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How to Pay for Unexpected Car Repairs

Can you afford the inevitable breakdown? Here are ways to manage the risk.

It’s early morning and you’re rushing out the door to get to school. You start your car… and your “check engine light” turns on. As you mentally run through all the things it could possibly be, you start to worry about how you’re going to pay for repairs.

This can happen to anyone, often at the worst possible moment. Car repairs are never convenient and often quite costly. According to CarMD.com, the average car repair cost in 2016 was $398.

For example, here are the average costs of some of the most common check engine light vehicle repairs:

  • Catalytic converter: $1,190
  • Ignition coil and spark plugs: $401
  • Mass airflow sensor: $378
  • O2 sensor: $258
  • Thermostat: $255

And although less common, you’d really have to shell out to replace these parts:

  • Cylinder head assembly and spark plug(s): $2,493
  • Hybrid battery: $3,709.96
  • Transmission: $3,927.33
  • Engine: $7,124

Car repairs are inevitable, yet many of us don’t, or can’t, have money set aside specifically for that purpose.

Buying Peace of Mind

So how much is your peace of mind worth? Is it worth $150 a month not to be hit with an unexpected $1,000 auto repair?

Like any insurance, a vehicle protection plan is something you hope you never have to use. “It’s a way to plan and budget for unexpected auto repairs with a manageable monthly payment,” says Joe Campanella, Executive Vice President of Business Development at CARCHEX, which provides vehicle protection plans for cars.

As cars have more electrical and electronic components, repairs can be very expensive. While an engine replacement is still the biggest, an engine control unit can run $3,000, a transmission overhaul almost $4,000, even a relatively minor incident such as a head gasket failure can cost $1,000.

Also, “repairs for electric cars will be more expensive due to the fact there are more moving parts and items to break than normal combustion cars,” Campanella cautions. “Further, only very specialized mechanics can work on or fix electric cars, thus making them more expensive to repair.”

A combustion engine battery is easy and relatively inexpensive to replace, but a hybrid vehicle battery can cost $4,000.

“That’s a big deal,” Campanella says. “Most people don’t have that kind of money lying around.”

Vehicle protection plans kick in after the factory warranty expires and pays for repairs—not maintenance, so you still are paying out-of-pocket for costs such as oil changes—according to the level of coverage you choose. The most comprehensive vehicle protection plans are exclusionary, commonly referred to as “bumper to bumper,” and cover everything except a small list of items that are excluded, brake pads, belts, hoses and other maintenance items.

Exclusionary coverage, which is called Titanium in CARCHEX’s lineup, averages $125-$150 a month, or $3,500 over the life of the vehicle protection plan, although the actual rate depends on the year, make, model and mileage on the car. The next step down, CARCHEX’s Platinum plan, is an inclusionary vehicle protection plan—that is, it specifically lists the repairs that are covered.

This coverage is nearly as good, Campanella says, and most of the vehicle protection plans sold by CARCHEX are in the Titanium or Platinum category. Other options are Gold, Silver and Bronze. This last one is the cheapest and covers the power train—engine and transmission—and may be the best for an older car. Many of the programs include additional benefits such as 24/7 roadside assistance, car rental coverage and lodging coverage, if needed.

And as an NEA member, you’ll get a special discount on any policy through the NEA Vehicle Protection Program, backed by CARCHEX.

It’s About Managing Risk

Auto repair specialists mention that peace of mind may be a large part of what you’re buying. “I’m not sure you’re going to get your money back,” says Michael Cunningham, owner and operator of Bethesda Import Specialists in Washington, D.C.

However, while not all customers use their vehicle protection plans, having one protects you from a surprise repair you may not be able to afford.

For example, Cunningham says the high electronics component in new cars makes repairs more expensive and more likely. And an alternator or A/C compressor will run you more than $1,000. Even a more traditional repair, like a timing belt, can top $2,000.

Ultimately, a vehicle protection plan, like any insurance, is about managing risk, and a big factor in your choice will be your tolerance for risk. Pooling risk through insurance, by its very nature, means that some people will use it, and others won’t. But all will have reduced their risk to manageable proportions, and that can help the more risk-averse among us sleep better at night.

Other Ways to Help Manage Costly Repairs

“The reality is that vehicles ultimately break down,” CARCHEX’s Campanella says. But vehicle protection plans aren’t for everyone. And there are things you can do to reduce the risk of a major repair, short of buying a vehicle protection plan.

Research before you buy. Read up on the various makes and models for historical data on repairs—before you buy any car. Check out Consumer Reports or Edmunds.com, among others. If you’re buying a used car, get a vehicle history report from sites such as CARFAXAutocheck, Research.com and the National Insurance Crime Bureau (NICB). The NEA Auto Buying Program also gives you access to useful research through TRUECar.

Understand the coverage you already have. Some factory warranties run beyond the standard 3-5 years, even to 7 years.

Follow your car’s maintenance schedule. Break out that book in your glove compartment. Scheduled maintenance often can prevent, or catch, problems before they become huge repairs.

Fix the small stuff early. Temperature or oil light on? Engine running rough? Spots on your driveway? Take your car in for service to prevent expensive repairs. Overheating an engine can lead to severe damage and that expensive engine replacement. Ditto for a faulty water pump. And leaking fluid can be due to a worn seal that’s easy and inexpensive to replace, but ignoring it can entail a pricey transmission overhaul.

Start a car emergency fund. Instead of (or even in addition to) purchasing a vehicle protection plan, contribute to a car repair savings fund every month, or maintain a rainy-day fund big enough to cover scheduled maintenance and unexpected auto repairs. Consider setting up an emergency fund with an online savings program for NEA members.

Lease instead of buy. Leasing cars eliminates the need for a vehicle protection plan because the factory warranty generally will cover the leasing period.

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