An extended warranty car is a policy that pays for repairs beyond the manufacturer’s warranty. It offers a peace of mind for drivers worried about expensive mechanical breakdowns, but it also comes with some caveats that need to be considered before you sign up.
Dealerships sell warranties for cars, and they typically offer them as part of a financing package. This allows buyers to roll the initial cost of the warranty into their overall monthly payments and finance costs versus paying the fee upfront. However, third-party companies also sell standalone policies that you can buy at any time.
Whether an extended warranty is worth the investment depends on your personal risk tolerance, financial situation and the vehicle’s reliability. A warranty can add thousands of dollars to the price of a new or used car, so consider how much you could save by skipping it and setting aside some money for future repair bills.
Before you purchase an extended warranty, shop around for the best price and read the fine print carefully. Make sure to ask about the deductible, how long the policy lasts (measured in years and miles), whether it covers rental car coverage and if the policy is transferable should you sell the car. You should also find out if there are any service requirements such as only using approved repair shops or mileage limits.
Buyers should take into account the types of vehicles they drive, how often they use them and what the most common breakdown issues are for each model. This will help them narrow down the right plan for their needs. Some plans cover everything from the engine to the air conditioning, but these are usually more expensive. A more affordable option may be to get a bumper-to-bumper warranty, which covers the major systems of the vehicle.
If you’re unsure about what type of warranty to purchase, an expert can provide advice. A dealership’s finance manager can help you compare manufacturers’ and third-party warranties to find the best one for your vehicle. You should also check out the company’s track record and customer reviews.
An extended warranty can be an excellent way to protect your investment. However, it’s important to carefully consider your options and the cost before you sign up. If you’re not sure, try getting a free Carfax report to see the vehicle’s history and any previous repair issues. Also, research the vehicle’s manufacturer and dealership to ensure you’re getting a good deal. If you decide to cancel the warranty, find out if there’s a cancellation fee. You may be able to cancel the warranty through your credit union or directly with the manufacturer if it’s included in your car loan. Otherwise, you’ll have to pay back the refund deducted from your balance.