Should I Get an Extended Car Warranty

How to Decide if an Extended Car Warranty is Right For You?

Extended warranties are not for everyone, but they can make financial sense in certain situations. Use this decision tree below to help you decide whether or not you should consider buying an extended car warranty.

When to Consider a Warranty and When to Pass

*Consider an extended warranty if… *

Don't get an extended warranty if…

* If you own a vehicle that still has some of the manufacturer’s warranty left, particularly the initial, “comprehensive” warranty, you are in a good position. Most manufacturers will sell you an extended warranty direct from them, but only before your new-vehicle warranty expires. If you are already thinking you might want one, get moving before the original warranty runs out. It offers you options you won’t have later. However, before you do, make certain you know what your full warranty coverage is for the vehicle you own. Hyundai, for example, covers its initial owners for up to 100,000 miles or ten years. Don’t buy what you already own.

Recommended Extended Warranty Providers

Endurance

Endurance is an extended car warranty provider that sells and administers its own policies. The company that has a strong presence in the market and has earned good reviews. You can read our full review of Endurance here.

CARCHEX

CARCHEX is a flexible car warranty company, offering drivers a wide range of plan options. In contrast to warranty providers with shady reputations, CARCHEX has earned an A+ rating from BBB. You can read our full review of CARCHEX review here.

Ally

Unlike other companies, Ally is a massive, publicly held financial giant. It makes most of its money financing the purchase of new and used cars. Prior to the financial meltdown of 2008/2009, Ally was known as GMAC and had been in business as long as GM had. It’s not separate from GM, and provides financing as well as extended warranties/service plans for all kinds of brands. You can read our full review of Ally here.

Chrysler Warranty Direct

Those drivers who own a vehicle made by FCA (Chrysler, Dodge, RAM, Jeep, Alfa Romeo, Fiat) should start their search for an extended warranty at the Chrysler Warranty Direct program. There are a few things Car Talks likes about CWD. They’re a direct provider, meaning they don’t turn you over to a third party when trouble happens. Chrysler Warranty Direct also uses your brand’s original parts to service your vehicle. Finally, all of the work performed is by authorized FCA dealerships with technicians trained by the manufacturer.

GM Extended Protection Plan

GM Extended Protection Plans cover General Motors vehicles (Chevrolet, Buick, GMC, and Cadillac) and can extend the coverage of your bumper-to-bumper warranty for up to 10 years. The plans are sold through authorized resellers and GM’s dealerships, but GM administers this program. Simplicity is one benefit of a GM Extended Protection Plan. You don’t need paperwork or a membership card. Any authorized GM dealer can access your plan information from the car’s VIN and will provide repairs using GM-trained technicians, and service your vehicle with GM parts.

What is an Extended Car Warranty?

An extended warranty for your car, truck, crossover, SUV, or motorcycle is a pre-paid service plan. It’s not a “warranty” at all. The only warranty that exists on your vehicle is either the one that came with the car when it was new, or one that was mandated by the federal government on any related emissions components.

An “extended warranty,” then, is kind of like an insurance plan for your car’s mechanical systems. You pay an agreed amount to avoid having to pay for the full cost of repair in case your transmission falls out in the street. . These plans generally take over after the manufacturer’s warranty ends.

With an extended warranty, you’re usually going to pay for maintenance items like oil changes, spark plugs, transmission fluid service, tires, battery replacement and that sort of routine, scheduled work out of pocket. An extended warranty only helps you when something unexpected happens to a system you bought coverage for. For example, if your alternator quits. All of these plans are different, and sometimes they’re different even within a single provider’s product offerings, so it is CRITICAL to read the contract to understand exactly what one of these plans actually covers.

Extended warranties can be offered from the manufacturer who built your vehicle, they can be direct from a third party, and often they are from a company that sells you a plan and then sets you up with another provider to cover the claims. They are not all equal.

You can purchase an extended warranty that will cover nearly every possible repair needed. Conversely, you can buy a less expensive plan that only covers some of the bigger and more expensive problems that might arise. Many of the disappointed customers who post angy-grams in reviews purchased a warranty that didn’t cover what then broke on their vehicle, or they assumed that brake pads and tires were covered when they are expressly excluded from every single service contract we’ve read. When they try to use the extended warranty, they are horrified to find out that the contract, which they didn’t read, plainly states that the item is not covered.

So above all else, READ AND UNDERSTAND the contract you are offered to ensure you know exactly what you are getting, and what you are not.

Pros & Cons of Extended Warranties

When Should You Consider an Extended Car Warranty?

Certain vehicles are well known to have major repair needs. We pick on Land Rover sometimes, but let’s choose among some of the more common everyday cars we all drive. Subaru has a reputation for large issues with the engines in the ten-year old generation. They can have head gasket issues that lead to overheating. Nissan was a pioneer in CVT transmissions and the earlier vehicles have a reputation for trouble with that component. There are even a few years of the bullet-proof Prius that struggled with headlight issues. If the vehicle you drive has a known track record of trouble, an extended warranty may make sense.

