Should I buy an extended warranty on a new car?
In many cases, it makes sense to wait
If you’re buying a new car from the dealer, you’ll inevitably be asked to buy an extended warranty.
On the face of it, buying an extended warranty for a brand-new car may not make much sense. After all, your manufacturer’s warranty covers you for at least the first three years, and you can always buy an extended warranty later.
But is there a hidden advantage to buying an extended warranty when the car is still brand-new? And when would it actually make sense to buy an extended warranty on a new car?
In most cases, it isn’t worth buying an extended warranty on a brand-new car since you’re already covered by your factory warranty for at least three years. Plus, waiting until your factory warranty is close to expiring gives you time to save up, research warranties and compare quotes. In the meantime, the cost of an extended warranty often remains steady.
Jump to insightIt might be worth buying an extended warranty on a brand-new car if you plan to own it for a long time and the car you’re buying has a short factory warranty along with a poor or unknown reliability record.
Jump to insightWhen 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.
Jump to insightIs it worth buying an extended warranty for a new car?
In most cases, it probably isn’t worth buying an extended warranty on a brand-new car. Here are three reasons why:
1) You’re already covered by your manufacturer’s warranty for at least three years.
- A bumper-to-bumper warranty covering virtually everything but wear-and-tear parts (brake pads, clutches, etc.), cosmetic items and maintenance
- A powertrain warranty covering the engine, transmission and drive axle(s)
Some manufacturers offer much more than the industry minimum, though. The best new car warranty as of 2023 is a three-way tie between Hyundai, Mitsubishi, Kia and Genesis, which all offer five years/60,000 miles of bumper-to-bumper protection and 10 years/100,000 miles of powertrain protection.
Sometimes, a dealer will tell you that its extended warranty covers critical gaps left by the factory bumper-to-bumper warranty. This is little more than a sales tactic. Most factory bumper-to-bumper warranties are extremely robust, and even the tiny gaps they leave probably aren’t worth paying $2,000-plus to fill.
In a similar vein, if your vehicle has a factory powertrain warranty that outlasts your bumper-to-bumper warranty, a dealer may try to sell you on a “wrap” policy that fills the gap in coverage created when the latter expires. A wrap policy offers very similar protection to a bumper-to-bumper extended warranty, so the same pros, cons and conclusions elsewhere in this article apply.
2) You may not need the coverage by the time your factory warranty expires.
In some cases, dealers will insist that purchasing an extended warranty will add resale value to your vehicle. That way, even if you choose to sell it before the factory warranty runs out, you’ll get some of your investment back. However, we were unable to find any data to back up the claim that extended warranties add significant resale value to used vehicles.
Some warranty agreements may allow you to cancel within roughly 30 or 60 days for a full refund or after that point for a partial refund. In the latter case, your refund will typically be prorated based on your remaining warranty term, minus any paid claims and an administrative fee.
That said, we’ve read numerous reports stating that early cancellation was a long and tedious process that may take more than a simple email request. So, in addition to verifying that cancellation is possible, you may want to read customer reviews to see which providers allow you to break things off easily.
3) It may not hurt to wait.
Technically, that last one is true. The cost of an extended warranty can sometimes rise as your car ages, even while it’s still under the manufacturer’s warranty. But by how much?
To find out, we collected sample quotes for two sets of vehicles — two brand-new, two nearing the end of their bumper-to-bumper warranties — from two extended warranty companies.
| Vehicle | Endurance quote | olive quote |
|---|---|---|
| 2020 Ford F-150 | $2,976 | $2,606 |
| 2023 Ford F-150 | $2,976 | $1,603 |
| 2019 Audi A3 | $3,383 | $8,204 |
| 2023 Audi A3 | $3,383 | $4,375 |
As you can see, the cost of an extended warranty from olive did rise significantly as the vehicle aged. But Endurance didn’t seem to care how old our vehicle was as long as it was still covered by the factory warranty.
This is a small sample, but it goes to show that the cost of an extended warranty doesn’t always rise with time. That means waiting several years to decide may not cost you extra.
