With the cost of new and used cars near record highs, motorists are holding onto their cars and trucks for longer periods of time before trading them in.
The automotive research firm iSeeCars.com analyzed more than 5 million vehicles sold by their original owners to identify which cars are kept the longest. The average length of car ownership for the top 10 models ranges from 9.7 to 11.4 years. That’s 14.9% to 35% longer than the overall average of 8.4 years.
Cars in that age range typically need more maintenance to keep them on the road, making an extended service contract, or “warranty,” more important. However these products can vary widely in what they cost and cover, so consumers should do some research before making a purchase.
The ConsumerAffairs research team came up with these facts and figures about extended auto warranties:
In 2022, the market size of the auto extended warranty providers industry was $20.5 billion, 2.7% decline year-over-year. The industry has declined faster than the U.S. economy overall.
The average cost of owning and operating a new vehicle in 2023 is $12,182 per year ($1,015 per month). This is up significantly from 2022, when the average annual cost was $10,728, or $894 monthly.
There are 342 extended warranty providers in 2023.
Vehicle owners can expect to pay, on average, anywhere from $2,000 to $5,000 for their extended warranty.
What it covers
When motorists purchase an extended warranty, it covers some repairs and part replacement. But what it covers can depend on the warranty itself.
When a car is new it generally comes with a three-to-seven-year warranty from the manufacturer. When it expires, owners can sometimes extend the original warranty. It typically comes with a monthly or annual fee.
The extended warranties most people are familiar with are sold by third parties. They may be offered as drivetrain or powertrain warranties, but may also include comprehensive exclusionary plans to cover more components. The more these policies cover the more they may cost.
There can be limits to the age of the vehicle
Most can be renewed as long as the warranty provider deems the vehicle eligible. Like a typical insurance policy, these extended service contracts usually require a deductible before the product pays for repairs.
In the past, some car owners may have purchased coverage for peace of mind. Today, with the high cost of vehicle repair, they could prevent the owner from going deep into debt.
When the Bureau of Labor Statistics reported the Consumer Price Index (CPI) for September, it noted that car maintenance and repair costs were up 10.2% over the last 12 months.
Not only is a visit to an auto repair shop pretty expensive, many people find it unpleasant.
A study by American Trucks found that a third of car owners believe they had been cheated on at least one occasion when they had their vehicles repaired. The survey found that driving an expensive car made you more likely to be scammed.