Extended warranties on most products have become somewhat of a joke. Most experts advise that you should never purchase an extended warranty on any item. They are mostly a blatant cash grab and not worth the paper they’re printed on. However, this axiom has not stopped automotive manufacturers and dealerships from pushing extended warranties on the vehicles they sell. They are especially persistent when it comes to used vehicles where the original factory warranty has expired.

A lot of original warranty coverage have declined in recent years. They’ve dropped from the old standard of five years or 60,000 miles (100,000 km), down to three years or 37,500 miles (60,000 km). This change has many people are wondering if they should invest in an extended warranty. Before you make any decisions concerning an extended warranty, consider the following 10 pieces of information.

10. Most People Never Use Them

According to Consumer Reports, the majority of people (55%) who purchase an extended warranty never use it once. Yet, the average cost of an extended warranty on a used car in the U.S. is $1,200. That’s a lot of money for something you’ll probably never use. The reality is that extended warranties tend to cover the most reliable parts of a vehicle such as the engine and powertrain.

Extended warranties typically don’t cover things like headlight bulbs, brake pads and other parts of a car that wear out and need to be replaced frequently. If you’re going to purchase an extended warranty on a vehicle, make sure you know everything it covers. Otherwise you’ll be surprised when you’re told you have to pay to replace the spark plugs.

9. They Will Likely Cost You Extra Money

The same Consumer Reports study of more than 12,000 people who had purchased extended warranties found that, on average, those who had them saved $837 on car repairs. This means that, on average, $837 worth of car repairs were covered by the extended warranty. However, with extended warranties costing an average of $1,200 to buy in the first place, people actually lost more than $350.

Had those people just paid for car repairs when they occurred, they would have been $363 ahead on average. Plain and simple, this means that extended warranties are not a good investment. In the end, they do not save the average motorist any money. People would be better off paying out of pocket for vehicle repairs when they happen.

8. Some Brands Charge Even More For Them

An extended warranty on a second-hand Toyota can be bought for around $1,000. An extended warranty on an equivalent Chrysler (same year, same mileage) can cost as much as $2,500. Why the difference in price? Chrysler models have a bad reputation for breaking down more often. The more likely a vehicle is to breakdown and need maintenance, the more expensive an extended warranty will cost.

So which car brands are prone to needing frequent repairs, and therefore will charge more for extended warranties? The answers are BMW, Chrysler, Dodge and Mercedes-Benz. By charging more for the extended warranties, these brands are telegraphing that they sell among the least reliable vehicles on the roads. Conversely, the car brands with the cheapest extended warranties are Honda, Subaru, and Toyota, which happen to be some of the most reliable brands.

7. You Can Negotiate The Price

A sales person at the dealership offers you an extended warranty for $2,000. You politely decline. The sales person then drops the price for that same extended warranty to $1,300. This should tell you that the price, like most things when it comes to buying a car, is negotiable. There is nothing stopping you from offering $750, or even $500, for that extended warranty. You can even negotiate an extended warranty as part of the total price you pay on a used vehicle, if you’re lucky.

The worst thing sales staff could respond with is “No.” If you are planning to buy an extended warranty, be sure that you get it for the very best price. That won’t be the first price you are offered. However, if you negotiate the cost of an extended warranty down, make sure you’re not getting less coverage. Many car dealerships pull a bait-and-switch on customers, charging them for a premium extended warranty and then providing them with only basic warranty coverage.

6. You Don’t Have to Buy From Dealers

If you really want an extended warranty on a used car, do yourself a favor and shop around. After all, dealerships aren’t the only place where you can purchase one. Various banks, insurance companies, and automotive clubs also sell extended warranties on cars. You’ll find many of them offer more attractive prices than you’ll find through the dealership.

However, be aware that interest can be charged on warranty fees, especially if you pay for an extended warranty on a monthly payment plan. The interest rates charged at dealerships tend to be a lot higher than those charged by third party insurance companies or auto clubs. Shop around and you’ll be surprised at how much money you can save.

5. Extended Warranty Scams Are Pervasive

Scam artists love extended car warranties. In fact, scams related to extended warranties are among the most pervasive in North America. The Better Business Bureau receives thousands of complaints each year from consumers who have been ripped off by a scammer peddling an extended warranty for their car. Beware of any solicitations for warranties that come through the mail or by telephone, and never give out your credit card number to these people.

Also, you never want to buy an extended warranty that will be mailed to you later. If you do purchase an extended warranty, then you want to be able to read it upfront and know exactly what all the coverage includes. More importantly, you want to leave the building with those documents in your hand. This is why it is best to purchase directly from a dealership, bank, insurance company, or automotive club. Remember that you should be the one searching for an extended warranty, not responding to cold calls. If a company calls you out of the blue offering an extended car warranty, just hang up.

4. Get the Full Protection

We’re not saying you should never buy an extended warranty on a second-hand car. However, if you are going to take the plunge and purchase one, then be sure to get the full bumper-to-bumper coverage. There is very little price difference between a bumper-to-bumper extended warranty and limited extended warranty that only covers the engine and powertrain on a car. Might as well go all-in.

Consumer Reports found that an extended warranty providing the maximum protection for a vehicle typically costs less than $100 more than a limited extended warranty that only covers what’s under the hood. So, if you’re going to splash out on an extended warranty for a used vehicle, be sure and get the maximum coverage that is available.

3. Wait For The Factory Warranty To Expire

New cars all comes with what’s known as a “factory warranty.” This is the standard warranty on a car that is usually good for three-to-five years or until you exceed a certain number of miles. Some used cars are still covered by the factory warranty, depending on their age and odometer reading. Most car experts recommend that people try to buy a used car that still has some factory warranty coverage on it. Then remember that you do not need an extended warranty on a car until the factory warranty expires.

Most dealerships will contact you when the factory warranty is about to expire and ask you to come in to discuss purchasing an extended warranty. However, some unscrupulous car dealerships will try to roll an extended warranty into the purchase of a used vehicle, simply to drive the price up. Don’t be fooled. Use the time while your car is still covered by the factory warranty to get a sense of its reliability. Then you can decide whether you feel an extended warranty is needed when the factory warranty runs out.

2. They Are Used to Drive Maintenance Appointments

Extended warranties usually cost more than the upfront price. You may pay $1,200 for one on a used car, but that’s not the end. Most extended warranties also require you to pay to have your vehicle serviced only at the dealership, and at set times. That means you will regularly pay out of pocket for oil changes and to have the tires rotated at the dealership.

This practice rubs many people the wrong way. They feel that the car dealership is leveraging the extended warranty to drive business to their service department. Frankly, those people are exactly right. More than covering the cost of repairs for the policy holder, extended warranties are used to lock-up customers and ensure that they do everything needed for their car at the dealership. There’s no options for doing it yourself or shopping around for a better price. You’re trapped.

1. There Are Plenty of Loopholes

Most people feel that warranties are a waste of money because they contain complicated loopholes and fine print. This language enables the warranty provider to not honor them when a vehicle breaks down. What’s the point of buying an extended warranty when it won’t actually help you get your car fixed?

For example, if you miss a scheduled maintenance appointment, the dealer could render the warranty void. There goes thousands of dollars. If you get the car serviced at another garage, that could also void the warranty. Also what exactly does the warranty cover? You might assume it covers everything under the hood, only to read the small type and discover that it only covers “vehicle parts bathed in oil.” That’s not going to cover the radiator that just blew. Extended warranties are tricky. The bottom line is that they are designed to ensure that the customer pays more money and the company backing the warranty does not.


This article was worked on by a variety of people from the Autoversed team, including freelancers, editors, and/or other full-time employees.