Is an Extended Car Warranty Really Worth the Cost?

Here’s how having a protection plan can help you care for your car and make ownership a little easier.

by NEA Member Benefits

Key takeaways

  • You can avoid financial risk with an extended warranty. 
  • Save even more money by purchasing sooner rather than later.
  • Extended warranties can offer extra perks such as 24/7 roadside assistance, a rental coverage and more.

With any important personal asset, you want to make sure you are covered if things go wrong. Your car is one of your biggest assets, and an extended warranty plan can cover the cost of repairs for as long as you own your car.

There is no law requiring extended vehicle coverage, but there is a financial risk. An extended warranty is similar to an insurance policy: If major repairs are needed, you could end up saving thousands of dollars. Also, the cost of many smaller repairs can add up over time. These costs are covered within the terms of your protection plan.

Let’s look at how an extended car warranty is worth the investment:

Extended warranties can cover items not included in factory warranties. Every new car comes with a factory warranty, which typically covers specific mechanical breakdowns for a set amount of time. You might consider extra coverage on a new car because factory plans often don’t include perks such as round-the-clock roadside assistance, towing and a rental car while repairs are being completed.  

Once the factory warranty expires, you’ll be responsible for all repair costs. But you can make sure you aren’t hit with large out-of-pocket expenses by getting an extended vehicle protection plan, which picks up when the factory warranty ends. The coverage will be similar to factory warranties, and extended protection companies often are the same ones that are providing those original factory warranties.

Aging cars are prone to frequent, costly breakdowns. With extended vehicle protection, you can rest easy knowing that a factory-like warranty is covering your auto asset.

You’ll lock in savings upfront. If you go ahead and buy an extended warranty on your new car, you’ll save money. That’s because as a car ages, the cost of extended protection goes up. If you buy one sooner, rather than later, you’ll pay less for the extended warranty.  

You’ll protect yourself against inflation. When you buy an extended car warranty, you get a fixed price at the time of purchase. However, auto parts and the cost of labor are subject to inflation. As long as your repairs are included in your plan, they’ll be paid for no matter how much the cost of repairs has gone up since you purchased your plan.

You’ll save time by eliminating haggling. With an extended protection plan, you take your car into the shop, and they deal directly with the provider administrator. Those two parties handle payment, so you won’t have to deal with haggling on the price of expensive repairs.

Extended warranties offer extra perks. Extended warranties can include 24/7 roadside assistance, a rental car to use while your vehicle is being repaired, and your choice of licensed repair facilities, including dealerships or personal mechanics. If you can’t afford to be without a car even for a day, then these benefits are essential.

If you sell your car, a warranty can give it added value. Extended warranties often are transferable (for about $40-$50), which can improve the chances of selling your used car at a higher price.

The bottom line: Whether an extended vehicle warranty is worth it really depends on you. Do you protect your home with homeowner’s insurance? Do you protect your health with health insurance? Then, by the same logic, you might decide that a large asset—such as your car—deserves protection from risk through an extended vehicle protection plan.