Do You Need an Extended Warranty When Buying a Car?

Okay, so you’ve found the car of your dreams—new or used—and all the paperwork is almost done. The dealer representative then highly recommends buying the extended warranty for additional peace of mind. But do you need one?

Here are some things to consider. Basically, an extended warranty lengthens the warranty a new car manufacturer offers. For example, it might be used for additional coverage on a 3-year/36,000-mile warranty.

The first thing to consider is how long you are going to keep your new car. There’s no sense in buying an extended warranty if you don’t plan to keep the car beyond the manufacturer’s warranty.

Also, you need to consider a brand’s reputation for quality. J.D. Power publishes an annual look at dependability. Here are its results for 2015 models. Combine that research with J.D. Power’s initial quality, which looks at results for the first 3 months of ownership for 2015 models. New vehicles showing up on both lists are probably going to be reliable.

Buying a used car? Your best bet for avoiding the need for an extended warranty is purchasing a certified pre-owned used car. In effect, the manufacturers supply extended warranties for their vehicles at little additional cost to the consumer. The price difference for certified pre-owned cars over non-certified pre-owned has dropped significantly.

One thing to keep in mind is if you are purchasing a certified pre-owned car from a used car dealer not affiliated with a manufacturer, it’s not truly certified pre-owned. Cars advertised as certified pre-owned by independent dealers really just carry an extended warranty.

Consumer Reports is down on the need for extended warranties. It said in an April 2014 magazine article, “Looking for an easy way to save hundreds on your next new car and simplify the buying process at the same time? Skip the extended warranty.” That conclusion was reached because it found most people who bought the extended warranty were dissatisfied and felt they didn’t need it.

So, let’s say you decide you do want an extended warranty. How much will it cost? According to Bankrate.com, “To get a good deal on an extended service contract, you’ll have to negotiate the price. Prices for the exact same warranty vary widely from dealership to dealership, so it’s important to shop around.”

Consumer Reports points out plans are offered by both manufacturers and third-party insurers (technically a warranty offered by anybody other than a manufacturer is an insurance policy). It said the consumers it surveyed were generally happier with plans offered by manufacturers. An important statistic from the Consumer Reports research is that less than one-third of people who bought an extended warranty would buy it again.

Want to have peace of mind yet not be worried about expensive repairs? Find out what the extended warranty would cost. Then, set aside that amount of money either all at once or in monthly installments.

That way, if you never need the money for repairs, you have a nice kitty set aside when it comes time to buy your next new or used car. Also, if you do need to make a major repair, you have funds set aside. The beauty of setting up your own account? You can use the money for any type of repair—not just automotive. Consider it your own extended warranty protection without the need to finance it through a dealership loan.

-Keith Griffin

Find Certified Pre-Owned Cars and Used Cars in your area at CarGurus.

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