Extended Car Warranties: Are They Worth the Cost?

Jerry Baker
March 22 2023

Purchasing a car is a significant investment, and protecting that investment with the right warranty coverage is essential. While new cars come with a manufacturer's warranty, used and certified pre-owned cars may offer limited coverage, if any. 


Extended car warranties can provide additional peace of mind by covering repair costs beyond the original warranty period. Learn the basics of extended car warranties before deciding whether they are right for you.

What Is an Extended Car Warranty?

An extended car warranty, also known as a service contract or vehicle service agreement, is a plan that covers specific vehicle repairs and components beyond the manufacturer's warranty period. These warranties are available to anyone, even drivers with bad credit, and can be purchased from dealerships or third-party providers. You can also get them directly from the manufacturer. 


Extended warranties can vary in coverage, duration, and price, so it's crucial to carefully review the details of each plan before committing. However, a car warranty typically covers the following:


  • Engine components: This includes parts such as the timing belt, water pump, oil pump, and other internal components related to the engine.
  • Transmission: Both manual and automatic transmissions are covered, including their internal components and the clutch assembly.
  • Drivetrain: This covers parts such as the axle shafts, drive shafts, differentials, and associated bearings.
  • Fuel system: The warranty coverage may include components like the fuel pump, fuel injectors, and fuel lines.
  • Cooling system: This typically covers the radiator, water pump, cooling fan, and related hoses.
  • Electrical system: The warranty may cover components like the alternator, starter motor, wiring harnesses, and various sensors and control modules.
  • Exhaust system: Coverage may include components such as the exhaust manifold, catalytic converter, and mufflers.
  • Suspension and steering: Parts such as the control arms, ball joints, tie rods, and power steering pump may be covered.
  • Braking system: This often includes the master cylinder, brake calipers, wheel cylinders, and anti-lock braking system (ABS) components.
  • Air conditioning and heating: The warranty may cover components like the compressor, condenser, evaporator, and blower motor.

Benefits of Extended Car Warranties

An extended warranty alleviates the stress of unexpected repair costs. By covering major components and systems that may fail after the original warranty has expired, vehicle owners can rest easy knowing they have additional protection. Furthermore, extended warranties can help protect your budget by covering eligible expenses that arise.


When it comes to resale value, an extended warranty that is transferable to a new owner can potentially increase the value of your vehicle, as the buyer will benefit from the remaining coverage. Additionally, many extended warranties include extra benefits like roadside assistance, providing extra protection and convenience in the event of a breakdown.


Types of Extended Car Warranties

Consider the most common types of extended car warranties and assess which is right for you.


Manufacturer-Backed Extended Warranties

Warranties offered by the vehicle's manufacturer typically provide the most comprehensive coverage. They may include additional benefits such as rental car reimbursement, roadside assistance, and trip interruption coverage.


Dealer-Offered Warranties

Some dealerships offer their own extended warranties, which may have more limited coverage compared to manufacturer-backed plans. These warranties may only be valid at the dealership where the vehicle was purchased, so reviewing the terms and conditions before purchasing one is essential.


Third-Party Extended Warranties

Numerous third-party providers offer extended warranty plans. These plans can vary significantly in terms of coverage, price, and customer service, so it's important to research each provider and read reviews of the company before buying the warranty. 


Costs of Extended Car Warranties

MarketWatch conducted a survey and found that the median extended warranty cost was just under $2,500, although some survey participants secured warranties for around $1,600.


The actual price of the warranty you get will depend on several factors, including the make and model of the vehicle, the coverage level, and the plan's duration. Comprehensive coverage and longer terms are generally more expensive. 


Factors To Consider Before Purchasing an Extended Car Warranty

Here are the most important things to consider before you agree to an extended warranty.


Existing Warranty

Review the terms of your vehicle's original warranty to determine if extended coverage is necessary. If your car is relatively new and still covered under the manufacturer's warranty, an extended warranty may not be needed right away.


Vehicle Reliability

Research the reliability and repair history of your vehicle's make and model. If your car has a strong reputation for being durable, an extended warranty may not be as beneficial.


Calculate the potential savings an extended warranty could provide by comparing the cost of the warranty with the average repair costs for your specific make and model. It may be a worthwhile investment if the potential savings outweigh the warranty's cost.


Usage and Mileage

Consider your driving habits and the anticipated lifespan of your vehicle. An extended warranty may be more valuable to you if you plan to drive your car for many years and pack on the miles.


Coverage Details

Carefully review the terms and conditions of each extended warranty plan, paying close attention to the components and systems covered, as well as any exclusions or limitations. Plans with many exclusions may not be worth their cost.


Deductibles and Repair Facilities

Consider the deductible amount required for each repair claim and whether the warranty allows you to choose your own repair facility or requires you to use specific shops. Lower deductibles and more flexibility in choosing repair facilities can make a warranty more appealing.


Transferability and Cancellation

Check if the extended warranty is transferable to a new owner, as this can potentially increase your car's resale value. Additionally, inquire about the cancellation policy and whether you can receive a prorated refund if you cancel the warranty before its expiration.


Reputation and Customer Service

Research the reputation of the warranty provider, focusing on factors such as customer satisfaction, claims processing, and overall service quality. Read reviews and consult resources like the Better Business Bureau to ensure you're dealing with a reputable provider.


Should You Buy an Extended Car Warranty?

Deciding on purchasing an extended car warranty is ultimately a matter of personal preference. If your car has a reputation for dependability and you're financially prepared to handle unforeseen repairs, an extended warranty may not be the best investment for you.


When it comes to purchasing a new car and exploring warranty options, Allcreditautos has got you covered! They're committed to helping you find the perfect dealer and secure an attractive rate on your dream vehicle. 

Jerry Baker