Should You Buy an Extended Warranty for Your Car

Shopping for a new car can be a very exhilarating, exciting experience- after all, your car is an extension of your personality, and what we drive says a lot about who we are. Once you’ve found the vehicle you want to purchase and it’s time to make it official, it’s not uncommon to want to rush through the paper-signing process and get straight to the fun part- driving off the lot and taking that first victory lap around the neighborhood on your new set of wheels!

But before the joyrides and proudly showing off your new ride to friends commence, there’s something serious you need to get through the meeting with the Finance Guy. You know the one- the guy who sits in that little office in the dealership and tries to sell you on a bunch of upgrades and premium packages before you get down to the nitty-gritty of signing your finance paperwork. It’s tempting to want to decline all of Finance Guy’s add-ons, but there is one you may really want to consider, and that is the extended car warranty.

What’s an Extended Car Warranty?

When you purchase or lease a new vehicle from the dealership, you are offered an extended car warranty. Check here to know more. This warranty goes beyond the manufacturer’s warranty that comes with the purchase of your vehicle to provide coverage for parts and repairs long after the 36,000-mile mark, which is when most standard warranties expire (and, maybe not coincidentally, when a number of car parts begin to give out!)

By purchasing an extended car warranty at the time of buying your car, you can effectively protect yourself against having to pay out of pocket for the potentially costly repairs that can crop up even in new cars. Repairs and replacements of parts large and small will be covered for a considerably longer time than they would have been under the standard warranty, giving you peace of mind that you won’t be hit with a huge bill for an unexpected auto repair.

Most used car buyers search for “extended auto warranties”. But an extended warranty from companies such as is actually either Mechanical Breakdown Insurance (in California) or a Vehicle Service contract (in the rest of the USA).

Benefits of an Extended Car Warranty

Let’s put it this way- your future self will thank Past You for deciding to purchase extended warranty coverage every time you find yourself in a situation where a repair or part replacement is necessary for your vehicle. Car repairs- even minor ones- can add up fast, and it’s not uncommon for people to have to find alternate means of transportation or even take out a loan because they can’t afford to come out of pocket for the necessary repairs to their vehicle. The main benefit of the extended car warranty is having the reassurance that your car can be repaired at no additional cost to you, in most cases. Having a fixed, predictable, monthly transportation cost can be a tremendous help to budgeting, financial goal setting, and peace of mind!

Disadvantages of Extended Car Warranties

So you’re thinking to yourself, “If extended car warranties are so great, why doesn’t everyone just buy them?” Good question- for many people who decide not to purchase the extended warranty, it comes down to the additional up-front cost tacked onto the purchase price of their vehicle. When you’re in a car-buying mode, you want to get the best deal possible and see how far below sticker price you can pay-by the time you’re in that room with Finance Guy, you’re not looking to add another penny onto the purchase price you just worked so hard to negotiate. However, over time, the cost of the extended warranty can certainly pay for itself- just one transmission repair can cost upwards of $1,500, so you can see how quick of a return you could get on your investment!

Another potential disadvantage of purchasing an extended car warranty from the dealer is that you then must bring your car to the dealership any time you are in need of a repair or part replacement. This can be inconvenient for someone who doesn’t live close to the dealership, or for someone who already has a preferred mechanic where they like to take their cars to be fixed.

Perhaps one of the biggest disadvantages to an extended car warranty from a dealership is that they are only offered for new vehicle purchases. People who are purchasing pre-owned cars are not eligible for additional coverage. Since a number of people prefer to purchase used cars, this could be why not everyone invests in an extended car warranty! Of course, used cars need extended warranties as much as new cars – if not more so. With a used car, sometimes, you may not know the history – or history of problems – that a vehicle has had. Vehicles have sometimes had repeated issues with certain components, which may or may not have been covered under a manufacturer’s recall. Other vehicles have perhaps been exposed to floodwaters, or have even belonged to rental companies! Having an extended warranty (or mechanical breakdown insurance) can be a huge help with any used vehicle with an unknown or suspect past.

Fortunately, there is good news: while a traditional extended warranty from a dealership may not always be the right fit, some insurance companies offer mechanical breakdown coverage, which acts as an extended car warranty while offering some flexibility, such as affordable monthly payments with the option to cancel anytime, as well as the ability to choose any mechanic you wish for your car repairs. Some mechanical breakdown policies are even able to be used by people who have purchased used cars!

If you want the peace of mind that you’ll never be strapped for cash due to an unforeseen car repair, an extended car warranty may be just what you need!