Extended Vehicle Warranties – Are they worth it?
Have you ever heard someone claim that new cars are a safer financial choice than used, since you won’t be stuck with expensive repairs and no warranty? Well, let’s put that idea to rest.
New cars typically lose about half their value in the first three years. It would have to be a pretty terrible car for the warranty to save you that much in repairs! And second, you can get an excellent warranty for a used car, as we'll cover here.
This article will cover:
- how to decide whether an extended warranty or “Vehicle Service Contract” (VSC) is right for you.
- the differences between the highest-quality plans from well known companies and the other, cheaper options.
- our recommendations for choosing an extended warranty company and a specific plan.
Should I buy a warranty?
The first question to ask yourself is do you even want or need a warranty at all?
Well, it depends.
Basically, an extended warranty is just another form of car insurance. You probably pay for liability coverage with your auto insurance, just in case you get in an accident and someone is injured. Certainly you don't expect that to happen, but it's nice to have the coverage just in case.
Regardless of what some companies imply, don't expect a warranty to pay for itself. It might, and it might not. On average though, the companies selling warranties expect to make money, which would be difficult if they paid more for repairs than the cost of their warranties. So, if you've already managed to save up several months' expenses for emergencies, you might consider forgoing the auto warranty.
On the other hand, if you're like most people and a repair bill in the thousands of dollars would cause you significant pain, you might prefer the affordable monthly payment and peace of mind that an extended warranty offers.
If you do decide to purchase an extended warranty though, don't go halfway. There's little point in deciding on a warranty, then trying to save a bit of money by opting for a plan with only partial coverage. You'll end up paying for the warranty, while still having no guarantee that you won't face a large repair bill! You're better off getting a plan with comprehensive coverage. That way when you need your warranty, you know it will be there for you.