Should I buy an extended warranty on a new car?

Buying an extended auto warranty for a new car

An extended car warranty can help you protect your financial well-being by covering repairs if a covered part fails. There are a few important factors to consider when shopping for an extended warranty for a new car.

Look at the car's manufacturer's warranty

When evaluating extended warranties for your new car, make sure you understand exactly what coverage the manufacturer's warranty offers. Powertrain warranties may provide limited coverage, and a wrap warranty can help you supplement the manufacturer's powertrain warranty.

Consider how long you'll drive the car

Many car manufacturers offer a standard warranty that covers at least 36,000 miles or three years.

Think carefully about how long you may drive the car. While many manufacturers offer a standard warranty covering 36,000 miles or three years (whichever comes first), others offer more robust coverage.

For example, if you purchase a new Hyundai, the bumper-to-bumper warranty stretches to five years or 60,000 miles. The powertrain warranty is good for 10 years or 100,000 miles. If you know you'll replace the car before the warranty is up, an extended auto warranty may not be the best use of your money.

Find out what the warranty covers

Most warranties do not cover maintenance items (brakes, tires, oil changes, etc.), but some do. It's important for the buyer to consider whether they're likely to use the warranty.

While some warranties cover routine repairs and even some maintenance, many have a limited number of coverages. Before you purchase an extended warranty on a new car, go through the entire list of what's covered.

Unless the extended warranty covers some common repairs or offers coverage for routine maintenance not covered by your car's manufacturer warranty, it won't do you much good.

Think about the vehicle problems you might expect

Consider how reliable the make and model of the vehicle is, whether it’s known to have specific problems and whether the car has a lot of high-tech components that might fail.

Each vehicle model and make has parts and systems that tend to fail more often than on a competitor's model — some cars may be known to have transmission issues, while others might have climate control units that are prone to fail.

Even if understanding a vehicle's potential issues doesn't dissuade you from making a purchase, you can avoid expensive repair bills with an extended warranty that covers known potential problems.

Consider other drivers' experiences with extended car warranties

For drivers who never use their extended auto warranty, the additional coverage is a waste of money. While every extended vehicle warranty comes with terms and fine print, many people don't take time to read the rules and understand how to file a claim, get the repairs done under the terms of the contract and receive reimbursement for the cost of fixing the car.

In many cases, by the time you pay the premium for the warranty coverage, pay the deductible and cover any costs not included with your warranty, you'd save money by paying the repair bill without coverage.

There's no federal regulation on extended car warranties

Unlike many other products and services consumers pay for, an extended car warranty isn't regulated closely by all states. So, if you have problems with a company that won't pay a claim, you may have difficulty getting help.

Can you purchase an extended auto warranty later?

Yes, you can buy an extended car warranty after your new car's manufacturer warranty runs out. Third-party sellers offer many options for extended warranties, although they may have restrictions on the car's age, model and the number of miles on the odometer.

Rolling the cost of an extended warranty into your loan means you'll end up paying more in interest.

In some cases, it pays to wait until your vehicle's manufacturer warranty is close to expiring. While many dealerships will try to sell you an extended warranty by rolling the price of the coverage into your total loan amount, it's smart to avoid paying interest on a warranty that may not be as useful as you hope.

It doesn't make sense to pay for something (plus interest) today that won't do you any good for at least three years, especially if it's something as easy to get as an extended car warranty.

Waiting to buy an extended car warranty gives you the chance to shop around a bit as well. You'll have time to compare coverage and prices; research common repairs specific to your vehicle's year, make and model; and decide which coverage may provide you with the best possible return on your investment.

Pros and cons of extended auto warranties for new cars

It's crucial to evaluate the pros and cons of buying an extended warranty on a new car. Here are a few things to consider:

Bottom line

While it may be tempting to pay for protection that reaches beyond a manufacturer's warranty on a new car, it doesn't make sense in many cases. Since your car's main systems and parts are covered under the manufacturer's warranty — typically for at least three years or 36,000 miles for bumper-to-bumper coverage and even longer for the powertrain — it may be smart to wait to buy an extended warranty until your current one is about to expire.