Extended car warranties can be worth it if you have an older vehicle with a high mileage but may not be worth it if your vehicle isn’t likely to break down
Updated:
Mar 23, 2024
Written by:
Alexandra Carver
Alexandra Carver
Writer
Edited by:
Rashawn Mitchner
Rashawn Mitchner
Senior Editor
When your vehicle’s factory warranty comes close to expiring, you’ll have the choice to extend it either with your manufacturer or through a third-party warranty provider. However, is an extended auto warranty worth the cost?
We at the MarketWatch Guides team delve into the reasons you should buy an extended warranty, when it doesn’t make sense to buy one and the differences between manufacturers and third-parties. We also recommend the best extended car warranty providers to consider.
Key Takeaways:
- Extended auto warranties cover repair bills for your vehicle’s most important components, like its engine, transmission and drivetrain parts.
- The average cost of an extended car warranty per year is $977 according to our collected quotes, but this can vary greatly from your own car’s warranty cost.
- Your vehicle’s particular extended warranty costs will depend on its make, model, year, mileage and other factors.
- These warranties work best if you plan to keep your vehicle for a long time and plan on doing the routine maintenance.
Should You Buy an Extended Car Warranty?
If you want peace of mind and protection from high repair costs, an extended auto warranty could be a smart option to consider. Normally, you’ll want to buy this when your manufacturer’s warranty is close to expiring. In many cases, your manufacturer will notify you when it’s close to expiring — that way, if you want to continue similar warranty coverage, you’ll have the option of doing so.
When shopping for extended warranty plans, there are two types to consider: manufacturer and aftermarket.
Extended Warranties From Manufacturers
As its name implies, manufacturer warranties come from the company that built your vehicle. You can purchase these at the dealership at the time you buy your vehicle or when your factory warranty is close to expiring. A smarter approach is to buy directly from the manufacturer so the dealership can’t mark up the price or bundle it into your financing.
Manufacturer warranties deal directly with the manufacturer — there’s no third-party company to go through. And you have the benefit of bringing your vehicle to your local brand dealership, where factory-trained technicians work on it. Many manufacturer warranties also include low deductibles to reduce your up-front expenses.
There are some drawbacks to consider as well. For one, you won’t have your choice of mechanics like you would with a third-party warranty. You also don’t have a large selection of coverage plans like you would with aftermarket warranty providers. On average, extended warranties from manufacturers can be more expensive than contracts from independent companies.
Extended Warranties From Aftermarket (Third-Party) Providers
Another option for protection from unexpected repair costs is to buy a third-party warranty. These work best for used vehicles because they have higher mileage coverage levels, especially when compared to manufacturer warranties. Those usually cap around the 100,000-to-150,000-mile mark, while some third-party warranties can last as long as 300,000 miles.
Third-party warranties give you the freedom to choose a mechanic for repairs, provided the person meets the qualifications outlined by your provider. You’ll also have more plan choices, so you can find the right mix of coverage and value for your budget.
That said, there are some things to consider before buying a third-party extended warranty. Since you can take your vehicle to other mechanics, they might use aftermarket parts. If your vehicle is still under your manufacturer’s original warranty, it could void it.
Extended auto warranty providers can be expensive and don’t always have great reputations for customer service. That’s why you’ll want to research a provider’s reputation using tools like customer reviews from the Better Business Bureau (BBB) and Consumer Reports before selecting one.
What To Consider Before Buying an Extended Warranty
There are several factors to take into account before deciding if an extended auto warranty is worth it. Here are some of the top things to consider.
Vehicle Reliability
Your vehicle’s reliability ratings can clue you into whether you’ll encounter many repairs during ownership. You can use RepairPal or J.D. Power studies to determine how reliable a vehicle is compared to other brands.
For example, according to the J.D. Power U.S. Vehicle Dependability Study℠, the top three brands reported to have the least amount of mechanical problems per 100 vehicles were Lexus, Toyota and Buick. The three with the most mechanical issues were Land Rover, Audi and Chrysler.
Average Repair Costs
Another factor to consider is how much the average repair costs for a brand or vehicle are. Here are some of the top brands and average repair expenses, according to RepairPal:
How Long You Plan To Keep Your Vehicle
One of the biggest factors impacting your decision is how long you plan to keep your vehicle. If you bought a new car and want to exchange it every few years to take advantage of innovations, an extended car warranty won’t be a good fit since you won’t have your vehicle long enough.
However, if you plan to keep the new vehicle for years after its original warranty expires, an extended auto warranty could be a smart choice to consider.
What’s Covered Under an Extended Warranty?
Your extended auto warranty covers some of your vehicle’s major components, such as its engine, transmission, gaskets and axles. If you keep up with your regular maintenance when these parts break down, your provider covers the expensive repairs associated with them.
Types of Extended Warranties
Your warranty provider offers several different coverage options like a bumper-to-bumper warranty, a mid-tier warranty or a powertrain warranty. Here are some details about each:
- Bumper-to-bumper warranty: This extensive coverage is most similar to the factory warranty that comes from an automaker. It covers everything (from “bumper to bumper”) except a small list of components as outlined in the contract.
- Mid-tier warranty: Mid-coverage warranties state the exact components they do cover in the contract, which usually includes all parts covered by powertrain warranties plus vital parts and systems like heating and cooling, electrical, suspension and more.
- Powertrain warranty: This only covers the drivetrain components of a vehicle and is more ideal for high-mileage and used cars. Powertrain warranties are desirable because they are the most affordable and cover the most expensive car parts.
The graphic below can show you the major differences between bumper-to-bumper warranties and basic powertrain warranties:
What’s Not Covered
It’s common for providers to have exclusions for coverage. These typically include:
- Routine maintenance: This means oil changes, brake pad replacements and tire rotations, among other things.