Some of us live on a budget that runs week to week or month to month. If you can’t afford a surprise breakdown with a four-figure repair bill, an extended warranty might be right for you. Just keep in mind that according to Consumer Reports studies, most people pay out for a warranty more than they recoup in covered repair bills.

Others among us just hate surprises. If you own a highly reliable but older vehicle, a warranty may still be worth the cost. Let’s say you have a 2010 Lexus IS 350C with a retractable hardtop roof. If that roof runs into any trouble your extended warranty is going to pay for itself in one repair. Wouldn’t it be a nice feeling to have a fixed cost of ownership and keep driving the car you love?

Again, not only is what these warranties cover different from provider to provider, but how they pay for a major catastrophe is, too. A lot of these plans are reimbursement plans, meaning that you’re on the hook to pay for that transmission that fell out, and then you wait for a check from the extended warranty provider. Others will pay for the repairs directly. They’re becoming more rare by the minute.

With a reimbursement plan, you have to ask yourself what the value is if you have to pay for the repair. That’s kind of the whole point with an extended warranty, right? What good is it if you have to rack up debt on your credit card to pay for a $4,000 repair. Yes, you’ll likely get a check in the mail, less the deductible you agreed to, but by that point, you’re four grand in the hole and Visa wants its monthly vig on the loan. Not exactly the “peace of mind” you were after when you signed up for the plan.

When to Say “No” to an Extended Warranty?

If a robot caller or a happy lady recording just buzzed your cell and offered you a warranty, we suggest declining the offer and stepping back. Do your research. Don’t buy a warranty as a result of a cheesy sales pitch. Many of the best warranty companies, CARCHEX, for example, do not offer unsolicited sales pitches.

As we have highlighted above, extended car warranties are not for everyone. Most of all, those who own a new or used car already covered by a warranty. New cars have warranties as long as 100,000 miles, but they typically have two milestones. The first is the comprehensive warranty that runs to three years of 36K miles. The drivetrain warranty then continues on to five years or 60K miles. Certified pre-owned vehicles come with warranties that usually last at least one full year and 10,000 miles. You may not need coverage, but you could bookmark your calendar for a few months before the warranty expires for reconsideration.

You also don’t need an extended vehicle warranty if you can afford to fix a typical large repair yourself, or replace an old vehicle when its useful life has ended. The typical large repair is about $600. If you can manage that once or twice per year, save your money on an extended warranty. Finally, if your vehicle has a value of less than $1,500, do you really want to purchase an extended warranty that will cost you more than the vehicle’s value?

One last note: If you already have a car in need of a costly repair and hope to sign up, get the car fixed, and then cancel the plan, think again. These companies are experts at detecting fraud, and they are smart enough to make you wait a few months before coverage begins. Some even inspect your vehicle prior to approval.

How to get the Best Deal on an Extended Warranty?

This is the hard part: Comparison shopping these extended warranties is like trying to nail jello to the side of a barn in a hurricane. The contracts are all over the place. Some are “stated benefit” plans that tell you exactly what they’ll cover, and nothing more. Others are “exclusionary” plans, which tell you what they WON’T cover, meaning they cover everything else. Trying to decide on the benefits between those two plans is a recipe for madness.

If you are buying a used car and the dealer is offering you a warranty, get the price in writing and then go home and do some research. How highly is the company that is administering the warranty rated? Price is just one aspect of value. A low price is worthless if the last 20 Google reviews all said that the company ignored the vehicle owners’ claims. (Which is exactly what we found when we researched one warranty company this very week).

If the company that you have been offered a quote from is reliable, shop the price around a bit. Call the company directly and see if they will sell you the same policy for less. Call other highly-rated warranty companies and see if they have a similar plan for less money. It doesn't take you long to get a few comparable quotes, and you can see reviews at three places instantly; Google Reviews, Yelp, and Better Business Bureau.

Our Methodology For Best Warranty Providers

Car Talk has spent the last year doing a deep dive into the warranties industry for the benefit of our readership and long-time listeners. Our process for deciding on the best warranty companies for the year was exceptionally thorough, involving in-depth research and our unique secret shopper initiative. We compiled over 50 data points across all reviewed companies to refine and inform our selection process. Car Talk reviewed the following important criteria for each company:

• Consumer Satisfaction: Cross referencing multiple trusted resources to pull our fair and balanced customer reviews.

• Cost: Utilizing our secret shopper initiative, we got comparable quotes across all companies so we can validly compare pricing.

• Coverage and Offerings: Our research team delved into the coverage and offerings for each company, comparing what is available, including extras and discounts.

• Official Ratings: We consulted a wide range of verified review sites to extrapolate a ratings score for each.