Pros and Cons of Extended Auto Warranties

Weighing the pros and cons of an extended auto warranty

Let’s go over the pros and cons of extended auto warranties to help you decide if one is right for you.

Advantages of extended warranties

First, let’s go over the main advantages of buying an extended auto warranty.

1. It can help cover costly repairs

Car repairs aren’t cheap. Data from Cox Automotive shows that the average car repair costs about $550. However, some fixes, like a head gasket replacement, can cost thousands.

If you have an extended auto warranty, your cost for even a large repair could fall to $100 or less, depending on your deductible. That’s a relief, whether you’re looking to reduce your overall ownership costs or protect yourself from a single catastrophic bill.

Did you know?

Only 41% of drivers have enough saved to cover a $1,000 repair bill, according to a ConsumerAffairs survey.

» RELATED: Car repair statistics 2025

2. Many plans include valuable secondary benefits

Outside of repair bills, there are plenty of secondary costs associated with having your car out of action. You may need a tow truck, a rental car or even a hotel room if you’re stranded far from home.

Protection plans from Endurance include a year of 24/7 roadside assistance. Some providers also bundle trip‑interruption coverage and rental car reimbursements.

3. You can choose your level of coverage

Only pay for the level of protection that makes sense for your car and budget.

Extended warranties aren’t one-size-fits-all. If you drive an old truck and only worry about keeping it running, a powertrain warranty covering your engine, transmission and drive axles costs significantly less than comprehensive coverage.

And if you want something in between that covers your sensitive electronics, many providers offer a “Silver” or “Gold” plan that’s still cheaper than their top-tier options.

4. Having coverage can provide peace of mind

Some drivers like the reassurance they get from having coverage even if they never file a claim.

For instance, Carlos in California got an extended warranty for his high-mileage Ford with around 120,000 miles. “It gave me that extra peace of mind for another three years,” Carlos told us. “Everything has been great. All of it was very easy, efficient and affordable.”

Drawbacks of an extended auto warranty

Extended auto warranties aren’t right for everyone. Before you buy an extended auto warranty, consider the disadvantages.

1. Warranties often cost more than they save

The average extended auto warranty costs around $1,000 per year of bumper-to-bumper coverage. RepairPal, a site that compiles automotive repair data, estimated that the average vehicle costs around $900 per year to maintain and repair.

Because many cars don’t need enough repairs to offset the cost — especially when total plan prices can exceed $5,000 over several years — extended warranty companies typically profit from drivers who rarely file large claims.

Average extended warranty costs by coverage type

Basic powertrain plans are often around 50% cheaper than bumper-to-bumper plans. As you might expect, mid-level Gold/Silver plans fall somewhere in between.

Costs vs. benefits

You need the right deal and situation to break even. An extended warranty can still be worth it for peace of mind or protection from a big surprise repair, but it’s not a guaranteed money-saver.

Example: Extended warranty prices for a 2019 Chevy Equinox

2. Even the most robust bumper-to-bumper plan has exclusions

There’s an old industry saying that auto warranties “cover most of the parts, some of the time.” But even a top-tier bumper-to-bumper coverage won’t cover costly repairs related to:

• Cosmetic parts
• Glass and body panels (unless they rust)
• Wear-and-tear parts (like brake rotors and tires)
• Any parts listed under “Exclusions” in your contract
• Parts that failed due to neglect (like missing an oil change)
• Repairs needed due to damage (like from a collision) or misuse/abuse (like off-roading, racing or towing too much)

Plus, extended auto warranty companies aren’t always upfront about precisely what is — and isn’t — included in your contract, so it’s best to read your chosen plan carefully before committing.

3. Plans can be difficult to cancel

Most extended auto warranty companies should give you a full refund if you cancel a plan within 30 days and a partial refund after that. Still, many ConsumerAffairs readers say it’s hard to cancel these plans.

“Cancelling was a nightmare,” Sharry in Utah told us. “I had to call multiple times, their customer service is outright disrespectful. The guy actually hung up. I got so fed up I eventually called my bank and cancelled my credit card so they would stop charging it. Turns out, even with a cancelled card they were still adding up the costs every month and mailing it. After multiple tries, and getting the runaround, and being on hold so many times, someone was honest enough to tell me how to REALLY cancel.”

Before signing up for an extended warranty, get the company’s cancellation policy in writing and research to avoid the worst extended auto warranty companies.

