Extended Car Warranties

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Are Extended Car Warranties Worth it?

Extended Car Warranties
Extended Car Warranty?

One of the most attractive benefits of leasing or buying a new car is the peace of mind you get from knowing you’ll have no car repairs for 3-5 years. Most of the brand new car makers provide a warranty for the first 36-60 months of the car or 12,000 miles per year; whichever comes first. Obviously, one huge benefit of leasing a new car every 36 months is that you will spend very little of your time and money in the shop for repairs or maintenance. Most cars will last three years without needing brakes or tires. The most you will need to do is change the oil 2 or 3 times a year. So, what if you want to keep your car longer than its 3 or 5-year warranty period? Should you consider an extended warranty?

What Do Extended Car Warranties Cover?

  • What brakes on a car after 3 years? Not much.
  • What brakes on a car after 5 years? Not much.
  • Will you need new brakes and tires? Very likely.

Will extended car warranties cover new brakes and tires? Not at all. A few years ago, when I was finalizing the paperwork on the 4-year lease of my Pontiac G6, I was presented with an assortment of extended car warranties. The car dealer explained to me that since my warranty would expire after 3 years, I would be left with a 3-year old car that was not covered by a warranty in my 4th year of leasing it. Oh, the horror! The cost of extending my warranty ranged from around $30 to $60 a month, depending on the size of deductible, coverage options and benefits. Benefits include things like hazard and road-size assistance. I was not impressed, nor even slightly inclined to pay for warranty coverage on a car that would be only 3 years old and have less than 40,000 miles of use. My previous experience with cars that I kept longer than 4 years was a 1996 Infiniti G20 and a 2000 Chevrolet Venture Mini Van. Getting an extended warranty would do me no good. The Infiniti G20 required a $680 alternator and belts repair/ replacement after 5 years. In years 5-7, the Mini Van required 3 trips to the repair shops for new Starter, Door Mechanical and fuel problems totaling about $1,200. These are things that most likely would be covered by extended car warranties. The new brakes, tires and battery replacements would not be covered. Assuming I had purchased a 36 month extended warranty for the Chevy Venture and assuming I was able to get those $1,200 of repairs covered by the very cheapest, $30 per month plan, would I have saved any money? Not really. $30 per month x 36 = $1,080. Add $300 in deductibles over that 3 year span and and warranty would have cost me $1,380; $180 more than what I would have paid with no warranty at all. This, of course is assuming these repairs would be covered in the first place. In the case of the Infinity G20, a warranty premium would have doubled the cost of my actual repairs.

The benefit of these extended warranties is mostly a mindset. Budget minded individuals liked to know where the money is going each and every month. Not everyone is disciplined enough to put money aside in the bank on a regular basis and don’t want to experience the pain and sticker shock of unexpected house or car repairs. This is the same reason people lease cars. In return for a regular payment, you get piece of mind, insurance and certainty. Another reason you might consider an extended warranty is if you are a high mileage driver. The more use you get out of your car, the more you stand to lose in repairs. Most extended car warranties offer additional, warranty coverage options that include a certain amount of wear and tear at an increased premium. However, is paying a monthly premium and deductible really anymore expensive than the proper maintenance required to keep your car running year around? This doesn’t appear to be the case. Back in 2007, Consumer Reports reviewed over 8,000 extended car warranties owners from 2001 and 2002. After five years, the feedback was less than favorable for extended automobile warranties. In fact, only 38% of those owning cars with poor reliability ratings thought the extended warranty was of any benefit. Still, if you’re obsessively worried about the unlikely possibility that something terribly wrong could happen to the mechanics of your car, an extended car warranty may be right for you.

A Better Option for a trouble-free Car

Each and every year, JD Powers reports the reliability ratings on every car sold in America. Even cars which are rated very low on the list are more reliable than they were 20, 30 and 40 years ago.  If you want to maximize your chances of a trouble-free car, choose one that is near the top of the Car Reliability Ratings, listed here. The best warranty is only equal to a good, reliable car.  The best insurance policy is to lease a new car every 2-4 years.


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