Should I Buy a New Car Extended Warranty?

by Shanan Miller ; Updated July 27, 2017

New vehicles come standard with a factory warranty, so purchasing an extended warranty can help you to save money down the road. The extended coverage is cheaper when a car has less mileage on it. The extended warranty begins coverage at the time your factory warranty runs out. Before purchasing one, determine your future vehicle intentions and cost.

Warranty Types

You can purchase an extended bumper-to-bumper warranty for the vehicle, either from the manufacturer, which supplies the same coverage as the new-car factory warranty, or from an after-market provider the dealership uses. This warranty covers any item in your vehicle that needs repair, limited to original vehicle equipment that is not maintenance or body-work related. A powertrain warranty covers major components of the engine and transmission. It is also available from the same providers, but is cheaper than bumper-to-bumper coverage.

Benefits

Extended warranties are cheaper to purchase when a car is new. Although you can purchase your coverage before your factory warranty ends, you will pay a higher price. Outside of your vehicle's factory warranty period, you are responsible for all repairs needed, even if the repair is not from neglect or lack of maintenance. Ask the dealer if the warranty is transferable; you can likely sell your vehicle for more down the road if it has a warranty.

Vehicle Intentions

Determine how long you plan to keep your vehicle. If you commonly trade out of your car every three to four years, you may be covered by the factory warranty during your ownership period. If you're leasing your new car, you may not have to purchase the coverage if you're leasing during the car's warranty period, either. If your lease is longer than the factory period or you plan to keep your car for as long as possible, seriously consider purchasing the warranty to avoid expensive repairs.

Purchase Options

Find out which purchase options exist for extended coverage and if the warranty company will allow you to cancel if you change your mind in the future. Many warranty companies prorate the unused portion back to you if you decide to cancel. However, this depends on how you pay for the warranty. If you pay cash for it or work out payments with the warranty company, you may receive a partial refund if you cancel before the end of the warranty contract.

About the Author

Shanan Miller covers automotive and insurance topics for various websites, blogs and dealerships. She has extensive automotive experience, including auction, insurance, finance, service and management positions. Miller has worked for dealer sales events around the United States and now stays local as a sales and leasing consultant for a dealership.