I would never buy an extended warranty on a new car. But if someone else asked me if they should buy one, I would have a different answer: it depends.
Over the years, I have spoken to hundreds of car buyers and have found that the decision to buy a car automobile warranty extension is very personal and quite emotional. Many seek peace of mind, and a warranty can provide that.
But it’s also a peace of mind for the dealer – another chance to make a big profit.
Either way, it’s a good idea to make your decision before you walk into the dealership sales office and get the hard to sell. Here’s how to get there.
Is a warranty extension for you?
How long will you keep the car?
Almost all new cars come with a bumper-to-bumper warranty of at least three years and 36,000 miles. For many brands, the warranty is even longer.
If you keep or lease your car for less than the length of your factory coverage, you don’t – repeat, you don’t need – an extended warranty.
If you plan to keep your car until the wheels fall off, you might consider purchasing an extended warranty to cover repairs in the car’s fifth and sixth year or so.
Will you actually use the extended warranty?
Remember that the warranty only covers the things that break on your car.
Warranties do not cover oil changes, brakes, tires or other “wear items” – things that are subject to wear and tear. A seasoned auto dealer recently told me that only 1 in 10 people who buy extended warranties end up using it. A Consumer Reports survey concluded, “Car owners generally paid more for coverage than they received in direct benefits.”
Look at it another way: They wouldn’t sell you the warranty if they really thought you were going to use it. As one wise friend of mine who knew her way in the auto industry said, “I’m ready to roll the dice.
Did you know that you already have an extended warranty?
Most cars come with a powertrain warranty that goes into effect after the bumper-to-bumper warranty expires. For example, Chevy has a powertrain warranty that lasts for five years or 60,000 miles. If something is wrong with the car’s powertrain – those parts that move the car on the road – it’s covered. Free.
But if the door handle breaks or the window does not come up, you have to pay to fix it.
Can you buy the extended warranty later?
Imagine telling a financial planner that you were going to give someone $ 2,000 today for a product that you won’t be able to use for at least three years. They would say you’re crazy. But a lot of people buy an extended warranty when they buy a new car, and that warranty doesn’t even take effect for three years!
Buying the warranty when you buy the car is easier, of course; you can transfer the cost into your monthly payment. And most warranties are transferable if you decide to sell.
But why pay interest on something you won’t use for years?
Consider waiving the extended warranty at the time of purchase. Then, as your car nears its third anniversary, consider the extended warranty. Then you will know two things that you didn’t know when you bought the new car: how much you love it and how annoying it has been.
Plus, you can shop for the best price from the comfort of your home.
Will the cost of repairs exceed what you pay for the warranty?
Dealers offer warranties using the worst-case scenario: the electronic system is broken and the bill will be three thousand dollars. Or, the transmission falls off. Yes it’s possible. But you’re more likely to have a leaking water pump or a failing oxygen sensor.
Let’s say you’re tempted to buy an extended warranty for $ 1,200 (although a lot of people pay a lot more), but you refuse. Later, you end up with a $ 600 repair. Ouch – but you’re still $ 600 ahead of the game.
OK, so how do you say no?
I would never tell anyone to lie. But sometimes you can carefully craft statements to deflect the aggressive arguments of salespeople trained to overcome your objections.
So if you come across a salesperson who doesn’t take no for an answer, try this: “I usually exchange my cars every three years. The word usually prevents you from lying. And there is no way for a seller to overcome this objection.
And, by the way, if you’re reading this after you’ve already purchased an extended auto warranty, here’s a fun fact to cheer you up – you can cancel a warranty extension at any time and get a pro-rated refund.