Are Extended Car Warranties Worth It?

For some people, an extended warranty can provide peace of mind and protection against costly repairs, while for others it may be an unnecessary expense.

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Between paying for gas, maintenance, and car insurance, the costs of owning a vehicle can add up. One of the costliest factors is paying for unexpected repairs.

An extended vehicle warranty can help you cover some out-of-pocket repair costs beyond what the vehicle manufacturer’s warranty covers or after it ends. You might want to consider buying an extended car warranty to keep your car repair bills under control. Whether this type of warranty is worth it for you will depend on your vehicle and financial situation.

Here’s what you need to know about extended car warranties.

What is an extended car warranty?

A vehicle warranty is a plan that provides coverage for certain repairs. Many brand-new vehicles include a warranty from the manufacturer, but the plan expires after several years or a certain number of miles.1

An extended auto warranty is an optional plan that covers vehicle parts, components, and systems that the manufacturer’s warranty may not cover. People usually purchase extended warranties from the dealership where they bought their vehicles or through a third-party company.

An extended warranty isn’t actually a legal warranty as defined by law. An extended warranty is technically a vehicle service contract where the warranty provider agrees to pay for work as outlined in the contract.2

How does an extended car warranty work?

Using an extended car warranty is pretty simple.

If your car needs maintenance or repairs, you can take the vehicle to a repair facility that accepts your warranty. Then, the mechanic or auto body shop will diagnose the problem and determine whether your plan covers the work.

Once the issue has a diagnosis, the auto body shop works with your warranty provider to file the claim and get approval for the work. If the warranty company approves the job, the mechanics will fix your vehicle and collect the money for parts and labor. Depending on your plan, either the warranty company will pay the shop directly, or you’ll pay up front and the warranty company will reimburse you.

Many extended car warranties have a deductible, much like a car insurance policy. If you have to use your warranty, you’ll have to pay the deductible out of pocket.

What does an extended warranty cover?

Extended warranties cover repair costs for vehicle parts and systems the manufacturer’s warranty doesn’t cover.

Coverage specifics vary depending on what type of extended warranty you purchase, but some examples of what an extended car warranty can cover include:

  • Vehicle parts

  • Vehicle systems

  • Engine

  • Transmission

  • Gaskets

  • Axles

  • Electrical components

  • Rust and corrosion

Extended warranties don’t typically cover vehicle costs related to wear-and-tear damages or routine maintenance, like oil changes and tire replacement.

When to purchase the different types of extended car warranties

You can choose from several extended car warranties to purchase, and some provide more protection than others. Here are some of the most common types of plans:

  • Bumper-to-bumper warranty

  • Powertrain warranty

  • Rust and corrosion warranty

  • Accessory warranty

  • Dealership warranty

If you’re unsure about a car warranty, it can be helpful to understand which plans are useful and when you should consider getting one. Some warranty types work better in certain scenarios, so it’s important to make a thoughtful decision.

  • A bumper-to-bumper warranty is generally the most comprehensive warranty you can purchase. As the name suggests, this plan covers most parts, systems, and components from the front to the back of your vehicle.

    But bumper-to-bumper warranties still have a few exclusions. For example, these warranties don’t usually cover interior components like trim, upholstery, wheels, paint, brake pads, and tires.

    Bumper-to-bumper coverage can be valuable for pretty much any vehicle, but it’s especially beneficial if you have a used or unreliable vehicle. It can also be a good idea to get bumper-to-bumper coverage if you simply want peace of mind.

  • A powertrain warranty covers all the parts and systems that keep your car moving. It usually covers things like the engine, axles, driveshafts, transmission, differentials, and transfer case.

    Powertrain warranties cover many of the same parts and systems as bumper-to-bumper warranties, but powertrain warranty plans have more exclusions.

    You might consider a powertrain warranty if you couldn’t afford to pay out of pocket for major repairs, like a new engine, which could leave you without a vehicle. These plans can also be useful if you want coverage for the most essential parts and systems but don’t want to pay extra for a bumper-to-bumper warranty.

