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Are Extended Vehicle Warranties Worth the Cost?

Understanding Insurance

To buy or not to buy an extended vehicle warranty?

That is the question—and a quandary that pits extra expense against peace of mind. Are you willing to roll the dice and hope for minimal repairs after the factory warranty expires? Or do you purchase coverage you might never need and rest easy knowing that many types of maintenance will be covered for years to come?

debt vs savings

Often, the decision-making process goes even deeper: How reliable is the car you’re planning to buy? If you’re thinking about a vehicle that requires more ongoing maintenance, an extended warranty would probably make sense. If it’s a historically dependable car, you may not need extra coverage.

Still undecided? Let’s break down a few factors that might steer you toward a “yes” or “no.”

Pro: Built-in maintenance fund

Doesn’t it seem like all your car problems begin after the standard 3-year/36,000-mile factory warranty expires? (Some new models are equipped with more extensive coverage.) For the drivers who put thousands of miles on their cars each year, that free coverage can run out in a hurry. Used cars generally don’t even come with a manufacturer warranty. If there is still some coverage left on the original warranty, it’s occasionally transferable.

Think of an extended warranty as sort of a security blanket. If your timing belt fails, or you need new gaskets or 24-hour roadside assistance, there’s a pretty good chance it will be covered. Costs vary, depending on the model, condition of the vehicle, and age/mileage. If you’re taking out a loan for a car, the warranty can be rolled in to your monthly payment. To avoid interest, the warranty can be paid in full at the outset.

Con: You may never need it

The flip side of having peace of mind is your vehicle may always run like a charm. Suddenly, you’re out hundreds, possibly thousands, of dollars from extending your warranty. And if you didn’t pay for the coverage up front, you’ll also have paid extra in interest. Again, doing preliminary research on cars’ dependability can sway your decision one way or the other. It also doesn’t hurt to have your credit union/bank representative or vehicle dealer do that research for you.

“I often let people know the vehicle they’re purchasing has X amount of (warranty) claims in the past year,” said SELCO Loan Officer Ashlee Hickman. “I like to present the facts and full insight into the package offered on their vehicle, then let them make the decision from there.”

Pro: Plans are customizable

Depending on the package, many of the same types of maintenance covered by your factory warranty will also be taken care of by an extended warranty. Want nearly every type of repair to be covered? Choose a comprehensive package. Then there are individual drivetrain and powertrain warranties. Drivetrain coverage includes the transmission, driveshaft, axles, and wheels but not the engine. As the name suggests, a powertrain warranty covers the engine and other parts that supply the power and make the vehicle go.

At SELCO, the plans are broken down into three categories—Easy Street (factory-type coverage), Main Street (deluxe coverage), and First Street (drivetrain coverage). Terms range from 12 months all the way up to 96 months. Our plans also can also be added to a car you already own, so if the dealer's warranty was a little too steep, you may find a more cost-effective option with us. Learn more about our plans here.

Con: Repairs are limited (where they can be done, too)

Be sure to read the fine print on an extended warranty contract, specifically the “items not covered” section. Here are a few common vehicle repairs/issues that typically aren’t covered by warranties—parts that are inherently intended to wear out over time:

  • Exterior damage
  • Brake components (friction materials)
  • Tires
  • Clutch components (friction materials)
  • Suspension (shocks and struts)

Furthermore, your prospective warranty provider may only partner with specific repair shops, which means you might need to take your car somewhere else. So if you’re loyal to your neighborhood auto mechanic, maybe you’re not willing to make that change.

As you can see, there are plenty of arguments for and against an extended warranty. It really comes down to your personal tolerance for risk.

“The most reliable vehicles can develop mechanical issues, too,” Hickman said. “But even if your car doesn’t need a repair, peace of mind is irreplaceable.”

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