Extended Car Warranties: The Good and The Bad

by Jeff Youngs

When consumers are asked why they choose one auto manufacturer over another, one of the top reasons given year-after-year is perceived dependability and reliability. As this is one of the biggest purchase drivers, manufacturers have responded and are now making automobiles that are more reliable that ever before. This long-term view on the importance of reliability may be why, on average, consumers are also keeping their vehicles longer than ever.

Coupled with the increase in reliability, manufacturers are offering longer original warranties to boost consumer confidence and trust in their brand. Most major brands now carry a warranty somewhere between 3 years, 36,000 miles and 10 years, 100,000 miles. These generous warranties help set a consumer’s mind at ease with the knowledge that they will not have to pay out of pocket for many major repairs during the first few years they own a vehicle.

Despite these longer warranty periods, a significant amount of consumers are keeping their vehicles well past the warranty expiration date. One of the primary drivers of this may be the availability of extended car warranties. As vehicles become more and more complex with greater electrical and computer integration, repairs become more complicated and expensive. An extended warranty can help protect an owner from paying for repairs out of pocket, but these warranties can also come with drawbacks.

The Good


Because extended warranties are, by their nature, an aftermarket product, they can be tailored to fit almost any situation. If there is a difference between your vehicle’s original bumper-to-bumper warranty and the powertrain warranty, you may consider an extended warranty that covers bumper-to-bumper repairs, but do not want to pay for additional powertrain coverage. In this case, an extended warranty can be tailored to only extend the bumper-to-bumper warranty coverage so the consumer is not paying for coverage they already have.

In another scenario, a vehicle’s original warranty may run out after 5 years, but the owner knows they will keep the car for at least another two years. It is possible to structure an extended warranty for those two years instead of buying a single year of coverage and then having to go through the process in another year.

Manufacturer Backed

If you have received extended warranty offers, you’ve probably noticed that extended warranty offers from a dealer are typically more expensive when compared to an offer from an outside third party. This premium price may be worth paying, however. Extended warranties offered through a local dealer are often backed by the manufacturer. This will ensure OEM parts are used in any repairs. Additionally, these warranties are often good at any manufacturer affiliated dealership in the US. This allows the owner to continue the warranty benefits should they relocate.

Repairs Are Covered

Of course, the key benefit of an extended car warranty is that expensive repairs will be covered by the warranty. Today’s vehicles come fully equipped with complicated engines, electronics, computers, cameras, giant panoramic sunroofs, and more. Though these components are designed to last a long time, sometimes things break and require repair or replacement. An extended warranty can cover the cost making an expensive repair as stress-free as possible.

The Bad

Wrong Side of the Bet

If you’re considering purchasing an extended car warranty you’re doing so with the thought that there’s a relative likelihood that your vehicle will need a significant repair while you still own it. As the purchaser of the warranty you are willing to pay a premium now in order to limit or eliminate your financial exposure to a major repair later.

On the other side is the company issuing the extended car warranty. By issuing the warranty, they believe that the premium paid to them will be more then they will have to pay for any future repairs. Judging by the fact that companies offering extended warranties continue to stay in business, they appear to be right more often than the consumer when it comes to which side ultimately pays more for an extended warranty.

Repairs Not Covered

After purchasing an extended warranty, the consumer expects the warranty to cover future repairs that may come up. Unfortunately, this is not always the case. Before purchasing an extended warranty, make sure you see the warranty’s “exclusion list”. This will clearly show what is not covered under the extended warranty. Reviewing this list will help you make an informed decision and prevent unpleasant future surprises.

You Never Use It

Lastly, and perhaps the most significant downside to buying an extended warranty is that you may never use the warranty. As mentioned earlier, the majority of consumers heavily weigh vehicle reliability when making a purchase decision. When you add together the fact that vehicles are more reliable than ever and offer longer original warranty coverage, it becomes reasonable to conclude that an extended car warranty is more likely to cost more than one will ever get out of it.

Despite the risk of never using an extended car warranty, many consumers consider the peace of mind that an extended warranty can offer worth the risk. If the thought of being responsible for an expensive repair is too stressful for you, an extended warranty may be a good choice. Just make sure you shop around and carefully review all of the warranty’s fine print and coverage details before making a purchase.