Understanding extended car warranty

If your car needs repairs that are covered by the plan, an extended car warranty could save you money. Many consumers who buy extended warranties, on the other hand, never use them. To determine whether a warranty is good for you, consider the cost of the warranty versus the possibility of needing it and your ability to pay for repairs without one. When your manufacturer’s warranty expires, an extended auto warranty may help cover the cost of some repairs to your vehicle, but it’s not for everyone.

Extended car warranty

When respondents used their warranty, the cost of repairs was frequently less than the cost of the warranty. Instead of buying an extended warranty, you might want to lay away from the money you’d spend on one and use it to pay for necessary repairs.

But before you determine whether or not an extended warranty is good for you, you need to understand how one works, how much it costs, and the benefits and drawbacks of purchasing one. While we’ll refer to this as an extended warranty because it’s a common term, it’s not a warranty as defined by federal law, and it doesn’t provide the same level of consumer protection as other warranties.

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In this article, the get answers to the following questions:

  • What is an extended car warranty?
  • What do extended car warranties cover?
  • How much do extended car warranties cost?
  • Should you buy an extended car warranty on a new or used car?
  • Is an extended car warranty the better option?


What is an extended car warranty?

An extended warranty, also known as a vehicle service contract, is an optional plan that you can purchase to help you pay for the cost of certain repairs your vehicle may require while it is still under your ownership. It usually starts when the manufacturer’s warranty runs out, but the two can sometimes overlap. An extended warranty, on the other hand, does not cover everything.

While extended warranties may appear to be a good idea in theory, they often come at a large cost and don’t always cover everything that could go wrong.

Furthermore, many customers who purchase extended warranties do not use them. In that situation, purchasing an extended warranty is a waste of money. According to a Consumer Reports poll, 55 percent of people who purchased an extended warranty never used it, and only a quarter said they would buy one again. And, for those who used their warranty, the cost of repairs was often less than the cost of the warranty.

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What do extended car warranties cover?

“Most warranties you buy don’t cover the same quantity of parts that the original factory warranty [does], so you have to be careful about the type of coverage it gives,” says Steve Roberts, Ardent Credit Union’s auto buying concierge.

Routine maintenance, like oil changes, new tires, and new brakes, is normally not covered by extended warranties. Roadside assistance is usually available as a separate purchase. Read the fine print of an extended warranty agreement carefully to find out exactly what it covers and what it doesn’t.

How to file a claim

If your car experiences a technical breakdown, such as an air conditioning failure or transmission problem, you must take it to an in-network repair facility. Most warranty providers give free roadside assistance, so if your car becomes unusable, it can be transported to the nearest authorized repair facility.

Before any covered repair work can begin, you must first obtain approval from your contract administrator, which may entail a vehicle inspection or tear-down. After the repair is completed, you will be required to pay a deductible to the facility. Depending on your provider, the remaining repair price will be paid straight to the shop or you will pay the amount and receive a refund check.

How much do extended car warranties cost?

When you buy a car from a dealer, you’ll almost certainly be asked if you want to add on an extended warranty. However, in the same way, that dealerships mark up the cost of extended warranties to make a profit, they do the same with finance.

If you’re serious about getting one, talk to the dealer about lowering the price or look for some independent providers. Coverage options vary greatly, as does the cost, which is determined by the plan’s coverage and the make and model of your vehicle. The warranty might cost anything from $1,000 to $3,000 or more upfront. You’ll also pay interest — and maybe fees — on the warranty if you roll it into your auto loan.

According to the quotes we received from the industry’s best providers, the average cost of an extended warranty is around $100 per month. Depending on your coverage and car, the cost of your contract could range between $1,500 and $4,000 USD.

Here are some quotes from Endurance, Carchex, and CarShield:

Warranty Company Plan Term Length Monthly Cost Down Payment
Endurance Supreme 5 years/

60,000 miles

$94 per month

for 30 months

Endurance Secure 5 years/

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100,000 miles

$91 per month

for 36 months

Carchex Titanium 3 years/

94,000 miles

$168 per month

for 18 months

First month’s payment
Carchex Silver 5 years/

75,000 miles

$123 per month

for 24 months

First month’s payment
CarShield Diamond Varies $99 monthly N/A
CarShield Gold Varies $89 monthly N/A


You might also have to pay a deductible. Deductibles are normally assessed on a per repair or per-warranty-service-visit basis. It’s critical to understand how your plan’s deductibles work since if a problem can’t be resolved in a single trip to the repair shop, you could end up paying numerous deductibles for a single repair.

What are the factors that affect extended car warranty costs?

A number of factors influence the cost of an extended warranty. Understanding how providers determine extended warranty pricing can help you get the greatest coverage at the best price.