- Wear-and-tear components: These are usually wiper blades, air filters, light bulbs and more.
- Modified parts: Not getting approval before modifying a part could void your warranty.
- Climate events: Repairs from weather events are paid by your comprehensive coverage.
- Road hazards: Tire damage from potholes is covered by your collision coverage
- Tampering: Tampering or causing damage on your own can void warranty coverage.
When you sign up for a policy, make sure to read the fine print. It’ll include all the exclusions that apply with your warranty plan.
Extra Perks With Extended Warranties
Along with covering critical components, many manufacturers and third-party providers offer other perks:
- Roadside assistance: It provides towing, fuel fill-up, locksmith services, repairs to a flat tire and jump-starting a dead battery.
- Trip interruption coverage: If you’re away from home and you experience a mechanical breakdown, trip interruption pays for lodging and food while your vehicle is in the shop for an approved repair.
- Rental car coverage: Many providers reimburse you for a rental vehicle when your car is in the repair shop. This benefit includes a daily and maximum spending cap.
- Monthly payments: Since the average costs of an extended auto warranty are thousands of dollars, having the option to break them down into manageable monthly payments benefits many car owners.
Extended Warranty Costs
One of the biggest concerns relating to extended auto warranties is the cost. The average costs of one can be thousands of dollars. Most manufacturer extended warranties are either paid in full up front or rolled into your vehicle cost or financing. With third-party warranties, you can either make an upfront payment or you can break it down into monthly payments.
What Affects the Cost of an Extended Warranty?
Your car warranty costs could be different from the average depending on a few factors. The details of your vehicle service contract will determine how much you end up paying. Some of the most important factors that affect your extended warranty costs are:
- Vehicle age
- Mileage
- Make and model
- Deductible
- Provider
- Coverage
Your vehicle’s age and mileage go hand in hand. If you have a higher-mileage car, chances are it’ll need more repairs, which can make your extended warranty more expensive. Also, certain manufacturers are more prone to expensive repairs and that also influences costs.
Choices you make also impact the price of a protection plan. Provider rates vary based on coverage options and deductible amounts. The more comprehensive coverage you choose, the more you’ll pay for it. The same applies to deductibles: the lower it is, the more you’ll pay monthly. We suggest getting free quotes with several providers to give you a baseline of what to expect to pay.
Mechanical Breakdown Insurance
Another option is to consider mechanical breakdown insurance (MBI). It works the same way as extended auto warranties in that it covers car repairs for your vehicle’s engine, transmission and other covered parts. However, MBI is bought through your car insurance provider.
Insurance companies like Progressive and Geico offer these policies, where you’ll roll the costs into your monthly premium payments.
Are Extended Warranty Plans Worth It?: The Bottom Line
Yes, extended warranty plans can be worth it if you don’t want to pay out of pocket for expensive repair bills. They work best for car owners looking to keep their vehicle for a long time — way past when the manufacturer factory warranty expires. And they cover major repairs associated with your vehicle’s engine, transmission and drivetrain.
However, they aren’t for everyone. If you only plan on keeping your vehicle for a few years, most repairs fall under your manufacturer’s bumper-to-bumper coverage or powertrain warranty. Or if you have a reliable vehicle, you might not want to spend money on a protection plan you’re more likely to never use.
Top Extended Warranty Recommendations
When shopping for warranty coverage, here are two of the best providers to consider:
Endurance: Most Comprehensive Coverage
Endurance offers six coverage options, with terms up to 200,000 miles — making it perfect for higher-mileage vehicles. It also offers roadside assistance, rental car reimbursement and one year of Endurance Elite Benefits. These include $1,000 for a new vehicle when a total loss happens, key fob replacement of up to $500 and replacing up to two tires annually.
Read more: Endurance Warranty Review
Carchex: Great Industry Reputation
Carchex offers up to five plans with coverage terms of up to 250,000 miles. If you have an older vehicle and want coverage, this provider might be the right fit. You also receive roadside assistance, trip interruption and rental car reimbursement with every plan. Carchex also offers you a 30-day money-back guarantee, giving you a risk-free way to try it out.
Read more: Carchex Review
Are Extended Warranties Worth It?: FAQ
Below are frequently asked questions about if extended warranties are worth it:
Yes, getting an extended warranty on a car is worth it if you plan on keeping your vehicle far past when the original warranty expires. If you don’t want to pay for costly repairs, it’s a wise option to consider.
No, you shouldn’t buy an extended warranty from a dealership because dealerships tend to mark these up. And a dealership might try to roll the costs into your auto loan, so you would pay interest on top of the higher prices.
Some good reasons for getting an extended warranty are it covers repairs to some of your vehicle’s most expensive components, you can break up the costs of a policy in monthly payments and you receive perks like roadside assistance.
Our Methodology
Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best extended car warranty companies. We collected data on dozens of auto warranty providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the companies that scored the most points topping the list.
Here are the factors our ratings take into account:
- Reputation: Our research team considers availability, ratings from industry experts and years in business when conferring this score.
- Coverage: Companies that offer a variety of choices for warranty coverage, long contract terms and added benefits are more likely to meet consumer needs.
- Cost: Auto warranty companies with affordable rates and multiple deductibles scored highest in this category.
- Transparency: This score is based on contract transparency and the availability of a money-back guarantee.
- Customer experience: Based on customer satisfaction ratings and our extensive shopper analysis, we consider the responsiveness, friendliness and helpfulness of each warranty company’s customer service team.
Our credentials:
- 500+ hours researched
- 50 companies reviewed
- 2,000+ consumers surveyed
*Data accurate at time of publication.
If you have questions about this page, please reach out to our editors at editors@marketwatchguides.com.
