What Are the Pros and Cons of Extended Car Warranties? (2023)

Let’s first look at the pros of extended car warranties.

Pro: Peace of mind. One of the biggest benefits to having an extended warranty is peace of mind. If a covered part breaks down, you don’t have to deal with the cost of repairs. You also don’t have to negotiate with the dealership or mechanic on auto repair costs. You can spend your time enjoying the drive instead of worrying about your powertrain warranty expiring next month.

Pro: Budgeting for repairs is easier. With an extended warranty, you make a monthly payment for the company to cover certain repairs. Sometimes, a repair may cost a few hundred dollars. At other times, a major repair could cost $2,000 or more. Instead of paying for repairs like this all at once, the cost has essentially been broken up into many smaller payments. This makes it easy to predict your budget over time.

Pro: Extra perks are usually included. Common perks include roadside assistance, trip interruption and rental car coverage. Car insurance companies can also provide similar services, but these are usually sold as add-ons and don’t come with the standard coverage.

On the other hand, extended warranty companies usually include these perks with all coverage plans. CARCHEX provides these three benefits on all its plans, as does CarShield. Roadside assistance from CARCHEX includes towing, spare tire assistance, lockout service, jump-starts, fuel delivery and winching. An Endurance auto warranty has a one-year program that includes key fob and tire replacement benefits.

Also, many providers allow you to use roadside assistance anytime your car is disabled. In other words, you don’t need to have a covered breakdown to use roadside assistance. However, extended warranty companies usually will only provide rental car coverage and trip interruption reimbursement after a covered mechanical repair.

Pro: An extended warranty can actually save you thousands. When looking at the pros and cons of extended car warranties, the big question is whether they can save you any money. On average, extended warranty contracts can cost between $1,000 and $3,000. It’s possible you can get many more repairs covered than the cost that you put into the warranty.

Repairs don’t happen every day, but they do happen. According to RepairPal, people who drive cars from the most reliable brands pay between $428 and $551 annually for repairs and maintenance. Volvo owners pay about $769 per year, and BMW owners pay $968. Of course, these are just average numbers over time. You could drive for years without any major issues then encounter a $1,802 head gasket repair or $1,498 catalytic converter replacement.

If a repair is covered under contract, the warranty provider will pay for it unless total repairs have exceeded a maximum amount. For most companies, the maximum amount payable is equal to your car’s value, which makes sense.

Pro: Easy transfers and cancellations. Any reputable extended warranty company will have a 30-day guarantee. You can cancel anytime within 30 days for a full refund, as long as you haven’t used any funds for repairs. Beyond that time, you can still cancel the extended warranty. You’ll just get a prorated refund based on the time, mileage and repairs received.

Another nice thing is that most contracts are transferable to a secondary owner. This can help you get your full asking price when you sell your car. You may have to pay a small fee to transfer the contract.

Pro: No paperwork. With an extended auto warranty, all you have to do is connect your repair shop to the claims department of your warranty company. After that, the warranty provider will negotiate with the repair shop on cost. If the repair is covered, the provider will pay the shop directly, and you will pick up your car after it’s fixed. There’s no paperwork to fill out at the repair shop.

Pro: Genuine parts and certified technicians. If you get an extended manufacturer’s warranty, it will cover genuine parts and certified technicians at the dealership. For example, a Dodge extended warranty is fulfilled by Mopar®, the parts manufacturer for Dodge, Chrysler, Jeep and Ram.

When you go in for a repair, your Dodge will get new or remanufactured Mopar parts. Some third-party companies will also allow you to go to your dealership for repairs and get service from certified technicians.

Pro: Coverage and prices are customized. It’s just a fact of life that BMW will cost more to repair than a Toyota. So, an extended warranty for a BMW is also going to be more expensive than an extended warranty for a Toyota. Within each brand, different models and model years have different reliability ratings. Costs reflect your specific vehicle, its year and its current mileage.

Also, extended warranty providers give you a number of different plan options to choose from, each with different base costs. You can customize the length of time and mileage limit that the plan covers. You can mix and match those limits, too. If you don’t drive very much on average, you could get a warranty for 5 years/50,000 miles. On the other hand, you can get a warranty for 5 years/80,000 miles if you do drive a lot.

Like car insurance, you can choose different deductible amounts for an extended warranty. A higher deductible will lower your overall cost. You can usually choose $0 to $200 deductible amounts.

Coverage usually costs more as cars age. So, purchasing an extended warranty is worth it on a new car because you’ll get the best price for that coverage. In general, your car is “new” if it’s still under the factory bumper-to-bumper warranty and you’re the original owner.