If you are considering purchasing an extended warranty to cover the costs of future auto repair, there are a few things you should look into before making the purchase. Depending on your vehicle and driving habits, the extended warranty may be a cost saver, or it may not be the best option for you.
With an average cost of over $1,200 for coverage, extended warranties can sometimes cost more than the repairs that they cover, especially when there is a deductible to factor in.
According to a Consumer Reports study, car owners who purchased and used their warranties saved $874 on parts and repairs. The problem is that this is a net loss of $326 from the average cost of the warranty. Even more alarming is that the study found that an overwhelming majority of car owners who purchased extended warranties did not use them for any auto repair whatsoever. When this data is factored in, the “value” of an extended warranty spirals from negative $326 to an absolutely horrible negative $1,200!
On the other hand, there are certain types of repairs that would cost a vehicle owner thousands of dollars in the absence of an extended warranty, and it is impossible to know for sure what is going to happen with your vehicle when you drive off the lot.
Auto repair work related to engine failure, transmission issues, and electrical system problems can end up costing much more than any extended warranty you would purchase before leaving the lot—making the extended warranty a great deal.
Also, for those who purchase traditionally less reliable vehicles like BMWs, Mercedes, and Chryslers, an extended warranty might be a good idea as Consumer Reports says that these vehicles typically need auto repairs that add up to thousands of dollars. Warranties for these automobiles generally cost quite a bit more, however, with costs ranging from $1,525 to $2,200 for the extended coverage.
At the end of the day, it’s difficult to know what type of repair your vehicle may need down the line. However, taking into account the reliability of the vehicle, its age, and your own peace of mind may help guide you to the best decision when it comes to extended warranties.