Extended Auto Warranties: great deal or money pit?
When you buy an extended auto warranty you are basically buying insurance against costly car repair bills. The warranty is a contract between the warranty company and you, that the warranty company will pay for repairs to your car covered by the agreement.
Warranties cover those unexpected costs that always happen when you least expect - and can least afford them. The peace of mind of an extended warranty can be wonderful. You never have to worry, and you can save hundreds and even thousands of dollars!
The risk is that you may well pay more for the warranty than you will for actual auto repairs over the life of the warranty. While an auto warranty provides peace of mind, regardless of whether or not you ever need to make a claim, the fact is that you may never need it. Depending on the reliability of your auto, its value, and your luck (meaning circumstances beyond your control), the peace of mind provided by an extended auto warranty may or may not be worth it to you. It varies from person to person.
Before committing to an extended auto warranty, take the time to explore the ins and outs of the various coverage options. You can save hundreds of dollars by comparing extended auto warranty quotes to find the best deal. Policies often differ in terms of price and coverage. It's all in the fine print, so be sure to read yours.
Here's a list of important questions to consider:
Do you really need an extended auto warranty?
Your vehicle is one of your biggest investments, and an extended auto warranty will ensure it's repaired if anything goes wrong. Did you know that the average major repair is over $2,000? With the complexity of today's vehicles, one major repair often costs more than the extended warranty.
You are making a bet when you buy any extended auto warranty. You are betting that the total amount of the warranty payments will be less than the amount you would pay when your car breaks down. Before purchasing a warranty, think critically about your particular car. Is it a make and model that will run for 150,000 miles just by changing the oil regularly? Then you might not want to pay for an extended warrantee. But if your car has a tendency to break down, or if you can't afford to make a large lump-sum auto repair payment, an extended auto warranty can be a great purchase.
There is no need to buy an extended warranty if you are purchasing a new car and don't plan to own it longer than the manufacturer's original warranty.
When should I buy warranty coverage?
An extended auto warranty is less expensive the earlier you purchase it. As your vehicle ages and accrues mileage, the price for protection rises. The newer your vehicle is, the lower the prices and the longer the terms. The warranty company usually takes into account the time left on your manufacturer's warranty, if any, and takes over after it expires.
What should I look for in the warranty's coverage?
Be sure the most expensive parts of the car are covered, namely the engine and power train.
How will my claims be handled?
Look for a company that handles all aspects of your claim -- and allows you to use the auto repair facility of your choice. Don't get locked in to going to their preferred provider, who may not be the best option for you.
The warranty company should pay for all claims immediately via corporate credit card. They should cover all parts, labor and even sales tax (if applicable) with no limit on the number of claims you may have, or restrictions on parts that may be used for replacement.
Make sure that the warranty company you are considering will pay the full, posted labor rate to the auto repair facility and not just the hourly rate designated by the repair guides.
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