You’ve decided it’s time to replace your vehicle. You’ve looked around, found the one you want and you’re working with a salesman to close the deal. While writing up the paperwork, the subject of protection packages and extended warranties comes up. We all cringe when thinking about the cost of keeping our car in good condition. Many of us dread the idea of buying or leasing a new or used one and the money you spend taking care of it. Do you need an extended warranty, are they worth the cost?
Consider how automakers finance their projected expenses on your next car. Most auto manufacturers set aside about 10 per cent of their car sales income to cover future warranty expenses. So, on a $25,000 car that the manufacturer sold to the dealer for, say, $22,500, they set aside $2,250 for future repairs. This amount is to cover all their warranty expenses, from recalls to base warranty repairs to powertrain and corrosion coverage. The latter is the rarest pay – out, as the fine print in all corrosion warranties states that the rust must start from the inside, and only covers outer body panels.
Here’s some info you’ll seldom find on any manufacturer’s website. First, extended warranty plans start at around $2,000 for any decent coverage (five years/60,000 miles), and go up from there. Next, these plans start the day you drive your new vehicle off the lot, not when the base warranty expires. So a five – year plan actually only gets you two years of extended coverage on a car with three – year factory coverage.
Automakers will tell you that their extended warranty plans offer benefits right off the bat such as loaner cars and such, but most dealers supply these things when required to keep customers loyal. Dealerships will often sell non – manufacturer extended plans as well as the factory authorized type. Why? Because there’s more profit in the non – manufacturer plans.
But these plans seldom carry the same coverage as factory warranties and often need pre – approval before repairs can start, which can lead to delays. And sometimes, they’ll only allow aftermarket or used parts. They place limits on the amount of the repair costs they will pay. If you travel, other dealerships that service your brand may not recognize or honor non – factory warranties. So if you’re going to buy one, make sure it’s the factory coverage.
If any sales rep uses the term “bumper to bumper” when describing their extended plan coverage, ask them to prove it. It is a much shorter list of the things extended warranties cover than what they don’t. They rarely cover trim items, glass or certain electronics. They’ll never pay for adjustments such as wheel alignments or tire balancing they never cover tires.
So why buy an extended warranty in the first place? It boils down to your penchant for budget risk. If your repair funds are tight, an extended warranty plan may reduce the chances of a major repair bill throwing a monkey wrench into the works. If you love to drive a fully loaded vehicle with all the toys, your repair risks are higher.
If you’re not sure how your new ride will treat your repair budget, don’t worry. Another little – known fact is that almost every car maker will allow you to buy an extended warranty right up to the end of the original factory warranty.
So, with most autos you can wait up to three years or 36,000 miles before making the plunge. Do a little research first – you can spend $10 to get an online subscription to Consumer Reports and access their archives on just about any vehicle sold in North America. If your choice of vehicle is not towards the top of their list, maybe you should be shopping for something else.
Generally, today’s vehicles are well built and pretty reliable as long as you keep up with the maintenance. Extended warranty companies will deny claims if the maintenance is not performed at the scheduled time or miles. Staying up to date with the maintenance helps keep the vehicle reliable and may catch problems before they occur.
If you are the type of person who takes care of your vehicle an extended warranty is probably not something you need. If you prefer to drive your vehicle until it breaks then an extended warranty might be a good idea. Either way you don’t need to make the decision until just before the manufacturer’s warranty runs out.