An extended car warranty is a service contract that drivers can purchase in order to pay for repairs to a vehicle’s major systems, including the transmission and engine. Drivers can purchase an extended warranty from a third-party company, like Carchex or Endurance, or directly from their vehicle’s manufacturer. Extended warranty providers often offer multiple levels of coverage that include benefits such as towing services, rental car coverage, and travel insurance.
Key Things to Know About Extended Car Warranties
- The average cost of an extended car warranty is $1,500, but the price can be as high as $3,000.
- Extended car warranties are only worth it if your car is unreliable and are unable to pay for mechanical repairs.
- You cannot use an extended car warranty until the original manufacturer’s warranty expires.
- Extended car warranties do not cover regular maintenance or damage caused by normal wear and tear or by a lack of maintenance.
How Does an Extended Car Warranty Cover?
An extended car warranty acts like an insurance policy for your car’s major components. If something breaks down and needs to be repaired, your warranty provider will cover the costs. You will only be responsible for paying a predetermined deductible.
Exactly what an extended warranty covers depends on the type of warranty that you choose. But in general, extended warranties cover the critical mechanical parts of your vehicle, including the engine, transmission, axles, and gaskets.
Manufacturer vs. Third-Party Extended Warranties
|Type of Car Warranty||Manufacturer Warranty||Third-Party Warranty|
|Parts||Factory parts||Aftermarket parts|
|Technicians||Factory trained (dealer)||Authorized network|
|Location||Must service at a dealer||Any authorized shop|
|When You Sell the Car||Warranty transfers to new owner||There may be a transfer fee|
|Ease of Refund||Easy to cancel and get a prorated refund||Variable, some easier than others|
|Price||$1,000 - $3,000||$1,000 - $3,000|
|Out-of-Pocket Costs||Deductible (if your plan has one)||Deductible (if your plan has one), plus you may need to pay the mechanic and get reimbursed|
Types of Extended Car Warranties
A bumper-to-bumper warranty is usually the most comprehensive extended warranty that you can purchase. It’s umbrella coverage for all of a vehicle’s parts and systems, excluding routine maintenance and damage from wear and tear.
Powertrain warranties cover everything that moves the vehicle, including the engine, transmission, and any power components that travel to the wheels of the car.
A drivetrain warranty is similar to a powertrain warranty, except it excludes the car’s engine.
A wrap warranty supplements a powertrain warranty, applying to the rest of the car. This effectively gives you bumper-to-bumper coverage.
Extended Car Warranty Cost
The average cost of an extended car warranty is $1,500. The exact price can vary widely between policies, however, usually falling between $1,000 and $3,000.
There are several factors that affect how much an extended car warranty is going to cost. For example, certain makes and models of cars cost more to cover, as do older, high-mileage cars that are more likely to break down.
The cost of an extended warranty also depends on how much coverage a driver is purchasing. If you purchase a powertrain warranty, you’ll likely pay less for coverage than you would for comprehensive bumper-to-bumper coverage.
Are Extended Car Warranties Worth It?
Extended car warranties generally aren’t worth it, purely from a financial standpoint. Most people who purchase an extended warranty save less on repairs than they pay for the contract, according to a survey by Consumer Reports.
If you drive a reliable car and maintain sufficient savings to pay for an auto repair emergency, then an extended car warranty probably isn’t worth what you would have to pay. Similarly, you might not need an extended warranty if you already have a trustworthy mechanic or carry insurance that offers similar perks.
But purchasing an extended warranty isn’t always a purely monetary decision. For some people, the peace of mind can be worth the price. If your car isn’t the most dependable, you might be more comfortable buying an extended warranty than going without. Just make sure that you’re clear on your vehicle history as well as your own priorities.