Extended Car Warranty Cost: Is Extra Protection Worth the Price?
Extended car warranties are designed to help you cover the cost of certain vehicle repairs, some of which can seriously drain your wallet. But is an extended car warranty cost worth it?
It may be for some drivers, like those who are concerned about being able to cover repair bills upfront or plan to keep their vehicle until the very last mile. Still, other drivers may find the cost isn’t worth it. Here’s what to know before you buy.
- Extended car warranties can help you cover the cost of some vehicle repairs.
- The make, model and age of your car, as well as its mileage, are a few factors that determine extended car warranty costs.
- There are several types of warranties available, each covering different vehicle components.
- Extended car warranties aren’t a replacement for insurance, and typically exclude accidents and other external factors.
Extended car warranty cost
The cost of your extended vehicle warranty depends on a variety of factors, like the make, model and age of your car. However, you’ll typically need to pay at least $1,000 per year of coverage, and you may need to pay as much as $3,000 per year, or even more.
For instance, an extended warranty for a run-of-the-mill domestic car will be cheaper than one for a foreign luxury vehicle with parts that might be hard to find, fix or replace. You’ll also typically find that an extended warranty for a newer car is cheaper than one for a used vehicle.
If you’re considering getting an extended warranty, the best thing you can do is shop around for coverage and get a few quotes before you buy. However, remember that if you’re purchasing a vehicle, the dealership will likely work with a specific warranty provider, so you should research your options before buying the car.
Factors that affect the cost of an extended car warranty
Though every warranty provider is different, providers typically consider the following factors when determining an extended car warranty cost:
- Make and model: In most cases, the more expensive your car, the more it will cost to get an extended warranty. Specialized parts, complex technology, and even the cost of labor are often higher for luxury vehicles, which means a warranty provider will pay out for claims on those vehicles.
- Age and mileage: The older your vehicle, the more you’ll pay for coverage. The same is true for mileage: the higher the odometer reading, the higher your coverage. That’s because warranty providers base coverage rates on risk, and older cars or those with more miles are more likely to have associated claims.
- Where you live: Extended warranties typically cover the cost of labor, but labor costs can vary by location. If you live in an area with higher labor costs, you’ll likely pay more for an extended warranty.
- Type of coverage: Most extended warranty companies offer multiple tiers of coverage. If you choose a cheaper or lower-tier plan, you’ll pay less than you would for more robust or premium coverage.
- Size of deductible: A deductible is the amount you’ll pay out of pocket for car repairs after a covered incident. You can typically choose from several deductible amounts, often ranging from $0 to $500 or more. A lower deductible will lead to a higher plan price, but you’ll be responsible for fewer out-of-pocket expenses after a claim.
- Length of coverage: The longer your coverage period, the more you’ll pay. However, you might be able to reduce the annual cost of coverage by purchasing a longer protection period.
- Warranty provider: Every warranty provider sets their own rates, so how much you pay for a plan will often vary by company.
Don’t assume that the manufacturer or dealer-based warranty is the best option. Before you purchase a plan, always shop around and compare your options.
If you choose to buy a plan from the manufacturer or deal, you can typically roll your warranty into your auto loan, which may make payments more affordable upfront. However, if you do that, you’ll be paying interest on your warranty. If you can afford to, it’s generally cheaper to pay cash for your warranty.
How much does an extended warranty cost for a used car?
Extended warranties for used vehicles are often more expensive, especially for older cars. For example, we found that one popular extended warranty provider charges around 19% more for an extended warranty for a 5-year-old vehicle than for a newer car. The same warranty for an 8-year-old vehicle was about 26% more.
How much you’ll pay for a used car warranty will depend on many of the factors listed above, with age and mileage playing a vital role. A warranty provider may also charge more for coverage if you’ve altered the vehicle, such as lifting the suspension.
What does an extended car warranty cover?
An extended car warranty covers the repair or replacement of specific vehicle components after the manufacturer’s warranty expires. Often, this includes the engine and drivetrain components. Still, depending on the warranty you purchase and the plan provider, it may also include things like cooling and heating systems, fuel systems, gaskets or advanced technology components, such as backup cameras.
Powertrain warranty
Powertrain warranties typically cover components that make the vehicle run, such as the engine and its parts: driveshafts, axles, transfer case, drive axles and transmission. Powertrain warranties often provide coverage for some of the most expensive vehicle components, though its coverage does not extend to other systems or parts, such as heating/cooling systems, electronic systems, etc.
Bumper-to-bumper warranty
As the name suggests, a bumper-to-bumper warranty protects most components that fall between the front and rear bumper. This can include brakes, heating/cooling systems, electronic devices, electronic systems and even the body of the vehicle.
However, these warranties don’t typically include coverage for glass or items that are commonly damaged or need to be replaced due to wear and tear, such as bulbs, brake pads and upholstery.
