What Is An Extended Warranty, And Do I Need One?

An extended warranty or a “service contract” is repair coverage valid after the manufacturer’s warranty has expired. It covers most major breakdowns and stabilizes repair costs as they fluctuate.

Dealerships sell extended warranties because they are profitable, but you should research your specific needs to determine whether it is necessary for you.  Keep in mind that you do not have to purchase the extended warranty the same time you purchase your car. Extended warranties can be purchased any time before the manufacturer’s warranty expires.

To help your decision on purchasing a warranty, ask yourself the following questions:

1.    How long are you planning to keep your car?

This may seem obvious; however, analyze your future plans for your new vehicle. If you plan on keeping this car long term, you may want to consider the extended warranty. If you frequently change cars, it may not be worth it.

2.    Where is this warranty from?

Dealerships can use third-party warranty companies, which can only be used at the specific dealership where you purchased your vehicle. They may also require you to pay for the repair out of pocket and then submit the bill to the warranty company for reimbursement.

 The manufacturer’s extended warranty can be used at any franchised dealership throughout the country. This ensures that franchise-trained factory workers with factory parts will do your repairs. A third-party backed warranty may or may not pay for work to be done at a franchised dealership.

3.    What exactly does it cover and how?

Look into the details of what is covered; “wear and tear” parts, or parts that tend to break down over time may not be. Many warranties are divided into sections based on their prices and levels of coverage.

Read the fine print to determine if all repairs are fully covered, if you have a deductible, or if you pay up front and receive reimbursement later.

4.    What is your track record?

Look back at your history with vehicle breakdowns and add up how much you have spent on repairs outside of warranty. Compare this to the cost of the extended warranty and determine if it is cost-effective.

5.    Is this what is best for you?

Although new cars are more dependable and reliable than ever, sometimes peace of mind is worth the price. Research and take the time to decide what is best for you before going to the dealership.

For more information on warranties, comprehensive research and comparison tools, or to use our auto-buying system, visit GrooveCar.com