Purchasing an extended warranty on a new car is, for many people, an excellent idea. Should you include the extra protection of an extended warranty on your next new car? And do you know why you should insist on the manufacturer’s extended warranty over the aftermarket plan the dealer may offer?
Traditional Warranty or Extended Warranty?
Consumers have several warranty options and should consider the advantages and disadvantages of each. Traditional warranties come standard with a new car purchase, at no additional cost. Extended Warranties provide more coverage, but incur additional expense.
Each buyer should do some analysis based on individual need. Does the traditional warranty offer enough coverage or should a consumer buy an extended warranty?
Ask yourself these questions before purchasing – or declining – an extended warranty:
- Do you normally trade every 3-5 years or do you keep your car for a much longer time?
- How secure is your current job?
- How much cash savings do you have for unexpected emergencies, including costly car repairs?
- What other high-cost expenses might you be facing in 3 years when the traditional warranty expires?
Traditional warranties cover three years or 36,000 miles. If you trade every few years or feel comfortable taking a few risks, this warranty may be perfectly adequate.
If you intend to keep your car for many years, an extended warranty may provide more peace of mind, knowing you are covered for 100,000 miles. Some people prefer to “pre-pay” repair bills by having the cost of an extended warranty included in their monthly payments. Extended warranties cover the drive train: engine, transmission and driveshaft. A single repair to the drive train is a major expense, usually starting at $2,000.
Perhaps you’re planning to retire about the time the car is paid off or your budget is tight. Maybe you are looking ahead to big expenses such as college tuition bills. In these cases, too, an extended warranty may be a good choice.
If you decide to purchase an extended warranty, be careful about the type you buy. Usually it is best to choose a manufacturer’s extended warranty.
Manufacturer’s Extended Warranty or Aftermarket Warranty?
NASA Credit Union recommends choosing an extended warranty, which is “backed by the manufacturer because those pay the dealer directly for repair work.”
Edmunds also encourages buyers to choose a manufacturer’s extended warranty over an aftermarket brand. Edmunds explains this choice: “manufacturer-supported extended auto warranties are the easiest to deal with.” Getting repairs paid for through a manufacturer’s warranty are quicker and easier. Claims “are almost instantly approved…and the whole process is basically seamless.”
Some Aftermarket Warranty Programs Under Investigation for Fraud
Ease of use aside, there may be a more important reason to choose the manufacturer’s extended warranty over an aftermarket product. Quite a few of the companies offering these plans are currently under investigation for fraud. Heartland News reported that the Missouri Attorney General is investigating at least six companies (Nov 13 2009).
The St. Louis-Post Dispatch reported a single firm had been named in more than 1,100 complaints filed with the Better Business Bureau (Hathaway, April 9 2009).
Purchasing an extended warranty is an individual decision. But most experts recommend choosing the plan offered by the manufacturer over the one offered from an aftermarket provider.