Should You Get an Extended Warranty ?
Purchasing a new car is a big investment and a tough decision to make when you are busy. You have work and other obligations to deal with and don’t have time to research the best buy. The car dealerships are there to streamline the process but may take advantage of your ignorance and alacrity.
They do this by padding up the bill with all sorts of overpriced extras. Among those extras, the financing specialists tend to push all sorts of additional protections and coverage down your throat:
- Roadside assistance
- Gap insurance
- Extended warranties
- Tire protection
- Pre-paid service plans
- Satellite radio
- Detailing services
- And other stuff …
They have the calculator there to tell you how little it will add per month when spread out over a 60-month auto loan. When they put it that way, it can seem like sacrificing a few dollars a day saves you from a lot. However, the dealerships are not always there to make the best deal for you. So, you should always compare plans and decide whether the dealership’s offer is really the best choice.
Don’t fall for the high-pressure situation when they have you tied up in their dominion. You are always free to walk away and compare the numbers. In the worst-case scenario, the competitor’s price can be used to negotiate a better rate if you do decide on dealership extras.
What Are the Main Types of Warranties?
Warranties are usually broken up into two main categories. Most brands focus on the first type, a robust 5- to 10-year powertrain warranty that covers the following:
- Engine heads
- Engine block
- Fuel injection
- Fuel-mapping sensors
- Ignition components
- Powertrain-management computers
- And other parts essential to their operation
The bumper-to-bumper warranty is the second type that is often limited to a mere 3 to 5 years. This warranty covers all the body system components such as the following:
• fog lights
• turn signals
• safety systems
• power windows
• power doors
• power mirrors
• heated seats
• trunk lock
• Power moonroof
• And other body control systems
The only thing that these warranties won’t cover is normal wear and tear to the following:
• And other moving parts
Warranties will also exclude any cosmetic or body damage that you incur on your own. Now, if the paint all peels off for no reason, you can expect a replacement.
The warranties will also have some additional obligations that prevent you from modifying your vehicle. But, you may be able to modify some non-mechanical issue like installing a body kit or seat covers, etc.
The warranty will generally prohibit you from taking the car for service at an unauthorized repair shop. This means that your warranty protections can be voided if you get your oil changed at the zippy lube around the corner. In addition, the warranty often requires you to have regular maintenance performed at an authorized dealership. This requires you to pay for pricey factory parts that are marked up outrageously.
These factory warranties are important because they act as a safeguard for lenders to prevent you from defaulting on your loan. For example, you can enter into a 5-year financing plan on a vehicle that develops a no-start electrical issue. It may cost endless sums of money to pinpoint and solve.
You may ultimately decide that it is impossible to do anything other than ceasing payments. It may be smarter to take a hit on your credit report just so that you can buy another vehicle and retain your job. As a result, dealerships have to provide these warranties to ensure a good reputation with lenders.
What is an Extended Warranty?
An extended warranty, in the general sense, is an extension on the protections available to you when you buy a new auto. Opting for an extended warranty requires you to pay thousands of dollars for additional protections above the standard coverage. An extended warranty is usually sold at car dealerships with brand-new vehicles. The basic factory powertrain warranty coverage on such vehicles may be as short as 36,000 miles or 36 months. However, extended warranties come in all shapes and sizes and may even be customizable to the needs of each customer.
How Much Do Extended Warranties Cost?
The average extended warranty has an entry price of $2,000. When you purchase this from a dealership, however, you may pay $500 or more in maintenance during a two-year period. On top of this, there are different deductibles that can lower or increase the price of an extended warranty. So, if you have to have a $700 repair and your deductible is $200, you have only gained free oil changes.
Furthermore, you have to read the fine print about what all is covered. Find out whether the company will reimburse your payments or pay the mechanic directly. You should also ask whether you are able to shop around for a competitive price on repairs. Some companies may only allow the service to be performed by authorized repair shops.
On top of this, you have to consider how many times you might use the warranty during the coverage period. If your deductible is too high, you may wind up with very little benefit. Of course, a plan with a low deductible will cost more in general. Finally, you should also find out whether you need pre-approval for repairs and how coverage is determined.
What Are the Different Types of Extended Warranties?
Extended warranties are broken up into two main categories. You have those offered by the dealerships and the competitive packages offered by third-party companies. The factory warranties continue your obligations to have all the service, maintenance, and repairs carried out at an authorized factory service center. A third-party warranty generally allows you to have your vehicle serviced at any repair shop.
Both warranties may have a deductible and a cap that is negotiable just like car insurance. In either case, drivers must speculate about how much protection they may need. They must also consider the resale value of the vehicle at the end of the warranty.
Should You Fix Your Vehicle By Yourself After the Warranty Expires?
The automotive market is changing rapidly. Like all other fields of science, specialization has taken over the trade. Having a car serviced and repaired now requires a lot of specialized tools and training.
You are not going to find the same universal issues occurring in the same manner across manufacturers. Each manufacturer, model, and even production run is prone to incurring highly technical problems. These problems would be impossible to diagnose if you did not know that these issues were trending in a specific line.
For example, the 1.8T turbo engines that were originally being run in Audi and Volkswagen vehicles were poorly engineered. They were designed with an oil sump that was too small for the oil cooling needs of the engine. Dealerships were not properly advising customers of the high-grade synthetic lubricants that they needed to run.
As a result, vehicles that were fitted with this early production oil pan would burn out their bearings. The engines would seize up with as few as 50,000 miles on the clock. This was often due to coking and sludge from the oil burning up in the oil pump pickup screen and oil cooler lines.
