Are Extended Warranties Worth It?

If you’re considering a new vehicle purchase or made a recent purchase, here’s advice on extended warranties.

Be forewarned that the dealer will push you to purchase an extended warranty at the time of vehicle purchase, but many manufacturers allow you to defer purchasing a warranty until the basic warranty coverage period ends. Toyota, for example, offers a three-year/36,000-mile basic warranty which is how long you would have to make a decision. The one advantage of buying the warranty when purchasing the vehicle is it would allow you to roll the price into the vehicle loan. But by waiting you also have a long time to figure out if your vehicle is trouble prone.

You may be able to find a better price on an extended warranty by buying it from another dealer; there’s no requirement to buy from the dealership where the car was purchased. Just pick up the phone and make some calls, or go online and find out where others with your car are buying theirs. However, stay with an extended warranty from your vehicle’s manufacturer instead of a third party offering because those companies are prone to going out of business.

Whether an extended warranty is worth it is a very individual decision, but with vehicles having so many electronic safety features they may be worth consideration. Also be aware that if you are being offered a five-year/60,000-mile extended warranty, you need to realize that the start date of the extended warranty coverage is the original in-service date of the vehicle. So in our example, since you have a basic three-year warranty when you originally purchased the vehicle and since the extended warranty runs concurrent with the original vehicle warranty, you are really only purchasing a two-year warranty.