Vehicle Extended Warranty - Do I Need One?

How To Determine If A Vehicle Extended Warranty Is Right For You

Choosing to purchase vehicle extended warranty protection is ultimately a personal decision. It is a form of insurance at least this is true in California and Oregon. In most states however, it is not actually considered insurance it is considered a vehicle service contract. In either case, you purchase extended coverage and a third-party assumes the risk and responsibility for the repair of your vehicle for a specific period of time.

The alternative is to be "self-insured". This means that you're aware of the risks and you choose to be responsible for assuming the cost of mechanical breakdown should it occur after the manufacturer's warranty expires. The question of whether or not extended protection is right for you is not always an easy one.

Here are some things to consider in determining if a vehicle extended warranty is right for you:

The manufacturers original warranties
The age and mileage of your vehicle
The reliability record of your vehicle
How many miles you drive annually
How long you plan to own your vehicle
Your risk tolerance
Your financial ability to pay for unexpected repairs

If you're on the fence after reading this article, try using our calculator, POMcalc! to help estimate your need for extended protection.

Manufacturer's Original Warranties

Before considering a vehicle extended warranty, it is important to know the manufacturer's original warranties. Every new vehicle comes with these standard limited warranties:

Limited Basic Warranty: This warranty is typically 36 months/36,000 miles. It typically includes all components other than normal wear and maintenance items.
Limited Powertrain Warranty: Typically 60 months/60,000 miles and typically include the engine, transmission/transaxle, front-wheel drive and rear-wheel drive components.
Additional Warranties: Rust warranty, tire warranty, emissions warranty, battery warranty, etc. These can vary according to manufacturer.

You will want to consider the remaining time and mileage on the manufacturer's warranties to determine your need for a vehicle extended warranty. Remember, the manufacturer's original warranties will expire whenever time (months) or mileage (whichever comes first) reach the thresholds advertised by the manufacturer. If you're going to purchase extended protection, you're going to want to do it before the manufacturers original warranty expires. The earlier you purchase the extended protection the less it is going to cost you. If you allow the manufacturers warranty to expire your options for purchasing extended protection may be limited.

Age and Mileage

New Vehicle: If you're purchasing a new vehicle then perhaps your decision to buy an extended warranty from the manufacturer/dealer can be deferred for awhile. A typical manufacturers warranty will provide 3 years or 36,000 miles of good coverage. This gives you plenty of time to consider your options. However, the dealer will most likely try to convince you that you need to purchase extended protection right now.

My advice to you is to wait. You can get a much better deal, and better coverage for less money if you purchase from a reputable third party provider. A vehicle extended warranty can be purchased at any time as long as the manufacturer's warranty is still in force. Remember, your options to purchase extended protection may be severely limited if the manufacturer's warranty expires (due to age or mileage). Keep in mind that the cost of a vehicle extended warranty does increase with the age and mileage of the vehicle.

Used Vehicle: If you're buying a used vehicle then you need to take into consideration the age and mileage of the vehicle and the remaining manufacturer's warranty, if any.

If the vehicle's original warranty is approaching expiration based upon age or mileage (whichever comes first) then you might want to seriously consider an extended protection plan. Even if there's a couple of years and several thousand miles left on the original warranty you should seriously consider buying extended protection for your vehicle. Since you're not the original owner of this vehicle, you want to let someone else assume the risk of mechanical breakdown and repair.

If the original manufacturers warranty has expired, you have up to 21 days (after your vehicle purchase date) to buy mechanical breakdown protection (from most 3rd party providers).

Remember, you don't have to purchase extended protection from the dealer (regardless what the dealer says). Check your third-party alternatives for value and reputation.

Reliability Record

It is easy to find out about a product's reliability in the age of the Internet. All you have to do is check with a community of people that have the same product. People in these groups tend to be very outspoken. In the case of automobiles one such community is Edmunds.com.

Before making a decision on extended protection, use the resources at Edmunds.com to research your specific model for known problems. Certain cars are known to be unreliable, making the extended protection decision a no-brainer.

Here's two additional resources to check the reliability record of your vehicle:

How Much You Drive Annually

A typical manufacturers warranty covers 36,000 miles or three years. That assumes 12,000 miles a year. If you drive more than that, it may be a good idea to invest in extended protection. For example, if you drive 20,000 miles per year (instead of 12,000) your warranty would expire in 1.5 years (instead of three) due to the mileage reaching 36,000 miles. Remember it is the case of whichever expires first - years or miles. On the other hand, if you drive less than 12,000 miles per year then your warranty will expire in three years.

Length of Ownership

If you plan to own your Vehicle for several years after the manufacturer's warranty is due to expire, you might want to consider buying extended protection. On the other hand, if you like to trade up every couple of years then you may not need the extended protection. This may be the case if you think that you will trade before the manufacturer's warranty expires.

Risk Tolerance

Some people have a high tolerance for risk and do not worry about "what might happen" tomorrow "C'est la vie" they say. Other people need some degree of peace of mind. Some say that this is the main thing that extended mechanical breakdown protection provides - peace of mind. You probably know which type of person you are see our calculator, POMcalc! to determine your risk tolerance.

Financial Ability To Cover Unexpected Repairs

If you happen to be in a financial position that will allow you to pay for your own repairs without breaking the budget then great! You may not need extended protection. This is called being self-insured. On the other hand, if an unexpected major repair would seriously disrupt the family budget then you might want to consider the extended coverage see our calculator POMcalc!

POMcalc!

If you're still on the fence and you're not sure if a vehicle extended warranty is right for you, we invite you to use the POMcalc! calculator to estimate your auto-related Peace Of Mind and help determine your relative need for extended auto protection. It only takes a few moments!