An extended warranty on a used car is an insurance policy against costly repairs and provides peace of mind for the buyer. These warranties are typically sold by dealerships, but are available from independent providers as well. These warranties usually cover mechanical problems that occur after the manufacturer’s bumper-to-bumper and powertrain warranty expire. They may also include extra benefits such as roadside assistance, rental car coverage, and trip interruption protection.
Generally, these warranties do not cover wear and tear items such as new brake pads or windshield wipers. Also, they cannot pay for a car that is declared a total loss after a collision or theft. Most warranties do not include damage caused by poor weather or lack of maintenance, either. Most warranties have a deductible, just like auto insurance, which the buyer must pay upfront before the company will reimburse the cost.
Some of the advantages to purchasing an extended warranty are that it can be transferred to a new owner if the vehicle is sold, some plans have zero-deductible policies, and many provide repair payments to the service shop directly. These plans can help buyers avoid paying for unexpected repair costs, and may even help buyers get better pricing from the dealer when it comes time to negotiate a price for the car.
But, a buyer should be careful when considering whether an extended warranty is worth the investment. In a Consumer Reports (CU) member survey, a large number of members reported that they had spent more on their extended warranties than they had received in reimbursements. This is because the cost of these plans often exceeds what a consumer could have saved by choosing a reliable car, and saving up for any repair bills that might arise.
Before purchasing an extended warranty, buyers should know the difference between an MBI or VSC and a service contract. MBI and VSC are designed to be rolled into your car loan, which can make them more affordable. Service contracts, on the other hand, are designed to be paid off in a lump sum or through monthly installments.
The dealership is often the best place to buy an extended warranty, but it is important for consumers to research these plans before making a purchase. A good way to find out if the dealership is overcharging for their MBI/VSC plans is to ask for a full breakdown of pricing options, including deductible and payment structures.
The decision to purchase an extended warranty should be made after researching the model and year of the vehicle, as well as its overall reliability rating. In addition, consumers should consider the vehicle’s mileage, as vehicles with higher miles are at a greater risk of mechanical failure. By doing the proper research, a car buyer can make an informed decision about whether or not to purchase an extended warranty on their used vehicle. For more information about how CARCHEX can save you money on an extended warranty for your used vehicle, contact us today. extended warranty on used car