  • A smaller deductible usually means a higher contract cost and vice versa.
  • Coverage duration – Longer-term contracts are often more expensive.
  • Exclusionary, bumper-to-bumper coverage is frequently more expensive than basic powertrain protection.
  • Vehicle type: Older, higher-mileage cars break down more frequently, resulting in greater coverage costs.
  • Existing coverage: If your car is still under factory warranty when you contact us for a quote, you’ll probably pay less for additional coverage.
  • Increased competition among third-party providers drives down contract costs.


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Should you buy an extended warranty on a new or used car?

When you buy a new vehicle, you won’t need to buy an extended warranty right away because the manufacturer warranty — which is usually included in the purchase price — covers most repairs for the first few years.

However, if you buy a used automobile from a dealer, the manufacturer’s warranty may not apply. Look for the Buyer’s Guide on the car window to find out. It should state whether or not the vehicle is covered by a warranty. If that’s the case, you could have to pay a charge to get it transferred to you. You can get an extended warranty for a price if you’re buying a car that’s no longer protected by the manufacturer’s warranty or if you want more coverage after it expires.

How long does the manufacturer’s warranty last?

Manufacturer warranties vary in length, but many provide bumper-to-bumper coverage for three years or 36,000 miles, whichever comes first. Warranties on powertrains can run up to 60 months or 60,000 miles.

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How does extended warranty works?

Extended car warranties shield you from having to pay for certain vehicle repairs or part replacements for your new automobile after normal wear and tear. Warranties, unlike certain auto insurance policies, do not cover collisions, environmental damage, theft, or vandalism. They also do not typically cover standard maintenance services such as oil changes or normal wear and tear parts such as brake pads.

Drivers can obtain additional coverage through their vehicle manufacturer or through an independent provider. Here are a few things to think about when determining which extended warranty is right for you:

Manufacturers plan 
Purchase Date Typically when the vehicle is purchased or before the factory warranty expires Anytime
Repair Facility Dealership or authorized auto repair center Any licensed repair shop
Cancellation Varies by manufacturer Varies by the provider, but generally a fee of about $50
Transferability Transferable Transferable

Read more: What should I do if my car is demanding too many repairs?

Is an extended car warranty worth it?

It may be tempting to buy an extended warranty plan to cover unforeseen repair costs. But, before you do, weigh the benefits and drawbacks.

The most significant advantage of an extended warranty is that it can save you money if your vehicle requires a costly repair that is covered by your contract. Instead of paying the entire price out of pocket, you’d just be responsible for the deductible (if you have one) and the remainder would be covered by the warranty provider, as long as the issue is covered by the service contract.

Having an extended warranty can also bring peace of mind if concern about how you’ll pay for a repair keeps you awake at night. “It’s similar to vehicle insurance,” Roberts explains. “We don’t enjoy paying for it, but we appreciate it when we need it.”

Some drawbacks of extended car warranty include:

Usage – Many people who buy extended car warranties never utilize them. And if they do, the repair cost is frequently less than the cost of the guarantee.

Overlap – If the extended warranty’s coverage period overlaps with the manufacturer’s warranty, you may have to pay for a warranty that you already get for free. With a new car, the extended warranty is unlikely to kick in until the manufacturer’s warranty expires.

Coverage – Most extended warranties do not cover everything that could go wrong with your car. Read the fine print to figure out what it does and does not cover so you aren’t caught off guard by a repair fee you believed was covered by the warranty.

Service requirements – You may only be able to get your car repaired at specified repair shops.

Depreciation clauses — Some extended warranties may only cover a percentage of the cost of repairing or replacing broken parts based on the car’s mileage.

Reliability – Under most extended warranties, repairs are paid for by the dealer, manufacturer, or an independent third party. If the corporation responsible for paying the invoices goes out of business, you may be left with a warranty that you can’t use.

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In Summary

An extended warranty might save you thousands of dollars when purchasing a car. If you’re financing it and incorporating the warranty cost into your monthly payment, this may not seem like much. Even if you don’t pay it all at once, it can still add up to a large sum of money.

If you’re purchasing a vehicle with a proven track record, skipping the warranty may make sense. Instead, try saving the money you’d spend on it for a rainy day when anything might go wrong. If you don’t need the money for repairs, you can save it or put it towards anything else.

Finally, you must evaluate whether the peace of mind that an extended warranty might bring is worth the cost. If you do decide to get an extended warranty, make sure you do your research, avoid auto warranty scams, and work with a reliable organization.

I hope you learn a lot from the article, where extended car warranty is been discussed. I hope you learned a lot from the reading, if so, kindly share with others. Thanks for reading, see you around!