Should I get an extended warranty?
Extended warranties are great for people who want to be prepared for possible repairs that may be needed once the factory warranty expires.
Keep in mind there is a difference between third party and factory warranties. In the past, we have not recommended third party warranties because they are inconvenient to use. The companies sometimes go out of business and you may lose your money as well.
Things to consider before purchasing an extended warranty:
Is there is a deductible for repairs?
Most third party warranties have deductibles but extended factory warranties do not typically have a deductible for repairs. This means if you need something repaired and the warranty covers it, you may be paying anywhere from $50 to a few hundred dollars for the repair. It’s probably still cheaper than the actual cost of the repair if you don’t have the warranty, though. Also, there are “per visit” and “per repair” deductibles. They sound similar, but a “per visit” deductible means you would pay, for example, $100 per visit even if you need three repairs done. A “per repair” deductible would require $100 for each of those three repairs even if they are completed on the same visit.
What repairs are covered and not covered?
Even a bumper-to-bumper factory warranty does not cover everything. The warranty will not cover "wear" items such as tires, windshield wipers and brake pads. Also, if the vehicle has been driven in a way not intended by the manufacturer, the warranty might not be honored. You should always research the company and read any available literature to learn what is and isn’t covered.
Will your local dealership’s service department accept the warranty?
Not all dealerships accept third party warranties. If you have an OEM warranty, such as Toyota Care, any Toyota dealership should accept it. But the third party companies are where the gray areas may exist. We recommend calling your local service center to see if your warranty is something they accept.
How long do you plan on keeping the car for?
It’s worth considering how long you’ll keep the car for. Let’s say you have a car with a factory warranty of 4 years or 50,000 miles but only plan on keeping the car for 3 years and you typically average about 15,000 miles a year, then an extended warranty won’t likely serve you any good.
When does the warranty start?
You should find out when the warranty would actually start. Is it at the end of the factory limited warranty or at the end of the powertrain warranty? Again, it may depend on the warranty and what exactly it covers.
How much should I pay for an extended warranty?
Edmunds.com does not have pricing information on extended warranties. They are usually negotiable and you can sometimes find online forum discussions where people will post how much they paid for a specific warranty.
Should I purchase an extended warranty when I buy the car or should I wait?
You can purchase an extended warranty when you purchase your vehicle or at a later time. The major benefit of purchasing it when you buy the car is the ability to add the purchase price into your total amount financed. This means you’ll be paying a little more each month rather than a lump sum for the additional warranty at a later date.
Some manufacturers offer 0.0% APR financing on warranties, even when the vehicle is being purchased at a higher rate. Usually the bank will ask for 10% down but in turn will offer 0.0% APR for 12-18 months on the remaining warranty cost (manufacturer and third party companies alike also often offer this 0.0% APR offer). This is a way to think about getting the warranty, and still be able to finance it if not done at point of sale.
Within the first 12 months or so of ownership, the price will probably stay the same. But after the 12 month mark, it’s likely that the manufacturer will impose a surcharge for that same warranty and an even higher surcharge if the warranty is purchased after the 24 month mark, or the 36. Every 12 months incurs a surcharge. This is in addition to the periodic price increases that could happen.
For additional information on extended warranties, we recommend the following articles:
http://www.edmunds.com/auto-warranty/third-party-extended-warranty-scams.html
http://www.edmunds.com/auto-warranty/how-to-get-the-best-price-on-an-extended-car-warranty.html
http://www.edmunds.com/car-buying/secrets-of-an-ace-negotiator-part-ii.html