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Millions of dollars are spent every year by Americans alone on extended car warranties. Chances are, you have considered or are currently considering whether it is worth it to purchase one for your vehicle.
Our review team believes that whether an extended car warranty is worth it or not depends on your personal goals and your definition of “worth it”.
In this guide, we help you decide whether an extended car warranty is worth it for you. And, we recommend providers to those who decide to purchase a coverage plan.
Table of Contents:
- What Is An Extended Car Warranty?
- What Does An Extended Car Warranty Cover?
- What Does An Extended Car Warranty Cost?
- Are Extended Car Warranties Worth It?
- Our Recommended Extended Warranty Providers
- Frequently Asked Questions
What Is An Extended Car Warranty?
An extended car warranty is a vehicle service contract designed to protect you from costly repairs. Extended car warranties are typically purchased from a dealership or a third-party provider after the manufacturer warranty on your vehicle expires.
What Does An Extended Car Warranty Cover?
There are a variety of different extended warranty plans. Some cover your car bumper to bumper and others cover only specific components of a vehicle.
We recommend that you compare sample warranty contracts before deciding on a specific provider or plan. These sample contracts give you detailed information on what exactly your warranty would cover in case of a needed repair.
What Does An Extended Car Warranty Cost?
An extended warranty’s cost is also dependent on the plan and provider you choose. In addition, the cost of an extended warranty is determined for each car owner based on other factors, such as your car’s mileage and age.
Providers such as CARCHEX and Endurance allow you to receive a free quote for your vehicle online. This can help you get a better idea of what you would be paying for coverage.
Are Extended Car Warranties Worth It?
Whether or not an extended car warranty is “worth it” depends on your preferences and lifestyle. Below are two reasons it might be worth it for you and two reasons it might not be.
#1 Costly repairs are not affordable
If you cannot afford a $2,000 or $3,000 repair, purchasing an extended warranty will give you peace of mind that your vehicle — and budget — will be protected. With an extended warranty, you won’t have to worry about potentially racking up more credit card debt or having to sell your car.
#2 Lower repair bills are worth a potentially greater long-term cost
Many extended car warranty owners do not recoup the long-term cost of their extended warranty through needed repairs. That is how extended car warranty companies make a profit.
If you are more worried about large repair bills than a potentially greater long-term cost, purchasing an extended car warranty would be a wise decision.
Not Worth It
#1 You can afford costly repairs
If you can easily afford a $2,000 or $3,000 repair, purchasing an extended warranty likely does not make sense. While it would be unfortunate to have to foot the bill, an extended car warranty would likely have cost you more money in the long-run.
#2 You have a good credit score and you pay off credit debt quickly
If you are a responsible credit card owner with a good credit score, you could potentially save money by paying for an expensive repair using your credit card.
Instead of paying a monthly payment for your warranty, you would only be responsible for paying the principal amount loaned to you and the interest on that money.
Our Recommended Extended Warranty Providers
If purchasing an extended warranty makes sense for your personal car repair needs, we recommend CARCHEX and Endurance.
CARCHEX was awarded Best Provider by our review team for its notable industry partnerships, national media recognition, and A+ rating from the Better Business Bureau (BBB).
If you prefer a direct provider that doesn’t work with any third-party administrators, Endurance is a solid alternative choice. Endurance scored highly by our review team for its leadership in the extended warranty industry.
Having trouble deciding between CARCHEX and Endurance? Read our Endurance vs. CARCHEX review to help yourself make a decision.
Frequently Asked Questions
What is a good price for an extended warranty?
According to Endurance, the average extended warranty price ranges from $350 to $700 per year, but the cost of your policy will depend on several factors such as your car’s mileage and age. Extended warranty companies will charge more money for cars that are older or have many miles.
Can you cancel an extended warranty on a car?
Yes, a reputable provider will allow you to cancel your extended warranty. Review your extended warranty contract before signing to understand the cancellation policy.