Should I Buy an Extended Warranty on a New Car?

When it’s worth buying an extended warranty for a new car

Christopher Lawrence, founder of AutoAcademics, said extended warranties are generally only worth considering if you can meet several conditions.

“Extended warranties on a new car might be worth considering if the car is all new with no previous versions sold or if it has an entirely new powertrain that has not been sold previously on the market, [and] if you plan on keeping the vehicle longer than the factory warranty period.”

So, buying an extended warranty for a new car can be worth it when:

• You plan on owning the vehicle well beyond the factory warranty period
• The vehicle has either a poor or totally unknown reliability record
• You want the lowest possible price on an extended warranty

When it’s not worth buying an extended warranty

In most cases, it probably isn’t worth buying an extended warranty on a brand-new car.

You’re already covered by your manufacturer’s warranty

Most new cars sold in the U.S. come with a manufacturer’s warranty that lasts for at least three years or 36,000 miles, whichever comes first. A manufacturer’s warranty is typically split into two parts:

• Bumper-to-bumper warranty: A bumper-to-bumper warranty covers virtually everything but wear-and-tear parts like brake pads and clutches, cosmetic items and maintenance.
• Powertrain warranty: A powertrain warranty covers the engine, transmission and drive axle(s).

Some manufacturers offer much more than the industry minimum, too. For example, the best new car warranty is a four-way tie between Hyundai, Mitsubishi, Genesis and Kia, all of which offer five years or 60,000 miles of bumper-to-bumper protection and 10 years or 100,000 miles of powertrain protection.

You want time to think about it first

Some car dealers may pressure you to purchase an extended warranty now instead of later, saying prices will increase over time. But you don’t have to buy an extended warranty at the same time you buy your car, and you can even buy it after your new car's manufacturer warranty runs out. Just bear in mind that costs may increase in some cases, and warranty providers may have restrictions based on your car's age, model and mileage.

Still, your manufacturer’s warranty gives you time to shop around, compare coverage and prices, get a feel for your vehicle’s reliability and simply prepare for another large purchase. Without the pressure to act now, you can research your purchase and make a smarter decision.

Pros and cons of extended auto warranties for new cars

Considering how much extended warranties cost, it’s crucial to weigh the pros and cons before purchasing a policy.

» MORE: Pros and cons of extended auto warranties

What to consider before buying an extended auto warranty for a new car

Here are some additional factors to consider before getting an extended warranty for your new car.

Current manufacturer’s warranty

If your factory bumper-to-bumper warranty lasts four, five or six years, you may not benefit from an extended warranty. For example, if the extended warranty you’re considering is measured from your vehicle’s in-service date, or when you took delivery, a seven-year or 100,000-mile extended warranty may only add a few years of coverage.

How long you plan to own the vehicle

If you’re not sure whether you’ll still have the car in four or five years, an extended warranty likely isn’t a good investment. However, it could be worth paying for if you plan to drive it until it falls apart.

Your vehicle’s reliability

Research your vehicle’s expected reliability ahead of time. Are the cost and frequency of unplanned repairs higher than average? If so, an extended warranty might offer valuable protection.

Extended warranty coverage tier

Exclusionary extended warranties, often called platinum or bumper-to-bumper plans, tend to provide solid coverage. However, lower-tier warranties usually only cover about 20% of the car or less.

Payment options

Some extended warranties must be paid in full upfront, while others let you pay on a monthly basis. Consider which option might work best alongside your new auto loan payments.

Warranty provider and its reputation

Choosing the right extended auto warranty provider can mean the difference between getting claims paid or dealing with lots of frustration. A great way to vet potential providers is to read reviews from customers who discuss their actual claims and experience.

For example, William, a ConsumerAffairs reviewer in Georgia, said the following about Endurance: “They're good people and we get no hassle whenever I have a claim. I had a claim for the radio and Endurance took care of it. They're the real deal. I have already got four of my family members signed up with them.”

Ideally, you want to see a history of happy customers who have had their claims approved and have received good customer service. However, if you see a consistent theme of angry customers who report that the company didn’t hold up its end of the deal, you might want to stay away.

» LEARN: How to avoid the worst extended auto warranty companies

Where can I buy an extended auto warranty?

Regardless of where you buy, always read the fine print before purchasing a policy. Verify what’s covered, how claims are processed and whether the provider has a solid reputation for paying claims promptly.

When you’re ready to purchase an extended auto warranty, you have several options to consider.

Through the dealership

This is the most common option offered when buying a new car. While convenient, dealer-sold warranties are often more expensive and may include markups. If you go this route, be prepared to negotiate.

Directly from the manufacturer

Some automakers offer their own extended warranties, which tend to integrate seamlessly with your vehicle’s existing coverage. These warranties often provide more comprehensive protection but may be limited to newer vehicles still under the original warranty.

Third-party providers

Independent extended auto warranty providers that specialize in extended warranties often offer a range of coverage levels and pricing options.

Financial institutions and credit unions

Some banks and credit unions offer extended warranty plans as a part of their financial services. These may come with competitive rates and flexible payment options, so check with your institution before buying elsewhere.

» MORE: How to choose an extended car warranty

Alternatives to extended auto warranties

There are a few alternatives to purchasing an extended auto warranty.

• Self-funding repairs: Set aside money in an emergency repair fund to cover future vehicle expenses without relying on a warranty.
• Buy a used car with an existing warranty: If you’re considering a new car with a weak warranty, look for a slightly used car that still has a strong manufacturer’s warranty remaining.
• Mechanical breakdown insurance: Mechanical breakdown insurance offers similar coverage to an extended warranty and may be available through your auto insurance provider.

Bottom line

While it may be tempting to pay for an extended warranty that extends 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, which typically lasts for at least three years or 36,000 miles for bumper-to-bumper coverage and even longer for powertrain coverage, it may be smart to wait until your current coverage is about to expire before considering an extended warranty.

However, it might be worth buying an extended warranty on a brand-new car if you plan to own it for a long time and if the car you’re buying has a short factory warranty along with a poor or unknown reliability record. When browsing extended warranty options, be sure to consider how much you expect to spend on repairs without a warranty, the reputation of your warranty provider and your warranty’s cost, coverage and payment schedule.