Should You Buy an Extended Warranty For Your New Car?
As spring approaches, new car buyers may be tempted by the idea of an extended warranty on their vehicle. However, with 55% of those who purchased an extended warranty saying they didn’t use it (according to a Consumer Reports survey), this may be a big purchase that isn’t necessary. A lot of research is needed before deciding if an extended warranty is right for you.
Whether or not to buy an extended warranty depends on the type of vehicle you drive, your financial situation and how long you plan to keep your car. If you have a car with a history of breaking down just after the manufacturer’s warranty expires or if you know you’ll have to finance it, a warranty can provide peace of mind.
Many new car manufacturers offer their own warranty extensions for a fee at the time of sale, called a service contract. Typically, these warranties mimic the original warranty and last for a specific number of years or miles. These are a good option because they’re usually less expensive than third-party extended warranties. However, they also restrict you to a dealership for repairs, so it’s important to find out what is and isn’t included in the coverage.
If you do decide to purchase a warranty extension, make sure it’s through a reputable company. Look for customer reviews, BBB complaints and a record of paying out claims. Also, learn how the plan’s deductible works, as some require you to pay for the repair upfront and then be reimbursed by the provider. Another factor to consider is how long the coverage lasts (measured in years and miles) and if there is a transferability option in case you’re planning on selling your car.
You should also know if your car’s existing warranty is still in place, as some companies may require a waiting period before the extended warranty kicks in. This is a way for the company to prevent people from buying a warranty just to sell their car before it’s eligible for coverage.
Most extended warranties are refundable, but you should check to see how long the window of opportunity is. For example, some plans have a 30-day money-back guarantee and others allow you to cancel after one year of service. Some are even transferable if you sell your car, which can boost its residual value. Be wary of lenders that pressure you to purchase an extended warranty as a condition of financing your new vehicle, as this is likely a scam. The only legitimate reason a dealer would ask you to do this is if they were trying to sell you a service contract. If they’re only interested in making sales, it’s best to shop around for other financing options.new car extended warranty