For this reason, you should not expect to be able to fix your vehicle by yourself once the warranty runs out. The learning curve and investment into proper tools have become much steeper. If you want to fix your vehicle after the warranty expires, you also need flexibility. You have to keep open the option that your vehicle may require a specialist. Only a specialist may know about the particular problem that you are experiencing.
The dealerships mostly perform maintenance on vehicles and rarely get into the types of repairs that require skill to pinpoint and diagnose. They are happy changing oil, brake pads, and making time on the easy work of brand-new vehicles.
The independent garages that are focused on building a customer base are better suited for repairs. They don’t have to gouge to pay overhead. Their paychecks are often based on making a set quota of work for the day and getting a job done in a reasonable budget.
A lot of systems may need to be overhauled as they age. Rubber bushings go bad, steering components and suspension wear out, bearings start to whine. If you don’t keep up proper maintenance as parts start to fail, it can be difficult to figure out what is causing a running condition.
When your vehicle is under an extended warranty, you will stop in for checkups more often. The mechanics will have a greater desire to maintain a good working relationship with you. This means that they will recommend the proper services and help you keep your car going longer. Then, when something breaks that is covered under the warranty, they will have an easier time solving the problem.
Having an extended warranty also works to your benefit when a car shop does shoddy work. This happens when you have a reoccurring problem that should be covered by the repair shop’s warranty. Your warranty provider may be able to help you enforce that coverage so that they do not have to foot the bill again.
Benefits of an Extended Warranty
Repairs Are Expensive: When you purchase an extended warranty, you can hedge against major repair bills. If the transmission clutches burn out or the plastic components inside of it breaks, you are covered at 100,000 miles. If a water pump on your engine seizes, your extended warranty is there to protect you. This altogether will save you from having to enter into a debt treadmill of monthly car payments for the rest of your life. It will also protect you from unpredictable expenses that you can’t afford. Something as basic as a single tooth sheared off a timing belt can destroy an engine in seconds.
Custom Packages: You can research the components in your vehicle that are most prone to failure. This can save you considerable costs on covering items that are known to be well-engineered. You can purchase protection for just the powertrain or add on the extras. You should buy full coverage on a long-term plan when if you are unsure about the quality of the vehicle or it is super expensive to repair.
Stress Elimination: If you are able to pre-allocate the costs of potential failures in advance, this eliminates the speculation of a breakdown. Sometimes, the worry about what can happen in a vehicle can be greater than the reality.
For example, you may put off taking the at trip out of state. You might be worried that your vehicle will breakdown on a month when you are running behind on bills. Taking the worry out life’s biggest expenses is a huge relief. Paying for the risk coverage that you can afford upfront takes a world of stress off your shoulders.
The Downside of an Extended Warranty
Underutilized or Never Needed: The entire concept of warranty extension relies upon probability. Therefore, many drivers who opt for it will never use it or underutilize it. This is the only way that it would be possible to pay for your repairs beyond the purchase payment of the plan itself.
While this may be a gamble, many will find it worthwhile. Just think of the peace of mind and stress elimination it solves. Yet, at the end of the day, you may not care about your car breaking down. Many drivers are happy to buy a new one if it comes to that. If you like brand-new cars, saving thousands of dollars by avoiding an extended warranty is fine.
Holes in Coverage: No matter what warranty that you buy, not everything will be covered. You will still be on the hook for keeping up basic maintenance such as the following:
• Air filters
• Oil changes
• Gear oil changes
• Timing belt changes
• Tire rotations
• Brake fluid flushes
• And replacing any parts as they wear out
You have to be careful about investing in an extended warranty if you do not have a good mechanic. You need a shop who will cut you overhaul deals as components simply age on your vehicle. The dealerships and even commercial chains often charge piecemeal prices that can make the cost of basic maintenance repairs unaffordable. It can easily cost more than a new car if you try to hang onto your vehicle as it ages.
Unauthorized Service Centers: Your extended warranty contract does not allow you to take your vehicle to the mechanic of your choice. In this case, you may find that the warranty traps you within a local area. If you take that long road trip, you might wind up footing the bill yourself. The shops in the area where your car breaks down may not be affiliated or authorized by your warranty plan. You really need to read the details to ensure that the coverage that you obtain is flexible enough for your lifestyle.
Never enter into an extended warranty in a high-pressure situation. Know that there are many independent services that offer competitive warranty contracts that can provide you with more benefits than a dealership. Before you enter into an extended warranty, do some research on your vehicle. Note issues that you might expect as your particular vehicle reaches the 5-year mark, the 10-year mark, etc.
Finally, when comparing third-party warranty services, be sure to make a key comparison between these specific items:
• Reasonability of deductible costs
• Authorized service centers
• Your out-of-pocket maintenance obligations
• How “normal wear and tear” is determined
• How big the holes are in the coverage
• Transferability of the warranty
• Manner of payment, reimbursement or direct to mechanic
• Whether parts and labor are included
• The cap on coverage under the plan
• Whether the plan requires pre-authorization for repairs
• Whether rental cars are included, and if so, how much
We believe that extended automotive warranties are the ideal lifestyle choice. It is perfect for drivers who want to get out of the financing loop. You should buy this extra protection if you drive cars for many years after the warranties expire. The complicated nature of automotive repair on late-model cars is making it difficult for owners to take care of these repairs themselves.
An extended warranty can help you keep up maintenance and extend the life of your vehicle. You will no longer fear the bill when you take visits to a repair shop. But, like anything, the quality of the plan and the established reputation of the provider are key. The details can mean the difference between a good deal and deal that does you no good.
Be sure to work with a warranty company that has been around for a while. Also, find one that works in enough volume to hedge against losses. You never want to sign a deal with a company that goes bankrupt in a few years and leaves you with nothing.