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are extended car warranties worth it

Are Extended Car Warranties Worth It in 2020?

  • Extended car warranties offer you peace of mind on the road after your factory warranty expires.
  • The price of an extended warranty can sometimes outweigh paying for repair bills outright.
  • Choose carefully between manufacturer extended car warranties and third-party providers.

Affiliate disclosure: Automoblog and its partners may be compensated when you purchase the products below.

Extended car warranties can be a saving grace when you experience a mechanical breakdown, but they can also add a few thousand dollars to your cost of vehicle ownership. At the end of the day, are extended car warranties worth it?

In this article, we’ll go over the pros and cons of extended auto warranties, break down typical costs, and give you recommendations on where to buy the best extended car warranty coverage.

To start comparing free, personalized quotes from our top recommended providers, click below. 

Top Extended Warranty Companies
We reviewed the best extended auto warranty providers, and here are our top picks. 
Best Direct Coverage Best for Older Vehicles Best Prices
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What Is an Extended Car Warranty?

An extended car warranty, or vehicle service contract, promises to pay for certain car repair costs after your factory warranty expires. Unlike car insurance, which covers you in the event of a collision, extended car warranties protect against mechanical breakdowns or manufacturer defects in materials or workmanship. 

There are many types of vehicle service contracts available, the most common of which are a bumper-to-bumper warranty and a powertrain warranty.

Bumper-to-bumper coverage covers most car parts in the event of a mechanical failure. They’re more comprehensive than a powertrain warranty, and often more expensive. Powertrain warranties typically cover just the parts of your vehicle that make it move, including your engine, transmission, drive axles, and related parts. They usually last longer than bumper-to-bumper warranties but cover far fewer components. 

Many warranty companies also offer enhanced powertrain warranties that include coverage for other major systems, such as the air conditioning and brakes.

Are Extended Car Warranties Worth It?

Many drivers believe extended car warranties are worth it if only for the peace of mind they bring. With an extended auto warranty, you don’t have to worry about whether you can afford mechanical repairs after your factory warranty expires. In fact, according to a survey by Pegasystems Inc., 60 percent of extended warranty owners reported benefiting from their coverage within the last year.

However, an extended warranty may not be worth it for every driver. Below, we’ve compiled a list of pros and cons for you to consider before deciding whether to purchase coverage.

Car Warranty Pros

Pro: Extended car warranties can help you finance repairs. Repair costs can add up quickly, especially if a high-value component like your head gasket or fuel pump fails. Manufacturers include a factory warranty that protects against these costs for the first few years of your vehicle’s life, but after it expires, you’re on your own to cover repairs. Extended warranty plans pay for parts and labor for covered repairs, and you’re only responsible for paying your premium costs and a deductible. You can also end up saving money in the long run if you use your extended warranty coverage multiple times or have an exceptionally large repair.

Pro: You can choose the coverage that’s best for you. Manufacturers sometimes have multiple extended warranty plans to choose from, but third-party providers almost always give you plenty of options. Our top two recommended providers, Endurance and CARCHEX, offer drivers five different coverage tiers. These range from basic powertrain plans to full bumper-to-bumper warranties, so you can ensure you’re only paying for the coverage you need. 

Pro: You’ll get additional perks. With almost every extended car warranty plan, you’ll get additional benefits alongside the coverage you choose. Standard perks include 24/7 roadside assistance, trip interruption coverage, and rental car coverage. Some providers, such as Endurance, go the extra mile to provide benefits like complimentary tire replacements, key fob replacements, entertainment vouchers, and more.

Car Warranty Cons

Con: An extended warranty might not be the most cost-effective option. Extended car warranties are a great choice if you think you’ll use them. Otherwise, you may end up paying for coverage you don’t need. You’ll want to consider your vehicle’s reliability as well as your ability to pay for repairs outright to determine if an extended warranty is the best option for you.

Con: Sometimes, coverage options are limited. In some cases, especially with certain manufacturers, you’re limited to one or two coverage choices and there isn’t any flexibility with deductible amounts. If you’re stuck in a position with too few options, maybe skip the extended coverage or opt for a third-party plan.

Con: You’ll have to wait for coverage. Most extended warranty plans have a 30-day and 1,000-mile waiting period before coverage kicks in. This allows the provider to ensure there are no pre-existing issues with your car. Sometimes, the perks that come with your plan are still accessible during this period, but oftentimes, you’ll have to wait to use them, too.

Extended Warranty Costs vs. Out-Of-Pocket Repair Costs

Like we mentioned, extended car warranties can put money back in your pocket when it comes to costly repairs. Now, let’s break down how much an extended warranty might cost you and what factors play into pricing. 

What Is a Good Price For an Extended Warranty?

Based on our research, a good price for an extended warranty is anywhere from about $1,700 to $3,000. This is a wide range because the cost of a warranty will depend on many factors, including what plan you buy and your vehicle’s age and model.