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.
Is it ever worth buying an extended warranty on a new car?
There are some times when buying an extended warranty for a new car is worth it, though.
“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,” Christopher Lawrence, founder of AutoAcademics, told us.
In other words, it might be worth buying an extended warranty on a brand-new car if:
- 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.
But, for most buyers, it makes sense to wait and evaluate your options later.
» MORE: How to choose an extended car warranty
Pros and cons of extended auto warranties for new cars
Considering the average cost of an extended warranty, it’s crucial to weigh the pros and cons before spending another big chunk of cash.
Pros
- Helps cover the costs of repairs after the manufacturer's warranty expires
- Provides peace of mind
- Often cheaper to buy while your car is new
Cons
- Of little use while the factory bumper-to-bumper warranty is active
- May never be needed
- Probably won’t add value to your vehicle when you sell it
What to consider before buying an extended auto warranty for a new car
If you’re still on the fence, here are some additional factors to consider before getting an extended warranty for your new car:
- How long is the manufacturer’s warranty? If your factory bumper-to-bumper warranty lasts four, five or even six years, you may not benefit from an extended warranty as much. It’s also worth keeping the length of your factory warranty in mind if your extended warranty term is measured from your vehicle’s in-service date (when you took delivery). That means your “seven-year/100,000-mile” extended warranty may only add three or four years of coverage.
- How long do 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 probably isn’t a good investment. On the other hand, it could be worth it if you plan to drive the thing until the wheels fall off.
- What does the extended warranty cover? Exclusionary extended warranties (often called “Platinum” or “bumper-to-bumper” plans) tend to provide solid coverage. However, lower-tier warranties usually only cover 20% of the car or less. We asked a Lexus dealer if these lesser plans only exist to make Platinum look better, and he said, “Pretty much.”
- How reliable is your vehicle? 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.
Rolling the cost of an extended warranty into your loan means you'll end up paying more in interest.
- What are your payment options? Some extended warranties must be paid in full upfront, while others let you pay monthly. Consider which option might work best alongside your new auto loan payments.
- Who is the warranty provider? The extended auto warranty industry isn’t as well regulated as others. That’s why choosing the right provider can mean the difference between getting claims paid or dealing with lots of frustration.
- What is the warranty provider’s reputation? A great way to vet potential providers is to read reviews from customers who discuss their actual claims. These are customers who have seen the providers’ “true colors” and discovered just how efficient and dependable they are when it counts.
Ideally, you want to see a history of happy customers who have had their claims approved and received good customer service.
“They're good people and we get no hassle whenever I have a claim,” William, a ConsumerAffairs reviewer in Georgia, said of his auto warranty company. “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.”
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
Alternatives to extended auto warranties
There are a few alternatives to purchasing an extended auto warranty. You can opt for self-funding repairs, where you save up an emergency repair fund for future needs.
Also, make sure you take the time to consider the car. If you’re thinking about a new car with a weak warranty, maybe you can find a slightly used car with a better warranty left. Finally, you can also look into purchasing mechanical breakdown insurance that provides similar coverage to that of an extended warranty.
FAQ
What does an extended warranty cover?
The parts an extended warranty covers will depend on which plan you choose. A bumper-to-bumper plan can cover over 5,000 parts, while a powertrain plan can cover as few as 50 parts.
» LEARN: What does a car warranty cover?
How much do extended warranties cost?
The average cost of an extended warranty is around $2,500, but that price varies significantly based on your vehicle, warranty provider and coverage term. For example, our sample quotes above ranged from roughly $1,600 to $8,000. That’s why it often pays to shop around.
How long can extended warranties last?
Some extended car warranties can last up to 10 years, although these are significantly more expensive.
Can you purchase an extended auto warranty later?
You don’t have to buy an extended warranty at the same time you buy your car, and you can even buy an extended car warranty 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.
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 powertrain coverage — it may be smart to wait until your current one is about to expire before you buy an extended warranty.
