Are third party car warranties worth it

When something happens to your vehicle's engine or transmission, an extended car warranty may pay for its repairs. If your car's original manufacturer warranty is about to run out, you're probably trying to decide if buying an extended warranty is worth the cost.

You'll have the option to buy a warranty from your vehicle's manufacturer or a third-party provider. You'll also be able to choose from several warranty options so you can cover the repairs that concern you most.

While an extended car warranty or vehicle service contract has a lot to offer, the answer to whether you should buy one is tricky. An extended car warranty isn't the right choice for all car owners. For example, some warranty plans are very expensive. Or, maybe you're not planning to keep your car much longer. In these cases, a warranty is probably not the way to go.

Is an extended car warranty worth it? Before you commit to an extended warranty, you should keep a few things in mind.

What Does an Extended Car Warranty Cover?

Extended warranties cover the major components of your vehicle, including the engine, transmission, gaskets, and axles. In a way, an extended warranty can act like an insurance policy since you pay a pre-determined deductible for necessary repairs to these parts of your car. If your car is in compliance with the required maintenance schedule, your repairs will be covered if you take your car to the specified auto shop.

Some extended car warranties also include roadside assistance. Roadside assistance includes services like towing your vehicle from the side of the road to an auto shop or bringing you a tank of gas if you're stranded. Roadside service also covers assistance with flat tires and dead batteries.

An extended warranty is also beneficial if you have to stop your trip due to car issues. For example, a warranty could cover reimbursement for a rental car or for hotel rooms you have to cancel. If you travel frequently, a warranty with trip interruption coverage could be a great deal.

Keep in mind that extended car warranties don't cover regular maintenance or wear-and-tear damage. Additionally, you could void your extended car warranty if you don't take your car in for regular maintenance. If you aren't able or willing to stick to the schedule, the extended warranty is probably not worth it.

When Can You Get an Extended Car Warranty?

If you're considering an extended car warranty, you need to know if you're eligible to buy one in the first place. In most cases, you'll be offered an extended warranty by the manufacturer when the original factory warranty expires. At this point, you can choose to purchase the policy from the manufacturer or find a third party you'd rather buy from.

You can also purchase an extended warranty through a manufacturer on the day you buy a new or used car. The paperwork should detail exactly how much the warranty costs and what kind of warranty you're paying for.

Of course, you can buy third-party extended warranties whenever you'd like. These companies have their own stipulations for when you're eligible to buy a new warranty.

Should You Buy an Extended Car Warranty from a Vehicle Manufacturer?

Buying a car warranty from a manufacturer offers some benefits. For instance, your repairs will be completed by a factory-trained mechanic, and all replacement parts will be from the manufacturer. You can trust that the repairs are done by somebody who is familiar with your vehicle.

If you sell your vehicle, you'll also have the opportunity to easily transfer that car warranty to the vehicle's new owner. This could be a great selling point for a private party who wants a reliable vehicle. It could even slightly increase the value of your car.

The downside to this option is that you have to take your vehicle to an official dealership for repairs. If you don't live near a dealership, this could make repairs and maintenance more difficult.

Ultimately, buying an extended warranty from the manufacturer is a good idea in some situations. For example, you might consider this option if you have a unique car or only trust the dealership to handle repairs.

Additionally, your local dealership may be more suited than any other local mechanic to fix your specific car, especially if it's a unique vehicle, like a sports car or hybrid.

Should You Buy an Extended Car Warranty from a Third Party?

A third-party extended warranty also offers a few benefits. You may have more mechanic options to choose from because you don't have to take your car to a dealership for repairs. You could also have a broader list of authorized auto repair shops that can take care of your vehicle, so you don't have to worry if you live far from a dealership.

Keep in mind that even if you buy a third-party warranty, you may still be required to have your repairs done at an authorized provider. Additionally, the repairs may be completed with aftermarket parts.

You can also transfer a third-party warranty when you sell your vehicle, but there's a catch. While you can transfer the warranty to the next owner of the vehicle, you may have to pay a fee to do so. As a result, transferring the warranty may be less of a selling point.

When Is an Extended Car Warranty Worth the Cost?

Extended car warranties are a good idea for many drivers, but not everybody will see the same benefit. You should ask yourself a few questions before you commit to a plan. These questions include:

Is Your Vehicle Unreliable?

An extended warranty is worth your time if your car isn't extremely reliable and you wouldn't necessarily be able to pay for major repairs right now. If you purchase a used car from a dealer, an extended warranty could be the right choice if you're uncertain about a vehicle's reliability. Additionally, a warranty could be worth the cost if you know that your car is prone to specific types of problems, like transmission issues.

