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Purchasing a car is an investment. While the value of a car depreciates over time, the usage one gets out of the vehicle can be extremely valuable. A car intended to get the driver to and from work every day helps the person continue to draw an income.

Cars that end up in the shop end up costing money. No one wants to discover a vehicle has to go into a garage and come out with a huge repair bill. Manufacturers provide warranties on vehicles, but the standard warranty might not be enough. An extended warranty could pick up the proverbial slack on the costs associated with certain repair expenses.

Extended warranties can do a lot of good, but they are not 100% perfect. The right warranty can truly be a great investment and one that helps cut down on expenses.

A key point here is the extended warranty is often best purchased from a third party seller. Dealers do offer extended warranties, but the costs are commonly higher. Third party sellers are often more reasonable in terms of their costs. That said, cost is going to be based on how extensive the vehicle service contract is.

What is an Extended Warranty?

An extended warranty is really a “vehicle service contract”. Manufacturers provide a warranty to cover things that suffer damage that shouldn’t be damaged. Warranties only last so long. Five years or 60,000 miles is the most common term. An extended warranty/vehicle service contract can be purchased from a third party willing to assume the risk of covering repair costs beyond the warranty the manufacturer crafts.

Why Buy an Extended Warranty?

The obvious reason why purchasing an extended warranty is to save money. Those who feel their vehicle is “too well built” to break down or suffer defects may be mistaken. Usage of a vehicle really does factor into whether or not the vehicle suffers maintenance issues.

Certain car owners would be more inclined to purchase an extended warranty than others. Someone who chooses to own a car for short duration of time — three or so years — might not need one. Another person who intends to drive the car for many years past the limitations of the original warranty probably would benefit from purchasing an extended contract.

Again, the longer the car is in use the more the parts suffer wear and tear. Worn out and broken parts obviously need to be replaced. An extended warranty should be able to cover replacement costs as long as the problem in question is covered.

At some point, an old car needs to be sold or traded in. The extended warranty comes with a benefit that can help both causes. If repairs are made quickly and consistently thanks to the warranty coverage, the vehicle should end up being great shape when the time comes to unload it. The resale and trade in value will be much higher than would be the case had no repairs or limited repairs were performed.

No Extended Warranty Needed

An extended warranty is an investment. All investments need to be wise ones. As such, situations exist when purchasing an extended warranty would be a bad idea.

As already noted, anyone who does not plan to own a car for a long period of time really should not buy an extended warranty. Why? The ownership duration is not going to be so long that the original warranty ends up expiring.

Purchasing an extended warranty on a leased vehicle is usually not a good idea either. The reduced duration likely will not exceed the length of time the manufacturer’s warranty is in place.

Types of Extended Warranties

“Mechanical breakdown” and “wear and tear” coverage are the two most beneficial extended warranties to acquire. Costly “bumper to bumper” coverage might be worth the money to some but not others. As far as warranty types go, “exclusionary coverage” is more preferable to “named components coverage”.

Consumer diligence is also recommended. Putting a proper amount of time into researching as many extended warranty dealers and brokers is also necessary for finding the right service contract. Rushing into acquiring a contract is one surefire way to end up disappointed.