Should you get an extended warranty for your car?
Car buyers value reliability : According to a nationwide survey by Consumer Reports, 94 percent of car buyers consider reliability extremely or very important when choosing a car. But for many buyers, knowing which cars are trustworthy is not enough. They want security.
Vehicle maintenance contracts, often called extended warranties, are a
tempting option for consumers buying a used car or looking to extend
comprehensive coverage on a new car. These are typically included with certified pre-owned cars sold by dealers, along with a comprehensive
inspection. (Read how Honda extended its certified
pre-owned status to 10-year-old cars .)
Regardless of the exact type, extended warranties are an investment in
security that limits financial risk for a period of time. But beware: Previous surveys of CR members have shown that car owners typically pay more
for coverage than they get back in direct benefits. This is not surprising,
because extended warranties bring in a lot of money for those who sell them.
Our car tests are starting
"The fact is that extended warranties are overpriced. That's why
people sell them, because they make a lot of commission," says Dave
Ramsey, a financial expert and radio talk show host. "I don't recommend
buying extended warranties, ever. If you can't afford to fix your car, then you
can't afford the car."
Ramsey recommends that car owners set up an emergency fund for repairs
that they can draw on when needed, as well as a separate fund to save for the
purchase of their next car.
If you want to purchase an extended warranty, remember that the price is
negotiable, just like the purchase price of the car.
Extended warranties can reduce financial stress, especially for owners
of models from unreliable brands. They're available from dealers, auto clubs
and insurance companies (sometimes called mechanical breakdown insurance).
Plans can vary in terms of duration, coverage levels and price. And the fine
print really matters, because aftermarket programs have specific restrictions
on what repairs are covered and where the work can be done.
The best time to purchase protection for newer vehicles, according to
AAA, is while they are still under the original factory warranty. This helps
keep costs down, and you can get a wider range of longer coverage periods.
For used car drivers, vehicles with fewer than 80,000 miles are
typically the best insurance options. The club recommends used car buyers
consider how long they plan to keep the car, how many miles they drive annually
and whether they can afford to pay for repairs out of pocket. (The national
auto club offers extended warranty plans for vehicles up to 12 years old and up
to 175,000 miles. Additional benefits include key and battery protection and
tire and wheel protection.)
pure numbers , your smartest bet is to forego protection and instead
focus on buying a model with above-average reliability and then maintaining it
properly. Before buying a new or used car, check our reliability ratings .
If you're looking to purchase an
extended warranty ,
make sure you buy from a company with a long history, such as an auto
manufacturer, and read the fine print. Extended warranties often come with
numerous limitations, such as the scope of the warranty and vehicle maintenance
options.
Robocalls touting extended warranty coverage are common. We recommend
being skeptical of any unsolicited call offering such protection.