Are Extended Car Warranties Worth It?

Between paying for gas, maintenance, and car insurance, the costs of owning a vehicle can add up. And one of the costliest factors of having a car is paying for unexpected repairs.

To keep your car repair bills in check, you might consider an extended car warranty, which can reduce your out-of-pocket repair costs. But are extended car warranties worth it? Here’s what you need to know about extended car warranties, including the pros and cons.

What is an extended car warranty?

A vehicle warranty is a plan that provides coverage for certain repairs. Many brand-new vehicles include a warranty from the manufacturer, but the plan expires after several years or a certain number of miles.^[1]

An extended auto warranty is an optional plan that covers vehicle parts, components, and systems that the manufacturer’s warranty may not cover. People usually purchase extended warranties from the dealership where they bought their vehicles or through a third-party company.

An extended warranty isn’t actually a legal warranty as defined by law, according to the Federal Trade Commission. An extended warranty is technically a vehicle service contract where the warranty provider agrees to pay for work as outlined in the contract.^[2]

How does an extended car warranty work?

Using an extended car warranty is pretty simple.

If your car needs maintenance or repairs, you can take the vehicle to a repair facility that accepts your warranty. Then, the mechanic or auto body shop will diagnose the problem and determine whether your plan covers the work.

Once the issue has a diagnosis, the auto body shop works with your warranty provider to file the claim and get approval for the work. If the warranty company approves the job, the mechanics will fix your vehicle and collect the money for parts and labor. Depending on your plan, either the warranty company will pay the shop directly, or you’ll pay up front and the warranty company will reimburse you.

Many extended car warranties have a deductible, much like a car insurance policy. If you have to use your warranty, you’ll have to pay the deductible out of pocket.

Types of extended car warranties

You can choose from several extended car warranties to purchase, and some provide more protection than others. Here are some of the most common types of plans:

• Bumper-to-bumper warranty: This covers most major vehicle systems and parts, with a few exclusions.

• Powertrain warranty: This covers the parts and systems essential to the car’s drivability, like the engine and axles.

• Rust and corrosion warranty: This covers parts that have been damaged due to rust or corrosion.

• Accessory warranty: This covers parts and systems inside the vehicle, like airbags, seat belts, and sound systems.

• Dealership warranty: This is a manufacturer-backed warranty that dealerships sell and that extends the coverage from the original warranty.

When are extended car warranties worth it?

If you’re on the fence about a car warranty, it can be helpful to understand which plans are useful and when you should consider getting one.

Bumper-to-bumper warranties

Best for: Anyone who wants maximum peace of mind

A bumper-to-bumper warranty is generally the most comprehensive warranty you can purchase. As the name suggests, this plan covers most parts, systems, and components from the front of your vehicle to the back.

However, bumper-to-bumper warranties still have exceptions. For example, interior components like trim, upholstery, wheels, paint, brake pads, and tires aren’t usually covered.

Bumper-to-bumper coverage can be valuable for pretty much any vehicle, but it’s especially beneficial if your vehicle is used or has been unreliable in the past. It can also be a good idea to get bumper-to-bumper coverage if you simply want peace of mind.

Powertrain warranties

Best for: Protection for major repairs

A powertrain warranty covers all the parts and systems that keep your car moving. It usually covers things like the engine, driveshafts, transmission, differentials, and transfer case.

Powertrain warranties cover many of the same parts and systems as bumper-to-bumper warranties, but powertrain warranty plans have more exclusions.

You might consider a powertrain warranty if you couldn’t afford to pay out of pocket for major repairs, like a new engine, which could leave you without a vehicle. These plans can also be useful if you want coverage for the most essential parts and systems, but don’t want to pay extra for a bumper-to-bumper warranty.

Accessory warranties

Best for: Supplementing another type of extended warranty

An accessory warranty covers various auto parts that are important but don’t necessarily impact the car’s ability to function. For example, an accessory warranty often covers interior trim, seat belts, airbags, panels, sound systems, and sensors.

The main reason to purchase an accessory warranty is to supplement another extended warranty, like a bumper-to-bumper plan, that excludes coverage for some of these parts. While an accessory warranty can be useful on its own, it doesn’t cover the most important vehicle systems and components.

Rust and corrosion warranties

Best for: Older vehicles or weather protection

A rust and corrosion warranty specifically covers car parts that get damaged or fail due to rust or corrosion. Some manufacturer warranties include coverage for rust and corrosion, but not all do.

You might purchase a rust and corrosion warranty if your vehicle is older or if you live in an area with wet weather or snowy winters. Salt is often used to de-ice roadways and can cause cars to rust, which may accelerate corrosion.

Pros and cons of extended car warranties

If you’re wondering when extended warranties are worth it, it can be helpful to look at the pros and cons:

When you shouldn’t buy an extended car warranty

Extended car warranties aren’t the best option for everyone. Here are a few situations where it might not make sense to purchase a warranty:

• You have a new car with a warranty. If you recently bought a new vehicle that has a manufacturer’s warranty, you might not need an extended warranty. Bumper-to-bumper manufacturer warranties usually have the most robust coverage, with only a few exclusions.

• You’re getting rid of your vehicle soon. In most cases, it doesn’t make sense to buy an extended warranty if you’re thinking about selling your car soon. For example, if you’re only planning to keep your car for another two years, there’s a greater risk of paying for the plan and never using the coverage.

• You can afford repair costs out of pocket. Due to the high cost of some extended warranty plans, you might not need a warranty if you can comfortably afford vehicle repairs out of pocket, even if they’re unexpected.

Extended car warranty FAQs