There’s no one-size-fits-all pricing for extended warranty coverage, but here’s a closer look at the individual factors that will affect your warranty cost:

  • Warranty length: Longer term limits will lead to higher overall costs.
  • Location: If you live in a high-traffic area, you may pay more for coverage.
  • Deductible: In general, the higher your deductible, the lower your premium cost will be, and vice versa. 
  • Warranty plan: As mentioned, bumper-to-bumper warranties will be more expensive because they’re more comprehensive. 
  • Vehicle age: Old, high-mileage vehicles are more prone to mechanical breakdowns, so they’re often more expensive to cover.
  • Vehicle type: Expensive cars need expensive repairs, and that’s reflected in warranty costs. If you own a sports car or luxury car, you’ll likely pay more for coverage.

What Are Average Repair Costs?

Now that you know how much a warranty might cost you, let’s take a look at how much you may pay out of pocket for repairs without a vehicle service contract. We looked at the five most popular car brands in the U.S. and compiled a table of their average annual repair costs, according to RepairPal.

Car Brand Average Annual Repair Cost Reliability Rating
Ford $775 3.5 out of 5.0
Toyota $441 4.0 out of 5.0
Honda $428 4.0 out of 5.0
Chevrolet $649 3.5 out of 5.0

Here’s the same data for popular luxury vehicles, according to RepairPal. 

Car Brand Average Annual Repair Cost Reliability Rating
Lexus $551 4.0 out of 5.0
BMW $968 2.5 out of 5.0
Mercedes-Benz $908 3.0 out of 5.0
Audi $987 3.0 out of 5.0

These numbers are brand-wide averages, so they may fluctuate based on vehicle model. Additionally, repair costs will likely be higher for older or higher-mileage vehicles. However, even with these averages, it’s easier to tell whether an extended car warranty is worth it.

For example, according to our research, a five-year full-coverage warranty for a new Toyota Camry may cost you between $1,700 and $2,500. If you skip the extended coverage and pay for Toyota repairs out of pocket, you may end up paying about $2,200 over five years.

You can determine whether an extended car warranty would be worth it for your vehicle by looking at average repair costs on RepairPal and comparing the data with quotes from multiple extended warranty companies.

Where Should You Buy an Extended Warranty?

Figuring out your ideal extended warranty provider is another piece of the puzzle. In general, you have two options: your car manufacturer and a third-party provider. 

Manufacturer Extended Warranties

Typically, you must purchase an extended warranty from the manufacturer at the time you purchase your car or before your factory warranty expires. Unfortunately, this doesn’t give you a lot of time to decide if you really need longer coverage. Term limits for manufacturer extended warranties usually max out at around 100,000 miles, which isn’t very long compared to third-party contracts.

Most of the time, manufacturers also make you return to the dealership to have covered repairs completed. On one hand, you’re sure to have access to factory-trained technicians and authentic parts. On the other hand, you’re limited on where you can go for service.

If your vehicle is still protected under its original factory warranty, call your local dealership to explore plan options and get a quote. If not, you’ll likely need to look for coverage from an aftermarket warranty provider.

Third-Party Extended Warranties

Third-party warranty providers tend to offer more flexibility than manufacturers in terms of cost, repair shop availability, and coverage options. Reputable extended warranty companies can offer term lengths up to 15 years and 250,000 miles, depending on the provider. Drivers who plan on sticking with their car for the long-haul would definitely benefit from such a long coverage plan.

With a third-party provider, you can also choose from multiple coverage plans that allow for more customization based on the level of protection you need. Additionally, you can usually take your vehicle to thousands of authorized repair shops across the U.S., including dealerships and mom-and-pop shops.

If you go the third-party provider route, you can usually get a free quote online.

Our Top Recommendations for Extended Car Warranties

Are extended car warranties worth it? Yes, if you go with the right provider and know you need the extra protection. When weighing your options, it’s a good idea to get quotes from more than one company. Below, we’ve highlighted a few of our top providers to get you started.

Endurance: Best Direct Coverage

We rated Endurance the Best Direct Coverage provider because it sells and administers all plans itself rather than brokering plans that are administered through other companies. This means there’s no middleman involved in the quotes or claims processes, which maximizes efficiency.

Endurance has five different coverage plans to choose from, which can last up to 15 years and 200,000 miles. It also offers the best benefits package in the industry, which you can read about in our full Endurance warranty review

To get a free quote and see whether an Endurance warranty would be worth it for your vehicle, click below.

Best Direct Coverage

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Industry veteran that handles your plan directly, from quote to claim

CARCHEX: Best for Older Vehicles

If you want to purchase coverage for an old, high-mileage car, we recommend looking into CARCHEX. This provider has a specialty plan for high-mileage vehicles, and term limits last up to 10 years or 250,000 miles. Overall, CARCHEX offers five coverage plans that come with perks including emergency roadside assistance, rental car reimbursement, courtesy towing, and trip interruption coverage. 

You can get a free, personalized CARCHEX quote by clicking below.

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