Are Extended Car Warranties Worth It?

Elizabeth Rivelli
Elizabeth Rivelli
  • 5+ years writing insurance and personal finance topics

  • Auto, home, health, and life insurance expertise

Elizabeth has extensive insurance industry experience, having written for Insureon, Rate Retriever, and Insurify. She’s also finance and insurance editor for Car and Driver.

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Courtney Mikulski
Courtney MikulskiSenior Editor, Auto
  • 3+ years producing insurance and personal finance content

  • Main architect of the Insurify Quality Score

Courtney’s deep personal finance knowledge extends beyond insurance to credit cards, consumer lending, and banking. She thrives on creating actionable content.

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Updated February 9, 2023 at 11:00 AM PST

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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 auto body shop will diagnose the problem and determine whether the work is covered under your plan.

Important Information:

Auto warranties don’t cover everything. While issues like a broken sound system or a transmission fluid leak might be covered under certain plans, routine maintenance, like an oil change, typically isn’t covered.

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.

See More: Auto Body Repair Costs and Car Insurance Coverage

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.

Check Out: What to Look for When Buying a Used Car

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.

Read More: Car Insurance Quotes for Used Cars

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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:

Pros
  • You’ll spend less money on repairs. With an extended warranty, you will spend less money out of pocket paying for repairs. Most plans also cover the most expensive repairs, like issues with your engine or suspension.

  • You can drive your car for longer. An extended auto warranty may allow you to keep your vehicle running for longer. If you aren’t plagued with expensive repairs, you might decide to hold onto a used car for longer than you would otherwise.

  • You can choose only the coverage you need. Unlike a manufacturer warranty, an extended warranty allows you to select a plan that includes the coverage you need without paying for coverage you don’t want.

Cons
  • You might never use the coverage. If you drive a newer car or a reliable vehicle, you might pay for an extended warranty and never use the benefits.

  • Not everything is covered. Extended warranties have some exclusions. In addition, many warranties will only cover repairs if you keep up with scheduled maintenance like regular oil changes, which the warranty usually doesn’t cover.

  • Repairs could cost less than the warranty. Extended warranties can be expensive, depending on the plan you choose. If your car needs repairs, it’s possible that the job could cost less than the plan’s monthly payments.

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

Below are answers to some common questions about extended car warranties.

  • What are the reasons you don’t need to buy an extended warranty?

    If the factory warranty is still valid on your vehicle, you’re planning to sell or trade in your car soon, or you can afford to pay for your car’s repairs out of pocket, a warranty may not make sense. You might also be able to skip an extended warranty if your car is very reliable.

  • What is the average cost of an extended car warranty?

    The average cost of an extended warranty is between $500 and $2,500 per year. However, the price depends on factors like the type of warranty you purchase, the coverage limit you choose, and the deductible amount.

  • What does an extended warranty cover on a car?

    An extended warranty covers various car systems and parts. Depending on the type of warranty you get, the plan may cover your engine, transmission, suspension, airbags, seat belts, differentials, braking system, sound system, electronics, electrical system, upholstery, and heating and cooling systems.

  • When is an extended car warranty worth the cost?

    Extended warranties can be costly, but they can be worth it for some drivers. It all depends on the vehicle you drive, how reliable it is, and whether you can afford to pay for car repairs out of pocket. A warranty might also be worth the cost if you’re planning to keep your car for as long as possible.

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Sources

  1. Consumer Financial Protection Bureau. "What is the difference between a manufacturer’s warranty and an extended vehicle warranty or service contract?." Accessed February 3, 2023
  2. Federal Trade Commission. "Auto Warranties and Service Contracts." Accessed February 3, 2023
Elizabeth Rivelli
Elizabeth Rivelli

Elizabeth Rivelli is a freelance writer covering insurance and personal finance. She has extensive knowledge of various insurance lines, including property and casualty, health, and life insurance. Her byline has been featured in dozens of publications, including Investopedia, Forbes, Bankrate, NextAdvisor, and Insurance.com

Courtney Mikulski
Edited byCourtney MikulskiSenior Editor, Auto
Courtney Mikulski
Courtney MikulskiSenior Editor, Auto
  • 3+ years producing insurance and personal finance content

  • Main architect of the Insurify Quality Score

Courtney’s deep personal finance knowledge extends beyond insurance to credit cards, consumer lending, and banking. She thrives on creating actionable content.

Featured in

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