Thinking about buying an extended auto warranty?

When you're in the process of signing off on a new or used car purchase, you're going to be faced with making a decision on whether you should buy extended warranty, and the last thing you want as you're sitting in the dealership's business office is to feel pressured into making a decision you're unsure about.

If you’re unfamiliar or unsure about whether you should sign off on buying extended warranty, the following should help you decide if it’s worth it for you, along with some tips to consider before sealing the deal.

Extended Warranty 101

An extended warranty is basically a service contract that gives you repair coverage once the typical manufacturer warranty on your vehicle has expired. It will cover the cost of most breakdowns and in theory will work to stabilize the cost of repairs in the long-term given the price of parts + labor has a tendency to fluctuate over time. 

The first thing you should realize as an informed consumer is that extended warranty can be purchased at any point before the manufacturer's original warranty expires, so there's no need to feel any pressure to sign off on it today if you're not sure.

You can even have the option of purchasing it after the original warranty expires, although in that case the price would be much higher than if you were to purchase it before the expiration. The longer you wait, the more you'll pay.

And although you will find a ton of supporting arguments that go either way on whether you should extend your coverage beyond the expiration date, this decision ultimately boils down to your budget and whether you’re a risk-averse person or not. 

Studies have shown that if your car does in fact suffer from a major failure after the original warranty has expired, you'll end up paying more out of pocket to fix it than you would have paid for the extended service contract itself.

Having extended warranty is essentially having peace of mind, which for many car drivers is priceless. And if any unforeseen problems were to occur down the road to your vehicle, you won’t get hit with unexpected bills where you’ll be paying out of pocket for repairs ... so it's up to you on whether you want to keep your fingers crossed or stay secured with having a service contract. 
 

Before buying extended warranty

If you've decided to go ahead with buying extended warranty for your vehicle, consider the following before you sign:

• Extended warranties can be customizable
  Many extended warranty companies offer customizable options, so it's a good idea to browse and compare the different options that are out there. Not only does this allow you to choose the coverage that best suits your needs, you can use this insight to identify limitations on any proposed warranties. 
   
• Extended warranties can be transferable
  If at any point down the road you decide to sell your car, having transferable extended warranty can serve as a decent bargaining chip. So unless you plan on being the only owner for the vehicle's entire lifetime, make sure the extended warranty is transferable to a 2nd owner. 

• Extended warranties may not cover all repairs
  Read the fine print to understand what the proposed warranty covers by looking for or requesting the "exclusion list," which lists what doesn't get covered down to the parts, systems and repairs.

• Third-party extended warranties may be limited on approved facilities
  If you choose to buy extended warranty through a third-party, you'll find that there's a short list of approved facilities that could perform repairs on your vehicle. And if the unforeseen were to happen while on a long-distance road trip or if you end up moving out of province, the warranty could be rendered useless. 
  
  So while buying extended warranty through the manufacturer or dealership may cost more than through a third-party, having an OEM-backed warranty allows you to get your vehicle repaired at any dealership that sells the same brand, no matter where you are in the country. 

​Like with any form of insurance, extended auto warranties will only save you money if you end up using it. By the same token, browsing for the best extended warranty for your vehicle is a sensible financial choice that will provide you with years of worry-free driving, in addition to giving your car a longer lifetime.  Peace of mind definitely has its value!