  • An accessory warranty covers various auto parts that are important but don’t necessarily affect the car’s ability to function. For example, an accessory warranty often covers interior trim, seat belts, airbags, panels, sound systems, and sensors.

    The main reason to purchase an accessory warranty is to supplement another extended warranty, like a bumper-to-bumper plan, that excludes coverage for some of these parts. While an accessory warranty can be useful on its own, it doesn’t cover the most important vehicle systems and components.

  • A rust and corrosion warranty specifically covers car parts damaged or failed due to rust or corrosion. Some manufacturer warranties include coverage for rust and corrosion, but not all do.

    You might purchase a rust and corrosion warranty if your vehicle is older or if you live in an area with wet weather or snowy winters. Salt used to de-ice roadways can cause cars to rust, which may accelerate corrosion.

Pros and cons of extended car warranties

If you’re wondering when extended warranties are worth it, it can be helpful to look at the pros and cons:

When you shouldn’t buy an extended car warranty

Extended car warranties aren’t the best option for everyone. Here are a few situations where it might not make sense to purchase a warranty:

  • You have a new car with a warranty. If you recently bought a new vehicle that has a manufacturer’s warranty, you might not need an extended warranty. Bumper-to-bumper manufacturer warranties usually have the most robust coverage, with only a few exclusions.

  • You’re getting rid of your vehicle soon. In most cases, it doesn’t make sense to buy an extended warranty if you’re thinking about selling your car soon. For example, if you’re only planning to keep your car for another two years, there’s a greater risk of paying for the plan and never using the coverage.

  • You can afford repair costs out of pocket. Due to the high cost of some extended warranty plans, you might not need a warranty if you can comfortably afford vehicle repairs out of pocket, even if they’re unexpected.

Extended car warranty FAQs

If you still have questions about extended car warranties, check out the additional information below.

  • What are the reasons you don’t need to buy an extended warranty?

    If the factory warranty is still valid on your vehicle, you’re planning to sell or trade in your car soon, or you can afford to pay for your car’s repairs out of pocket, a warranty may not make sense. You might also be able to skip an extended warranty if your car is very reliable.

  • What is the average cost of an extended car warranty?

    The average cost of an extended warranty is between $500 and $2,500 per year. But the price depends on factors like the type of warranty you purchase, the coverage limit you choose, and the deductible amount.

  • What does an extended warranty cover on a car?

    An extended warranty covers various car systems and parts. Depending on the type of warranty you get, the plan may cover your engine, transmission, suspension, airbags, seat belts, differentials, braking system, sound system, electronics, electrical system, upholstery, and heating and cooling systems.

  • When is an extended car warranty worth the cost?

    Extended warranties can be costly, but they can be worth it for some drivers. It all depends on the vehicle you drive, how reliable it is, and whether you can afford to pay for car repairs out of pocket. A warranty might also be worth the cost if you’re planning to keep your car for as long as possible.

  • Are extended warranties on cars a rip-off?

    It depends. If your vehicle still has a manufacturer’s warranty, purchasing an extended warranty might duplicate the coverage you already have and be a waste of money.3 You also shouldn’t purchase an extended warranty if you plan to replace your car soon, or if you can easily handle out-of-pocket costs if they arise. In some cases, though, an extended warranty can help you save on vehicle repair costs and drive your car for longer.

  • Who has the highest-rated extended auto warranties?

    You should always do thorough research on any extended warranty provider before purchasing a plan. A few companies with high ratings that you can consider include Endurance, American Dream Auto Protect, and Car Shield.

Elizabeth Rivelli
Elizabeth Rivelli

Elizabeth Rivelli is a freelance writer covering insurance and personal finance. She has extensive knowledge of various insurance lines, including property and casualty, health, and life insurance. Her byline has been featured in dozens of publications, including Investopedia, Forbes, Bankrate, NextAdvisor, and Insurance.com. 

Elizabeth has been a contributor at Insurify since October 2022.

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