A natural and often frustrating part of owning a car is dealing with the burden and financial costs of break downs and repairs. During the factory warranty period, your car’s manufacturer will cover the bill for labour and repair costs should certain parts or components be defective and fail. Beyond that, purchasing an extended warranty or service contract will make this kind of coverage last longer.
If you’re not sure what an extended warranty is, the various types, or what your car manufacturer’s warranty means – check out our blog here.
Now let’s take a look at what you should consider when deciding if an extended warranty is right for you. New or used, the four important questions to ask yourself are:
- How many years do you plan to own your car?
- How many kilometers do you plan to drive each year?
- How dependable is the vehicle you’re buying? New or used, you’ll find vehicle reliability ratings from credible sources like JD Power.
- How much risk are you ok with? For example, are you ok with safe bets or would you rather minimize risk as much as possible and not bet with extra protection?
Now let’s apply these considerations based on whether you purchased a new or used car.
Extended Warranty Considerations for a New Car
The main areas to consider here are (1) how long you plan on owning your car and (2) how many kilometers you plan to drive each year. If you plan on owning your car for a few years and with minimal use, you may be fine without an extended warranty as you’ll likely face minimal to no repair costs.
On the other hand, if you do plan on keeping your car for a long time (such as six to ten years) or if you plan on driving many kilometers each year beyond your manufacturer’s warranty, an extended warranty may make more sense.
For example, if you usually keep your car for four years and your car manufacturer has a warranty beyond that, then you can likely make a safe bet in relying on just your manufacturer’s warranty.
However, if you hope to keep your car for 10 years and it only comes with a three-year/36,000km warranty, extended warranty coverage gives you peace of mind for the years after your new car manufacturer’s warranty expires.
It’s all in weighing your planned years of ownership against what’s offered from your car manufacturer. With your manufacturer’s warranty, make sure to double check the coverage periods and covered components for bumper-to-bumper versus powertrain.
Extended Warranty Considerations for a Used Car
If you own a used car, depending on how old and how many kilometers it’s been driven, check if any manufacturer warranty coverages still exist. If your manufacturer warranties have expired or will expire soon, then considering an extended warranty can come in handy.
The most important questions to consider for a used car is (1) how reliable is your car and (2) was it properly maintained.
Unlike new cars that are generally known to be reliable, for used cars you need to weigh the likelihood of costs incurred with repairs and breakdowns during your ownership.
If the car is relatively old and the car model is known to have reliability issues, extended warranty will save you money on breakdown and repair costs needed down the road.
In some cases, used cars may have been better cared for and maintained by past owners that help extend the life of your car and may mean you can make a safe bet without an extended warranty.
An option to help you determine reliability includes looking up reliability ratings on JD Power score. If your make and model has a less than average predicted rating, an extra protection could save you money in the long term.
General Extended Warranty Considerations
It’s important to keep in mind when shopping around that no warranty will cover each part of your car and not all extended warranty coverages offered are created equal. Our advice is to take your time, get all the information you need and ask your dealer or financial service advisor questions. Don’t feel pressured because you can always sign up for an extended warranty when you’re ready.
Most warranty providers have different coverage tiers that allow you to customize the contract to fit your need so that you don’t have to choose all or nothing. This allows you to determine what type of coverage, plan length, and price point is right for you.
Keep in mind most warranty policies also allow ownership transfer, which will add value to your car, in case you decide to privately sell your car in the future.
In general, if you plan on driving your car for a long time, crave reliability, like having extra protection, or don’t like having to worry – finding the right extended warranty can be worth it.