Will a Warranty Relieve Your Anxiety?

For some drivers, an extended warranty offers peace of mind. If you feel more comfortable on the road having a warranty, it's worth it. Maybe knowing you have access to free repairs could give you the freedom to take road trips you wouldn't take otherwise, for example.

Are You Willing to Pay for a Service You May Not Use?

Many people buy an extended warranty and never use it. There are no refunds or reimbursements for not using an extended warranty, so some feel they've lost money when they buy one without using it.

Are You Willing to Follow the Manufacturer's Maintenance Requirements?

Keep in mind that you could accidentally void your warranty if you don't stick to the warranty's maintenance schedule. You could pay for a warranty only to learn that you're no longer eligible for services because you missed an oil change or tuneup, neither of which is covered by the warranty. The same applies if you have a trustworthy mechanic you'd like to use who doesn't work at the local dealership or an authorized repair shop.

How Long Do You Plan to Keep Your Car?

You should also think about how long you plan to keep your car. For example, you may not need an extended warranty if you only plan to keep your car for one or two more years. If you want to keep your car running for as long as possible, that extended warranty could be useful.

Are There Different Types of Warranties?

Several types of extended car warranties are available, and you'll have the option to choose the right warranty for your car and personal needs. The warranty you choose will depend on several factors, including the age and value of your vehicle. These are the most common types of extended car warranties:

Bumper-to-Bumper Warranty

A bumper-to-bumper warranty is generally the most comprehensive extended warranty. This plan offers coverage for all parts and systems in your vehicle, except for routine maintenance and wear-and-tear damage. Any mechanical breakdowns due to defective parts or poor work will be covered. However, this plan often doesn't cover specific items like tires or brake pads.

Powertrain Warranty

The powertrain warranty typically covers everything that keeps your car moving, including the engine, transmission, and some electrical components. Exclusions typically include the battery, clutch, and some drive belts. A powertrain warranty is a good idea for many vehicles because it covers many of the most expensive repairs a car will ever need.

Drivetrain Warranty

If you buy a drivetrain warranty, you'll have coverage for everything that keeps the car moving except for the engine. The drivetrain includes the vehicle's transmission, driveshaft, axles, and wheels, which are all key components that can become worn out or damaged with time.

Wrap Warranty

Your extended warranty could be a wrap warranty, which is used to supplement the powertrain warranty. It covers the rest of the vehicle. So, if you buy both extended car warranties together, you'll have full coverage. If you have a bumper-to-bumper warranty that expires long before the powertrain warranty, you may want to add a few years of coverage with a wrap warranty.

Corrosion Warranty

For a car, rust can be especially damaging. A corrosion warranty covers damage associated with rust and corrosion. Rust is extremely common, and environmental issues can contribute to how fast components corrode. If you live in an area where this is a common issue, this type of extended warranty may benefit you.

How Long Does it Last?

This isn't an easy question to answer without knowing the warranty provider. Each extended warranty is different, but generally, extended warranties have a time limit or mileage cap. For instance, some warranties last up to three years or 36,000 miles, whichever comes first.

Some types of extended warranties, like powertrain warranties, may last longer. You can also buy extended car warranties that last much longer, such as seven years or 100,000 miles. Ultimately, you can choose to buy a longer warranty if you think you'll keep the car for a long time.

What Affects the Cost?

An extended car warranty cost varies from policy to policy, and the car you want to cover will have a lot to do with the cost of the warranty. Your quote will depend on a few factors, including:

Level of Coverage

The type of coverage you buy has a lot to do with the quote. Comprehensive warranties, like bumper-to-bumper warranties, are more expensive than plans with more basic coverage, like corrosion warranties.

Length of Coverage

You can also expect that an extended warranty that lasts longer will be more expensive than other plans. A seven-year plan will cost more than a two-year plan.

Vehicle Age & Mileage

An older vehicle or a car with high mileage is going to need a more expensive warranty. These cars are more likely to break down or require repairs.

Deductible

If you pay a lower deductible, the premium is going to be higher. You can reduce your premium if you're willing to pay a higher deductible when your vehicle needs repairs.

Should You Buy an Extended Car Warranty?

Whether you should buy an extended car warranty is a personal decision. While many drivers never use a warranty, others are glad to have the extra coverage. If you drive a reliable car and could afford to pay for unexpected repairs out-of-pocket, an extended car warranty might not be worth the cost to you.

Elizabeth Rivelli is a freelance writer with more than three years of experience covering personal finance and insurance. She has extensive knowledge of various insurance lines, including car insurance and property insurance. Her byline has appeared in dozens of online finance publications, like The Balance, Investopedia, Reviews.com, Forbes, and Bankrate.