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Should I Buy an Extended Warranty?

Extended warranties for vehicles and other large items can help protect your purchase — but are they worth the cost?

January 17, 2022

When making a major purchase, like a vehicle or an appliance, you may be offered an extended warranty. These warranties cost extra but help protect your purchase longer than the standard manufacturer’s warranty.

If you’re asking, “Should I buy an extended warranty?” this guide is the place for you. 

We’ll discuss everything you need to know to determine if an extended warranty is worth it for you. 

What is an extended warranty? 

New products often come with an offer of a warranty. The warranty will typically cover repair or replacement of the item if it has defects or damages resulting from a manufacturing mistake. Warranties usually come with the product at no extra cost. 

An extended warranty is an optional add-on with an additional cost. The extended warranty usually expands the length of the warranty coverage is valid for and may include other protections. 

Extended warranties are available for a wide range of products, but the most common are:

  • New and used vehicles from dealerships

  • Consumer electronics (laptops, phones, tablets, etc.)

  • Appliances (refrigerators, ovens, etc.)

The extended warranty won’t necessarily have the same coverage as the original warranty. Often these warranties are offered by third-party companies rather than the original manufacturer of the item. It’s important to read the fine print to see what’s covered with an extended warranty. 

Extended warranty example

For example, if you buy a new car, it may come with a 3-year, 36,000-mile warranty. This means that the warranty lasts for either three years or 36,000 miles, whichever comes first. 

The dealership may then offer you an extended warranty of 5-years, 80,000 miles. This would extend the coverage until either five years or 80,000 miles, whichever comes first. Depending on the vehicle, the extended warranty may cost $1,500 to $4,000 or more (the average vehicle extended warranty is around $2,500).

Should I buy an extended warranty? 

An extended warranty can offer peace of mind. However, they also add substantial costs to your purchase. Figuring out whether an extended warranty is worth it or not will be different for every buyer.

If you’re wondering, “should I buy an extended warranty,” evaluate your needs with these important aspects that you should consider:

Cost

Look at the initial payment, plus monthly fees, to estimate the entire cost of the extended warranty over its lifetime. Look out for deductibles and other fees that could add to the total expense. How does this cost compare to the price of the item? If you don’t buy an extended warranty, can you pay for the repairs on your own?

Length

Look at how long the warranty lasts and how this compares to the standard (included) warranty length. Would you rather pay more for peace of mind or take a chance to save money now?

Coverage

What specifically does the warranty cover? Try to think about how likely you may be to use the coverage. Warranties don’t typically cover normal wear and tear, accidents, or routine service like oil changes. If you can fix minor issues yourself, an extended warranty may be less valuable.

Claims process 

What is the claims process like? Do you have to go to a certain technician or ship the item to a specific place? What are the costs associated with making a claim (shipping, deductible, etc.)

Reputation

How reputable is the company offering the extended warranty? Sometimes, third parties sell warranties, so they’re not necessarily from the manufacturer. Search the internet for information relating to the company behind the extended warranty. 

What the experts say

Are extended car warranties worth it? In general, most experts advise against buying extended warranties — particularly for vehicles, the product category where these warranties are most common. 

Dave Ramsey says to “just say no,”  citing the high upfront costs associated with extended warranties. 

Jack Gillis, executive director of the Consumer Federation of America, calls extended warranties “a bad deal” regarding long-term costs. 

When should I buy an extended warranty?

Although most experts recommend against buying an extended warranty, there are some situations in which it might make sense: 

If you can negotiate a great deal 

Extended warranty costs may be negotiable, especially regarding vehicle warranties. If you can negotiate a better price (start your negotiations at around 60% of the sticker price), that can change the math on whether an extended car warranty is worth it. Note that you may also negotiate the price of the car itself.

If you value peace of mind 

If you’re someone who values knowing that things will be taken care of if something goes wrong, an extended warranty can be worthwhile. Just be sure to acknowledge that statistically, it’s unlikely to be the optimal financial decision. 

Finally, remember that you don’t necessarily have to buy the extended warranty right away. When it comes to vehicles, you can typically add on an extended warranty any time before the manufacturer’s standard warranty expires. This buys you some time to think about it. 

Extended warranty spam calls

Have you ever got a spam call or voicemail saying that your vehicle warranty has expired? These robocalls and spam telemarketer calls are becoming more common and should be ignored. 

According to the Federal Trade Commission (FTC), these calls are likely illegal if you don’t have a relationship with the company. 

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