Extended warranties, also known as vehicle service contracts, offer additional coverage for future repairs, which can be particularly appealing for used cars prone to more frequent repairs due to wear and age. However, potential buyers of used cars should approach the decision to purchase an extended warranty cautiously, weighing its benefits against their specific needs and circumstances. While some may find value in extended warranties, others might end up spending more than necessary.
To decide, it’s essential to evaluate the cost of the used car warranty, understand how these service contracts operate, and carefully consider their potential advantages and disadvantages. Keep reading to explore more about extended warranties for used cars.
What are extended warranties?
Extended warranties are optional plans that buyers can choose to add to their vehicle purchase. They aim to provide coverage for specified repair costs that may arise in the future for your vehicle. Typically, extended warranties start after the manufacturer’s warranty expires, although there can be overlaps between the two.
Having this additional coverage can be beneficial if your used vehicle develops issues later on. However, the usefulness of an extended warranty hinges on whether it explicitly covers the specific issue your vehicle experiences. If not, you may need to bear those costs yourself.
Extended warranties vary widely in terms of the repairs they cover. To understand the specifics of a particular warranty, carefully review its details, focusing on the covered items. Generally, extended warranties do not duplicate the coverage of a factory warranty, nor do they include routine maintenance tasks like oil changes, tire replacements, or air filter changes.
When purchasing a used car that is no longer under the manufacturer’s warranty, it may be prudent to consider an extended warranty. However, it’s crucial to thoroughly examine the warranty’s terms to determine if the potential repairs it covers justify the cost of the warranty.
What’s the cost of a used car warranty?
Determining the cost of a used car warranty requires research, as prices can vary widely. On average, extended warranty plans for used vehicles typically range from $600 to $1,000 per year, with an average cost of around $2,800Footnote 1. If you finance these costs through your auto loan, you’ll also incur interest charges, further increasing the overall expense of the warranty.
Several factors influence the cost of a used car warranty, including:
- Age and mileage of the vehicle: Older vehicles or those with higher mileage generally come with more expensive extended warranties.
- Type of vehicle: The brand, make, and model of the used car can affect the cost of the extended warranty, with more expensive vehicles typically requiring higher warranty costs.
- Deductible: Opting for a lower deductible usually means a higher cost for the extended warranty, while choosing a higher deductible may reduce the overall price.
Understanding these factors can help you evaluate whether the cost of an extended warranty aligns with the potential benefits it offers for your specific used car purchase.
Benefits of purchasing an extended warranty on a used car
The primary benefit of purchasing an extended warranty is having coverage for necessary repairs that may arise in the future. It can provide peace of mind knowing that your warranty will cover the repair costs, with you only needing to pay the deductible.
Extended warranty options are readily available from dealerships, auto clubs, and insurance companies, making them easily accessible.
Another advantage is that an extended warranty can potentially be cheaper than paying for repairs out of pocket. Researching the typical repair costs for the specific used car you’re considering can help you determine if the warranty cost is lower than what you might pay independently, making it a worthwhile investment.
Drawbacks to purchasing an extended warranty on a used car
Some things to keep in mind about extended warranties are that they may not cover all repairs, and it’s crucial to carefully review the contract to understand the limitations on types of repairs and service providers.
One potential drawback is if you never end up using the warranty, which means you’ve spent money on coverage that wasn’t needed. Additionally, if your used car is still covered by the manufacturer’s warranty, purchasing an additional extended warranty may be unnecessary.
Should I buy an extended warranty on a used car?
Ultimately, whether to purchase an extended warranty for a used car is a decision that requires serious consideration. If your research suggests that an extended warranty could potentially save you money in the future by covering unexpected repairs, it might be worth investing in one. On the other hand, if you believe the likelihood of needing such coverage is low or if it would be more cost-effective to pay for repairs out of pocket, you might reconsider purchasing an extended warranty. Remember, extended warranties can be expensive, may not cover all necessary repairs, and could end up unused altogether.
Alternatives to extended warranties
If you decide that an extended warranty isn’t the right choice for you, there are alternative options worth considering that might better suit your needs. One option is to allocate a reasonable amount of money each month into a savings fund specifically for future repairs. If you don’t end up needing these funds for repairs, you can use them for a future vehicle purchase or other expenses.
Another alternative is to purchase a vehicle that is still under the manufacturer’s warranty. This warranty is often transferable, possibly requiring only transfer fees or minor charges, and typically covers essential repairs for the specific vehicle model.
Additionally, leasing a vehicle could be a viable alternative since leased vehicles generally include their own warranties that cover necessary repairs during the lease period.