Drivetrain warranty
A drivetrain warranty extends coverage to components that provide power to the wheels and engine, though it does not cover the engine itself. Covered components can include axles, driveshaft, transmission and differential. As such, this type of warrant is considered less comprehensive than a traditional powertrain warranty, which does include the engine.
Corrosion warranty
Corrosion warranties can help pay for the cost of repairs or part replacements if the panels of a vehicle rust due to defects or manufacturer error. This type of coverage generally will not cover body damage repairs if they are a result of neglect, extreme weather conditions, scratches or damage to vehicle parts or general wear and tear.
Wrap warranty
A wrap warranty is designed to pick up where a manufacturer’s or dealer’s powertrain warranty leaves off. For instance, while a powertrain warranty may be limited to the engine and drivetrain components, a wrap warranty would fill the gap by covering things like electrical, suspension, heating/cooling and high-tech features.
A car manufacturer warranty is offered by the vehicle maker and is included in the price of a new vehicle. You may even be able to purchase a manufacturer warranty for a used car under certain circumstances. These warranties generally do not have deductibles and ensure that your vehicle is repaired with original equipment manufacturer (OEM) parts by trained and certified technicians. They’re typically more expensive than third-party warranties, but you may be able to lower it when negotiating the price of a car.
Independent companies provide third-party extended warranties, and each company offers its own protection plans, deductibles and terms. You may have more options to choose from when purchasing third-party warranties, but there may be claim limitations. For instance, the warranty may not cover OEM parts or you may need to pay for repairs upfront and wait for reimbursement.
When an extended car warranty makes sense
An extended car warranty can help you cover costly repairs to your vehicle and may be particularly beneficial if:
- Your factory warranty is ending. If you enjoy the protections offered by a factory warranty but that warranty is ending, an extended warranty may give you additional peace of mind.
- You like the security it provides. Some repairs may be relatively inexpensive, but others, like engine replacements, can cost several thousand dollars in parts and labor. Although an extended warranty means an additional monthly bill, you get some more security knowing that you’ll only have to pay so much in these types of emergencies.
- Your vehicle is made of costly parts. Some vehicles are more expensive to repair than others, and that’s particularly true for those that have a lot of high-tech or hard-to-find components. Choosing an extended warranty that covers those parts may help cut down on potential costs.
- You plan to keep your car for a while. If you plan to keep your vehicle for several years, then an extended warranty can ensure you can keep up with repairs, ensuring your vehicle runs as long as possible.
When an extended car warranty doesn’t make sense
Even though there are benefits to an extended car warranty, they aren’t a good fit for everyone. You may not want an extended warranty if any of the following are true:
- You don’t plan to keep your car long. If you are the type of person who likes to buy a new car every few years or you’re planning on selling yours soon, an extended warranty likely won’t be worth the cost.
- You’re looking for the cheapest option. Just because you have a vehicle doesn’t mean you’ll be faced with substantial vehicle repairs. You’re better off saving your money and creating an emergency fund to cover potential repair costs. Especially when you consider interest and opportunity costs, it may be most cost-effective to put $100 per month into an emergency fund for your car instead of putting the money towards an extended warranty.
- You have a robust warranty that isn’t expiring soon. If your vehicle already has a manufacturer warranty and you’re comfortable with the amount and duration of coverage it offers, it may not make sense to purchase an extended warranty right away.
Where to find extended car warranties
Finding extended vehicle warranties is fairly easy, and you’ll often have a variety of options to choose from. The most common include:
Manufacturers
Manufacturer extended warranties are sold directly by the manufacturer or dealership. These warranties often work seamlessly with both your original warranty and the manufacturer, ensuring your vehicle is repaired with OEM parts by technicians well-trained to repair that specific brand vehicle.
However, manufacturer warranties may be more expensive than those sold by third parties, and you can’t shop around for the best price. Further, you may be limited to working with specific certified repair shops.
Auto warranty companies
Numerous companies specialize in auto warranties, and that often leads to competitive pricing and multiple plan options for consumers. You’ll also likely have more control over where you get your vehicle repairs.
Still, plans offered by auto-warranty companies often come with deductibles, and you may need to pay for the repairs upfront and wait for the warranty company to issue a reimbursement.
Used-car sellers
Used car sellers can extend warranties from the manufacturer or through a third party, and the coverage details, costs and terms often depend on the warranty provider or manufacturer. For instance, if you buy a car via Carvana, you can purchase an extended warranty on their website, but it’s administered by SilverRock Inc. Similarly, CarMax warranties are administered by one of three warranty providers, not CarMax itself.
If you purchase a used vehicle from a franchised car dealership, or one that sells a specific brand(s) of vehicle, you may be able to get an extended warranty from the manufacturer.
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