Is an Extended Warranty Worth It?
Written by Lee Wyatt (last updated August 23, 2013)
Chances are fairly good that if you have ever purchased a new or used car, truck SUV, or other vehicle, you have had the salesman offer you an extended warranty. Some people take them up on this offer, thinking that this is a great idea; while others turn them down thinking that it is nothing more than a scam. The question that you should ask yourself, before you decide one way or the other, is if an extended warranty worth it? Here are a few things that you should think about before you make your final decision.
- How much extra does it cost? Extended warranties are not free, and frequently they are not even inexpensive. Some dealerships offer extended warranties as a flat fee, while others add a few extra dollars each month to your monthly payments. Make sure that you know which it is, and what the total cost will be (for example, how much will the extra cost on the warranty affect your monthly payment).
- What will it cover? What many people don't realize is that most extended warranties do not cover everything on the vehicle. Even those that claim to be comprehensive, or "bumper-to-bumper" typically only cover a few things, and not everything. Before you agree to an extended warranty, you should know exactly what is covered and what isn't.
- Are there any restrictions? There are usually some situations where even something that is supposed to be covered by the extended warranty won't be. Make sure that you read the fine print, and in what situations the vehicle will be, and won't be, covered. One example that has been seen in some extended warranties is that if you go to an "out of system" mechanic for work, it voids the extended warranty.
- How long will it last? An extended warranty is exactly that, extended. This means that it will eventually end, so you really should know when that mile mark will show up. For example, will it be in five years, or will it be in 60,000 miles. This is a rather common end marker for many extended warranties, so be aware of that all important word: or. This one word means that which ever comes first (the five years, or the mileage) will be when the warranty ends.
- What typically needs repairs? One of the more important things that you should definitely find out is what typically needs to be repaired on this particular model of car. If possible, ask to talk to the repair department of the car dealer, and ask them what the most common thing that they repair on that model of car, and how much it costs to repair each item. In addition, you may want to also ask how often that model of car has that problem.
- How much out of pocket expense is there? Many times even if you have a warranty you will have to pay some money out of pocket. Think of it like a co-pay that you have to make even if you have health insurance. Before you sign you should ask to see a copy of the pay scale, and if you do sign you should keep a copy for your own records.
Now that you know a few things that you need to consider, you should have no problem deciding whether or not you should get an extended warranty. However, keep in mind that the answer to some of these things you won't get from the salesman at the time of signing the contract. This means that you may want to consider doing a bit of research prior to signing, or even going to the car dealership. In addition, keep in mind that you are going to be the only one that can decide whether an extended warranty is worth it or not.
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