Extended Warranty: To Buy Or Not To Buy

Fear of expensive car repairs drive people to consider extended warranties for their cars. To be sure extended warranties may save you thousands of dollars, but are they really that necessary?

Extended warranty is a fancy way of saying longer-term service contract that covers the cost of certain repairs and maintenance after your factory coverage runs out.

In some cases, extended warranties will pay themselves off in the long-run. Repairs to your car's transmission, for example, may cost you around $2,000, air conditioning may run up to $700. If you have an extended warranty to cover it, you already got your money's worth.

However reassuring extended warranties may be, they might not be the right thing for you. Before adding this expensive service to your new car bill, ask yourself these questions:

How long are you going to keep your car? You may not need extended coverage if you'll turn around and sell it before the original warranty expires.

Understand your car's warranty. Manufacturers now offer comprehensive long-term warranties, so you may not need extra coverage after all. You may also be eligible for after warranty assistance

Do you have enough savings to cover unexpected, potentially expensive car repairs?

How reliable is your car?

What's the time or mileage limit on the extended warranty?

What's covered?

What's the deductible?

Who does the repairs?

Who pays the bills?

Even if you do decide an extended warranty is the smart thing to do, there's no need to buy it at the dealer's or right off the bat. You'll still be able to purchase an extended warranty later, even years down the road.

Keep in mind that extended warranty starts the day you purchase it, so you'll have double coverage until the original warranty expires.

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