An extended warranty may make sense if you are concerned about coming up with cash to pay for repairs after the manufacturer’s warranty expires. But before you buy, check reviews and the fine print for stipulations that could limit coverage.
For example, some warranties exclude wear items and scheduled maintenance. You also want to know how much it costs and what the deductible is.
Cost
Many people opt for an extended warranty car when they purchase a new vehicle. These warranties, also known as vehicle service contracts or mechanical breakdown insurance, cover most repairs. They are typically available at dealerships, auto clubs, or car insurance companies. Some of them include roadside assistance and rental car reimbursement. However, they often come with deductibles and other catches.
Despite their high cost, these policies can provide peace of mind and reduce financial stress if your car breaks down. They can also be rolled into an auto loan, saving you from paying cash upfront. However, you should research the company carefully to make sure they are reputable and offer good value for your money.
Instead of buying an extended warranty, you should consider setting up an emergency savings account or sinking fund to save for unexpected car repairs. You can automate a transfer from your checking to savings account each time you get paid to help build this cushion quickly. You can also look for ways to cut back on spending and save more each month.
Coverage
Many consumers opt to buy an extended warranty car to avoid a large repair bill once their original warranty has expired. They pay a monthly fee, which may be called a premium payment, to have the peace of mind that comes from knowing their vehicle is covered for a period of time.
It is important to understand how an extended warranty works before you purchase one. The plans vary in length, coverage and deductible amount. Some also include roadside assistance, which is a nice extra to have.
Most manufacturers, dealerships and third-party companies sell these warranties for new cars as well as used vehicles. They typically cover parts that are not covered by the manufacturer’s warranty. These include wear and tear, modifications and pre-existing conditions. The plans can be rolled into the car loan, which reduces the initial upfront cost but comes with interest. The other option is to buy the plan separately from the dealer or the third-party company.
Deductibles
You’ll want to shop around for an extended warranty, and you should be aware that some companies are less reputable than others. Check out how the company is rated on WalletHub, and look at reviews from past customers. Generally, extended warranties cover major mechanical repairs and replacements for parts that break down as a result of normal use. Some companies include roadside assistance and rental car coverage as well.
If you’re planning to own your vehicle for a long time, and you have a good track record with previous vehicles, it may make sense to purchase an extended warranty. However, you should carefully consider the cost, your risk tolerance and your financial situation before making a decision. It’s also important to understand what is and isn’t covered by an extended warranty, and be prepared for potential deductibles. You can avoid surprises by knowing what to expect. The most popular warranties include bumper-to-bumper, named-component and powertrain coverage.
Requirements
The decision to buy an extended warranty car depends on your specific needs and vehicle choices. However, it’s a smart move for drivers who plan to keep their cars past the initial manufacturer warranty coverage period or who are concerned about coming up with cash on short notice for unexpected repair costs.
Extended warranties typically have a variety of stipulations that must be followed in order to have your repair bills covered. For example, some warranties exclude repairs resulting from neglect of routine maintenance like not changing the oil or not checking tire pressure regularly. Others may require you to provide proof that you took care of the car as recommended by your auto mechanic.
Some warranties also have a long waiting period before you’re reimbursed for the cost of your auto repair, so make sure to check the fine print. Lastly, be aware that some extended warranties are sold by dealers or the carmakers themselves, while others are offered by independent third parties.