4. Scams are common in the industry

The extended auto warranty business is full of aggressive sales tactics that can look real but aren’t. The Federal Trade Commission (FTC) warns that scammers often call or text people, pretending to know details about their cars. They pressure people to buy fake or overpriced service contracts.

Many of these scammers ask for money or personal info before showing the full contract. This is a big red flag.

Unlike traditional insurance, extended warranties — also called vehicle service contracts — aren’t heavily regulated. Dealers can add big markups, sometimes thousands of dollars. There’s also a risk that the company could go out of business, leaving you with unpaid claims.

Pro tip

To protect yourself, always ask for the full contract in writing. Check that the company can actually pay claims and research its reputation. Look for clear cancellation terms and never agree to buy a warranty during a sales call.

» READ MORE: How to choose an extended car warranty

How extended car warranties work

Make sure your provider approves the repair before work starts.

Here’s how an extended auto warranty works: If something breaks on your car due to a factory defect, you roll your car into the repair shop and ask the mechanic to file a claim with your warranty provider. If your claim is approved, your provider covers the repair bill (minus your deductible).

Most extended warranties last for a set time or mileage. Basic plans usually cover about 3 years or 36,000 miles, whichever comes first. More complete plans can last up to 7 years or 100,000 miles. When picking a plan, think about how long you’ll keep your car and how much you drive each year.

What does an extended car warranty cover?

Car warranties only cover unexpected repairs needed due to factory defects.

A car warranty usually covers major components like the engine, transmission, air conditioning and electrical systems. The important thing to remember is that plans only help pay for repairs when your vehicle breaks down due to mechanical or electrical failure.

There are two main types of car warranty coverage: stated-component (lists covered parts) and exclusionary (covers everything except what’s excluded).

Types of car warranties

Exclusionary (“bumper-to-bumper”) plans offer the most coverage, while powertrain and drivetrain plans protect the major systems that make your car run. Midtier plans fall in between, covering more than powertrain but less than full exclusionary coverage.

• Powertrain plans cover repairs to your engine, transmission and drive axle(s).
• Silver/Gold plans add coverage for your electronics, cooling system and maybe a few other components.
• Platinum plans are essentially bumper-to-bumper plans, covering over 90% of the parts on your car except for a few specific exclusions. (That’s why they’re also called “exclusionary” plans.)

Platinum plans are the best relative value by far. That’s because Gold/Silver plans typically only cover around 10% of the 5,000-plus parts on a vehicle. Powertrain plans cover less than 5%. Platinum plans can cover around 90% of a vehicle’s parts. That means you’re usually getting the most coverage for your money with a bumper-to-bumper warranty.

What extended car warranties don’t cover

Warranties don’t cover damage from accidents, weather, vandalism, misuse or neglect. That’s where your car insurance comes in. They also exclude routine maintenance, normal wear and tear and cosmetic or body panel repairs.

Common coverages and exclusions

Most auto warranties exclude wear-and-tear items like tires, brakes and any damage due to neglect or misuse. Always read the “Exclusions” section of your contract carefully.

» LEARN MORE: Where can you use an extended auto warranty?

Alternatives to extended warranties

Here are some of the best alternatives to buying an extended car warranty, especially for a used car:

• Open a repair-savings fund: Sometimes, it makes financial sense to save the money you would have spent on an extended warranty and put it in a savings account exclusively for future repairs.
• Buy a reliable car and keep up on regular maintenance: Choosing a model with a good reliability record and staying current with oil changes, inspections and minor repairs will help avoid big breakdowns down the road.
• Consider mechanical breakdown insurance: Mechanical breakdown insurance (MBI) is usually available only for newer, low-mileage cars, and isn’t available in every state. MBI is often — but not always — easier to buy online and cancel anytime with prorated refunds. The best mechanical insurance companies offer similar benefits compared to extended coverage.

Bottom line: Is an extended auto warranty right for you?

Assuming your vehicle is no longer under factory warranty, an extended auto warranty is generally more likely to be worth it if you either:

1. Drive a car that is less reliable than the average vehicle
2. Can’t afford a big, unexpected repair bill
3. Expect to spend more on repairs than your warranty costs
4. Don’t mind paying a few thousand dollars just for extra peace of mind

“If an individual does not keep cars for long, the standard warranty would likely be all they need,” Bono, the lecturer at Auburn University, said. “However, if they plan to keep it longer or if it is known to be unreliable or have expensive repair costs, it would likely be a beneficial purchase.”

If you decide that an extended warranty is right for you, check out our picks for the best extended car warranty companies.