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How to Save a Bundle on Car Repairs

The smartest way to save may surprise you. Find out how to keep your car on the road for less—and get peace of mind you can trust.

You just negotiated a great deal on a new (or new-to-you) car. Congratulations! But now the dealer suggests you buy an extended warranty. Should you?

Here’s what you need to know about this often misunderstood offer and how it just might make the pride of ownership a little less costly over the long term.

Do you really need an extended warranty? According to Traci Gundersen, director of the Utah Division of Consumer Protection, the answer to whether or not to buy a warranty depends, in part, on the year, make and model of car. It also can depend on your financial ability to make future repairs as well as your emotional tolerance for risk.

It’s true that historical records and independent studies tend to show that extended warranties are not always worth the money. “If the consumer took the money they would have paid for an extended warranty and put it in a bank account, that amount would go a long way toward covering many future repairs,” Gundersen says. But that only works if you have the money available to put away right now.

Ronald Montoya, consumer advice editor at Edmunds, a car shopping website, says new cars are more reliable than ever. “If you maintain the car as the manufacturer recommends, you won’t run into many problems down the line,” he says. But that’s more likely if you really do follow the maintenance schedule.

In addition, if you don’t know a used car’s maintenance history, or if the type of car you want to buy is known for being not-so-reliable or if it’s really expensive to repair, then purchasing a warranty makes more sense. And if you’re the type of person for whom a warranty equals peace of mind, then the choice becomes clearer.

Where can you buy an extended warranty? You don’t need to buy the warranty at the same time you buy the car. Your new car comes with a fairly comprehensive warranty that may run as long as 5 years or more. Besides, waiting has its perks:
• You no longer have the dealer breathing down your neck.
• You get to drive the car for a year or two and see how it holds up.
• You have more time to shop.

“Consumers don’t realize that they can purchase the warranty at any time from the moment they purchase the car to the moment before the warranty expires,” Montoya says. However, the cost of warranties can fluctuate over time, depending on market conditions.

What are the options? You can go with the warranty offered by the dealership or you can go third party. Make sure the warranty is backed by the car manufacturer or is offered by a reputable third-party provider, Montoya says. Many companies are less than reputable and tend go under in a few years. A call to the Better Business Bureau or to your state’s insurance department or attorney general’s office could clear up any lingering doubts, Gundersen adds.

For example, CARCHEX is one third-party provider that is accredited by the Better Business Bureau and sports the bureau’s A+ rating. It also claims exclusive endorsements from both Carfax and Kelly Blue Book.

Can the price of a warranty be negotiated? You should certainly try. For example, if you’re buying a Toyota, shop the warranty around just like you would shop for that Toyota. You don’t have to buy the warranty from the same dealership when you buy your new car.

“Call around,” Montoya says. “You can say, ‘Hey, a dealership down the street quoted me $100 less. If you can beat that price, you get the business.’”

Will the terms of the warranty be negotiated? According to Gundersen, the answer is probably no. Warranty provisions are generally set in stone. “If the company is willing to add to or subtract from the standard policy, get those changes in writing,” she says.

Above all, remember that coverage is based on the fine print in the warranty contract. “Simply reading a brochure that broadly outlines coverage is not sufficient,” Gunderson says.

What does it cover? It depends on the policy. “Consumers should read all the small print to find out exactly what coverage they are being offered,” Gundersen says. Take the time to really understand what you are getting—or not getting. Doing that will prevent any misunderstandings and could save you—and the warranty provider—trouble later on.

For example:

• Some warranties cover parts only up to a certain dollar amount, while some offer full coverage.
• Some policies offer extra perks such as roadside assistance and car rental coverage.
• Cancellation rights vary by warranty. Generally any refund will be prorated against the remaining coverage. Often claims already paid will be offset against any refund amount.
• Some warranties require maintenance and repairs be done by the dealer that sold you the car, while others allow you to go to any licensed facility.
• Many policies list every single covered component. If it’s not listed, it’s not covered. If a non-covered part fails and damages a covered part, that part typically may not be covered either.

Anything else? Be wary of the seductive idea of rolling the extended warranty premium into your car loan. Yes, the additional monthly payment may be only $50, but remember to ask how much the payments increase the total cost of the warranty due to paying interest over the life of the loan. And watch out for warranties that “guarantee” a refund on all or part of the warranty purchase price if you never use it. “These programs have been known to fail,” Gundersen says.

Learn more about protecting your vehicle in our Auto Warranty Research Center.

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