member survey found that car owners typically invest more money in these plans than they take out in repair reimbursements. “While an extended warranty can buy peace of mind, you’re probably better off just picking up a reliable car and putting the extra cash in the bank for any repairs and maintenance down the road,” Jake Fisher, Senior Manager automotive testing at CU, US News said.
Extended warranties, which may be provided by car manufacturers/dealers or third parties, probably make sense for some buyers. Assuming the policy provides full coverage, you will only pay the deductible (if there is one) for major repairs. And some policies come with great perks, like 24-hour roadside assistance and trip interruption coverage. In general, extended factory warranties from car manufacturers offer the most reliable coverage, but there are no hard and fast rules.
But extended warranties are not strictly regulated and may contain a large number of restrictions and loopholes. If you decide to buy one, you should read the policy carefully, including all the fine print that may require you to pay for the work yourself, despite the coverage. For example, for a specific repair, the supplier may cap reimbursement. Or they may specify that the work be done in a small group of facilities, none of which suits you.
Some warranties are comprehensive, except for services specifically excluded. Read the “excluded” section carefully, as it may only include repairs that you are likely to need. If only typical wear items such as brake pads or tires are excluded, this is likely to be a reasonable policy.
Mechanic working under a carJazzIRT/Getty Images
Sorting out what’s covered and what’s not can be tricky, as the sections under “Buyer Responsibilities” can be written in quite dense legal language.
Exclusion warranties are generally better than alternative so-called inclusion policies. These cover only the specified parts and services. Autotrader suggests walking away from these offers. “These warranties are not very comprehensive, especially when compared to the exclusion warranties covering all parts with a few exceptions,” says Autotrader. said. “Read the policy very carefully to know exactly what coverage you will get.”
Ideally, all necessary work on the engine, transmission and transmission will be covered. But there are additional costs associated with this work. For example, are car rental costs covered for the duration of the works? If the vehicle breaks down and needs to be towed, is this covered?
And how are invoices handled? Some businesses expect their customers to pay upfront and then be reimbursed, but this can be a major issue when the vendor is slow to send a check. This is just one of the many reasons why you should check the supplier’s Better Business Bureau rating before signing a contract.
Deductibles are a problem. If you purchase an extended factory warranty from the automaker, it usually has no deductible. But third-party warranties usually include them, and they can run into a few hundred dollars.
Extended factory warranty then might seem like a bargain with no deductible, but looks can be deceiving – assuming your car is relatively new, it can duplicate your existing coverage.
Reports personal finance radio host Dave Ramsey, “For car dealerships, it’s more important than ever that they get you to buy an extended car warranty. Why? Because that’s how dealers make a lot of money. But 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 time or mileage. But extended car warranties cost thousands more and you may never use it! In the end, adding an extended warranty on your car (especially if you owe money on it) just isn’t worth it. And remember that car warranties don’t cover everything related to the car. You always need good auto insurance to protect you when you’re on the road.
Both CU’s Ramsey and Fisher suggest creating an emergency fund for repairs instead of buying an extended warranty. If you save, say, between $2,000 and $3,000, that will likely cover repairs for the same period as the warranty. And the advantage is that if the repairs were not necessary, the money is still in the fund.
Extended warranties can be very expensive. Marketwatch asked providers for five-year, 50,000-mile bumper-to-bumper coverage on a 2020 Toyota Corolla with 30,000 miles, and offered prices between $2,854 and $3,024. Monthly payments ranged from $80.22 to $168 per month.
Prices rise when cars are older and more prone to breakdowns. For a 2016 Chevrolet Equinox with 90,000 miles, the same coverage (with minor differences) was $2,952 to $3,915.
Flatbed tow truck carrying a broken down carchoochart choochaikupt/Getty Images
In many cases, you’ll be driving for years in either car without needing major repairs. While engines up until the 1950s required rebuilding after 60,000 miles, today 200,000 miles without significant problems is quite common. This Toyota Corolla, a very tough car that starts at 30,000 miles, is highly unlikely to need major engine or transmission work within the warranty period. But, of course, things happen.
If all this is not convincing, another approach is to research the reliability of your model. This information is readily available online. US News rates the best used cars here. Of course, you should ask around and talk to other people who have owned the same model. If you hear horror stories and still want to buy the car, definitely consider an extended warranty.
The AAA auto service company offers extended warranties, with benefits such as transferable coverage, useful if you decide to sell the car before the contract expires; no deductible policies; battery replacement; repairs at a wide variety of approved facilities; direct payments to repair shops; and rental vehicle assistance. About 30-40% of customers with AAA’s extended warranty needed repair while the policy was in effect.
Despite the problem of possibly duplicate coverage, AAA recommends getting an extended policy on newer used cars while they are still under factory protection. The cost is thus lower. AAA further notes that prices rise sharply after cars have driven around 80,000 miles on the odometer.
Extended warranties might make sense for some used car owners, but in general you’ll save money by simply dipping into your rainy day fund.
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