- If you seek an extended warranty for your new car, you can shop around for the best price.
- The Better Business Bureau can help you pick the right extended warranty provider for you.
- You can sometimes negotiate to receive even more than a traditional warranty covers.
You just negotiated a great deal on a new (or new-to-you) car. Congratulations! But now the dealer suggests that you buy an extended warranty. Should you?
Consider these key questions before you make a decision:
Do you really need an extended warranty? According to Traci Gundersen, former director of the Utah Division of Consumer Protection, the answer to whether or not to buy a warranty often depends upon on your financial ability to make future repairs and tolerance for risk.
“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,” says Gundersen. But that only works if you have the money available to put away right now.
It also makes a difference if you’re buying a brand-new vehicle. Ronald Montoya, senior 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. On the other hand, if you purchase a used car and do not know its maintenance history—or if you buy a new or used one that is expensive to repair—then purchasing a warranty makes more sense.
When can you buy an extended warranty? You don’t need to buy an extended warranty at the same time you buy the car. Your new car comes with a fairly comprehensive warranty that may run as long as five years or more. Besides, waiting has its perks, as you get to drive the car for a year or two and see how it holds up.
“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.
What are the options? You can go with the extended 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. A call to the Better Business Bureau or to your state’s insurance department or attorney general’s office could lend insights into a provider’s reliability, Gundersen adds.
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 where 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.’ ”
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.
- 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.
- Some warranties require that the dealer who sold you the car conduct all maintenance and repairs, 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.
Can the terms of the warranty be negotiated? In some cases. If so, make sure you document any changes in the policy. “If the company is willing to add to or subtract from the standard policy, get those changes in writing,” Gunderson says.
Anything else? Before rolling the extended warranty premium into your car loan, find out what it will cost. 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.