Extended car warranty: Is it worth it?

Update on

Whenever you visit the car dealership and you want to buy a vehicle, you will be asked if you want the extended warranty besides the factory warranty. This can easily lead to confusion since most people have no idea what such a car warranty is.

Fortunately, there is no need to become confused when you want to understand what this warranty is. Not much has to be known actually.

The important thing to be aware of is that the extended car warranty is longer than the factory warranty. Usually, the terms are exactly the same but it is the duration that is different. Sometimes, the deal is offered by a third party, not the dealership.

The Extended Car Warranty

As already mentioned, the extended car warranty oftentimes acts exactly like the other automotive warranties. Your issues will be fixed by the third party or the manufacturer. Even so, the end result of the policies is the same. When something bad happens, there will be someone that will help you to solve them.

The real complication with extended car warranties is that there are differences between what third parties and dealerships offer. For instance, if you take a look at Olive and its extended policy for Audi vehicles, you quickly notice a higher coverage than with dealership deals.

As you buy a new vehicle, you are offered a factory warranty. This is unique and offers fixed coverage for all clients. When you opt for extended warranties, options dramatically grow. The third-party providers will give you access to large warranty lineups so that you can choose something that is perfect for you, as opposed to something general.

A big difference you need to be aware of appears when looking at these 2 types of contracts:

  • Real Car Extended Warranties

When you are interested in extending the factory warranty, you have to talk to the manufacturer. The true extended warranty will cover factory limits. For instance, when the original policy lasts 3 years and covers 36,000 miles, you can get an extension from the automaker to 60,000 miles and 6 years. However, this is quite rare.

  • Vehicle Service Contracts

This is what we see when we talk about extended warranties. These are practically new agreements, vehicle service contracts you sign with a third-party provider or the automaker. You still get to have issues fixed but we are not talking about a factory warranty, even if you do get access to similar limitations and coverage. The largest difference between this and what the car manufacturer offers is that there are many different additions, plans, and limitations with the vehicle service contracts.

To put things as simple as possible, there are many more similarities than there are differences when looking at these extension options. However, the big difference of who offers the deal is covered.

Do You Need The Extended Warranty Policy?

According to the law, you do not need to choose an extended car warranty policy and you can drive your car on the street without it. You just need to be sure that you have the minimum of legally required insurance coverage.

Extended Warranty

The big advantage that comes to the table with the use of an extended warranty is that you get to save money. You basically receive more money than what you end up spending on the repairs. For an extended warranty policy, profitability and value become reality when some conditions are met. As an example:

  • Your vehicle is older and needs to receive more servicing as it ages and repairs are common.
  • The vehicle is new but its history of service is pretty long.
  • The make and model of the vehicle were proven to have a history of common service.
  • You will be able to take advantage of some extra perks, including roadside assistance, which is oftentimes not the case with regular factory warranties.
  • You will buy a vehicle that is used and that already includes the extended warranty.

The real challenge with the extended car warranty is that it is not valuable unless you actually need the services that are offered. Only when these services kick in and you end up with reduced repair costs you can make a profit. Until then, the only thing you do is spending money.

As a result of what was mentioned, you need to set a budget and you need to look for the extended car warranty plans that would balance coverage and costs for the vehicle you own or want to purchase. The plan that you choose should be used to be valuable.

Final Thoughts

The extended car warranty is not at all a bad idea in the conditions that were mentioned above. However, it is a very good idea to at least consider it, no matter the situation. There are many cases in which you need this deal.

Pin It on Pinterest