Often, a manufacturer tries to ramp up a product’s value by offering a warranty. When you purchase something of great value, isn’t it proper to have guarantees that you can have the item replaced or repaired if found defective?
By definition, a warranty is a form of assurance from the manufacturing company to provide after-sales support, such as replacement, repair, and maintenance of the goods purchased, for a specific period. Different companies offer different warranty coverages, and as a smart buyer, you should look closely at the warranty terms to get the best deal.
The same principle goes in buying a vehicle. Cars typically come with warranties, but some automobile makers offer better warranty deals than the others.
A new car requires a great amount of your hard-earned cash, but so does maintenance and repair costs. That said, you might have to consider an extended car warranty, especially for your second-hand automobile purchase.
What is an extended auto warranty?
Also called a vehicle service contract, an extended warranty refers to the guarantee of repair, maintenance, and other car services after the original car manufacturer warranty expires. Like the latter, an extended warranty also takes effect for a certain period. However, an original car warranty is typically included in the purchase price of your new vehicle, unlike an extended car warranty, which is sold separately.
This makes an extended car warranty more critical in buying a second-hand vehicle, as these units are more likely to need costly repairs and higher maintenance costs.
Consider the following factors in deciding whether you need an extended car warranty or not:
- The period covered by the extended warranty
- Car manufacturer’s reputation
- The likelihood of the vehicle breaking down in the near or distant future (esp. after the original warranty expires)
- Your capacity to pay for car maintenance and repairs
- The cost of the extended warranty vs. the cost of the vehicle
- Extended Auto Warranty cost vs. the expected amount of maintenance and repairs
With all these considerations taken into account, a prospective vehicle owner can now proceed by carefully weighing the pros and cons of availing of an extended vehicle warranty.
Pros of Extended Vehicle Warranties
- Cost-efficient – According to the Automobile Association of America, Inc (AAA), one in three drivers in America would need to resort to borrowing in order to pay for car repair costs. The said group’s overall yearly estimates of owning a car run at $8,500, with average repair bills pegged at $600.
That’s not all. The AAA also reported that car repair costs keep on increasing yearly. That’s bad news for owners with older vehicle models, as they’ll likely end up with more frequent and higher repair bills. But sophisticated cars eat up a significant amount of service bills, too, especially when any of their computer systems or parts break down.
- Choose your protection – An extended car warranty can cover essential parts, as well as those that may be less important, but ones that the owner cannot live without, such as the navigation system and other computer-based vehicle parts. Car warranty service providers are quite flexible and offer different tiers of warranty coverage, depending on your needs.
For instance, if you’re an owner of a second-hand car or an older model, you can choose extended warranties for cars with over 150,000 miles or more to make sure your potential and costly repairs are covered by a service agreement.
- Keep the car that you love – In some cases, owners are pressured into selling their car for a low price if they can’t bear the repair costs. By paying a monthly premium for an extended warranty and having your warranty cover a huge one-time repair cost, you can rest assured that you can keep your car for longer.
- Avail extra services – Some extended auto warranty companies offer add-on services to their clients. These may include towing and roadside services in case of unforeseen accidents, as well as vehicle theft, among others. This is very important for vehicle owners who frequently engage in long road trips.
- May increase car’s resale value – If you’ve decided that it’s time to part ways with your car, you may price it higher than its average cost if it has an extended warranty. You also will attract more potential buyers, who, more often than not, are looking to have peace of mind.
Cons of Extended Car Warranties
- You may end up spending more. In some instances, an extended warranty may not be a smart decision. This is especially true if you have a highly reliable car that you brought straight for the dealership. If you’re expected to pay an average cost of $1,800 in annual extended warranty fees, you might as well skip it, especially if you’re capable of paying for a one-time repair cost of up to $600.
- An extended warranty may still lack the coverage you need. Not all car warranty providers are flexible enough to offer the coverage you need in one package. What they typically offer are warranties in tiers, and each tier covers specific parts only.
- Waiting time. Like most forms of insurances, extended warranties won’t take immediate effect. That’s because they need to make sure that your car is working properly before it takes over the responsibility of covering the maintenance and repair costs. It may sound counterintuitive, but some warranties don’t work until after one month or a few thousand miles after purchase.
When looking at the possibility of extending your car warranty, always look at the fine print. Thoroughly check what is included and not included in the warranty to know which types of services can be availed of and whether these align with what you need.
The rule of thumb is, if you have an old and less reliable vehicle and can’t afford to pay one-time expensive car bills, an extended warranty might be a good decision.