Extended warranties are constantly advertised, and many people get endless spam mail, emails, and phone calls from sketchy companies offering extended warranties for their cars.
The way they’re marketed can lead to people thinking that all extended warranties are useless scams. However, there are reputable companies that offer quality extended warranties, and in some situations, buying an extended warranty can actually be a good idea.
The Pitfalls of Extended Warranties
Less scrupulous extended warranty companies use pushy tactics to convince people to buy their services because they can be a great way for these companies to make money without taking on much risk. The retailers selling these warranties keep a significant portion of what the customer pays.
The companies offering extended warranties often charge hefty fees for the service, knowing that most people won’t actually utilize their warranty coverage. If nothing breaks down throughout the warranty, then all the fees are just money down the drain. However, in the worst-case scenario, it might have very specific conditions that are incredibly difficult to meet, making the warranty practically useless even if something breaks.
Additionally, some companies try to convince you to purchase an extended warranty while your manufacturer’s warranty is still in place. In this case, you’re basically purchasing something you already have and won’t get any additional benefit from the extended warranty since you have to use the manufacturer’s warranty first.
When You Should Buy an Extended Warranty
Despite all the problems you can find with extended warranties, there are a lot of reputable companies out there that offer high-quality options that are easy to use. While they still aren’t right for everyone, there are some situations where buying an extended warranty actually makes a lot of sense.
One of these situations is if you own a car from a particularly unreliable brand or a model known to have many issues as they age. You can apply this same thought process to older vehicles that are likely to start experiencing problems as parts begin to wear out. Considering the average car in the US is 12 years old, if your car is older, you may want to consider an extended warranty that will cover any parts that give out.
Another situation where extended warranties make sense is if you own a car that is expensive to repair. If the cost to replace or repair parts is relatively small, then the expense of an extended warranty isn’t really worth it. On the other hand, if it costs several hundred dollars or thousands to repair even simple parts, an extended warranty can significantly reduce how much you have to pay out of pocket.
Is an Extended Warranty Right for You?
Does your car not meet the above criteria? Even so, you may still want to consider an extended warranty if you are particularly concerned or anxious about the risk of a major breakdown. Even if it won’t make a significant financial impact, sometimes having that extra peace of mind is worth the price.
If you decide to purchase an extended warranty, be sure to look for a reputable seller with a good track record. If you can purchase one directly from a manufacturer, that’s often the best course of action. However, you should also know exactly what’s covered by the extended warranty to ensure it meets your needs and is something that can be easily utilized when needed.
