Buy an Extended Car Warranty?
Time and time again, friends, family, and colleagues ask me whether or not they should buy an extended car warranty. I always turn it around and ask them how much money they have set aside specifically for car repairs. Inevitably, the answer I get back is none. With all of the other things out there to save for, saving money for car repairs seems to get overlooked in the hopes that "it won't happen to me".
Well, unfortunately, it can happen to you; like any functioning machine with moving parts, a vehicle and its components can stop working through no fault of your own. This is one of the reasons why I firmly believe in the importance of protection that will help you with the added expense and stress that come with car repairs.
I realize that just because I believe in the value of buying an extended car warranty doesn't mean that you have to as well, so I'd like to provide you with some information to help you make that decision for yourself:
- What an extended car warranty is
- Why you should buy an extended car warranty
- What to look for in an extended car warranty
What is an extended car warranty?
The term extended car warranty refers to a layer of vehicle coverage and benefits that provide protection in the event of vehicle failure. The coverage is designed to "extend" protection beyond the limits of the manufacturer's standard warranty.
The term extended car warranty may not be the best to use when talking about this type of protection. Only the manufacturer can offer a "warranty". Correct or not, extended car warranty is certainly the most used to describe this protection.
You will also hear it commonly referred to as a Vehicle Service Contract (VSC) or Mechanical Breakdown Insurance (MBI) in a handful of states such as California and Oregon. All of these labels refer to the same thing: coverage and benefits for your vehicle in the event of a breakdown.
Why should you buy an extended car warranty?
Two good reasons to buy and extended car warranty are:
- Financial Security
- Peace Of Mind
Financial Security: In today's economy, most of us are finding ourselves feeling less and less secure with our financial situation. Between housing, food, health insurance, and car payments, the majority of us have little left over for things like car repairs.
With labor rates rising and vehicles becoming more and more complex, the cost of repairs has skyrocketed in the last few years. By purchasing an extended car warranty or vehicle service contract you're buying security for your family. Knowing that, in the event of vehicle breakdown, your out-of-pocket expenses will be reduced or eliminated. You can save that money for other necessities in life.
Peace of Mind: If there is one thing we all need more of, it's peace of mind. After all, who doesn't want to get rid of unnecessary stress and anxiety? There are few life challenges that are more stressful than dealing with a broken down car. You may be stranded far from home, or on a busy street, or late for an important appointment, or low on funds. Possibly all of these at once. Not a good feeling.
However, when you buy an extended car warranty, you are taking pro-active steps to eliminate that source of stress and anxiety. Along with extensive protection that will fix your vehicle with little to no money out-of-pocket, most extended car warranties worth their salt will also provide additional benefits to add to your peace of mind, such as:
- Trip Interruption to pay your room and board when you’re stranded far from home.
- Emergency Roadside Assistance to get your vehicle towed off that busy street.
- Rental Car Coverage to place you in another car to get you to that appointment.
What do you look for in an extended car warranty?
Those same friends, family, and colleagues also ask me what to focus on when they buy an extended vehicle warranty. "Make sure the cup holder is covered," I always say, hoping to get a laugh. But I don't, and don't worry about it if you didn't laugh either; I'm used to it. My answer is not entirely in jest; I do like to use the acronym CUP to help remember the most important aspects of a good extended car warranty. Let's take a look at what this means:
- C – Contract Provisions
- U – Underwriter/Administrator
- P – Price
Contract Provisions: The Contract Provisions are the nuts and bolts of the contract. They provide detailed information that is vital to know when you're looking to buy an extended car warranty. I know, it sometimes seems like entirely too much detail. Don't be afraid to read the fine print! After all, when it comes claim time, you better believe the claims adjuster will be determining coverage based upon those exact provisions. It is best to know what you're getting into up front to save yourself the aggravation later.
Underwriter/Administrator: The Underwriter is the entity behind your extended car warranty that will insure your contract, and the Administrator is the one that is responsible for claims and cancellation functions. If you're really lucky, you will buy an extended car warranty that is backed by a company who is both Underwriter and Administrator. This way the important aspects of your extended car warranty are all housed under one roof. This eliminates confusion and ensures things don't "slip between the cracks". You can rest assured that someone is there to pay claims and provide cancellation refunds, all "under one roof".
Price: And now, the biggie... price. Price is often what we use to decide between two products, and it will be no different when you go to buy an extended car warranty. Every extended car warranty or vehicle service contract out there will come with every price tag imaginable.
It is important to keep in mind that the lowest price is not always to your benefit. Sure, it might keep the wallet a little heavier for now, but if your vehicle needs repairs, a "bargain" priced car warranty may not cover all your claims later. I have always said that there's no point in paying hard-earned money for something if it's not going to step up to the plate when you actually need it. This is why you can't let price alone guide you when you're out to buy an extended car warranty.
All in all, to my family, friends, and colleagues, and to you, my reader, in order to maintain a good sense of financial security and maximum peace of mind, my true answer to the question "should I buy an extended car warranty" is a most resounding "yes". And don't forget about that CUP holder when you're looking to buy an extended car warranty; turns out it's pretty important after all.
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