Insurance

What are Extended Car Warranties?

What are Extended Car Warranties?

When you purchase a new car it is likely that the dealer will offer you an extended auto warranty. This may be a good idea if you plan on keeping the car past the term of the manufacturer warranty which is usually 3 to 5 years. Extended warranties on new cars can cost around $1,000 while those for a used car may be 2 or 3 times that amount. The purpose of the warranty is to cover the cost of repairs on the car after the term of the original warranty has expired. There are mixed opinions regarding the usefulness of such a warranty. More and more people are filing claims with the Better Business Bureau complaining that obligations included in the extended warranty have not been met. This is in part due to lax regulation in this area of automobile sales.

Consumer Reports conducted a survey in which 65 percent of car owners said they paid significantly more for a new car warranty than they saved in the cost of repairs. However, the consumer car buying web site www.Edmunds.com claims an extended warranty can provide peace of mind with the added insurance so long as agreeable terms have been negotiated.

Some tips for choosing an extended warranty:

  • Buy the manufacturer's warranty if possible rather than from a third-party provider.
  • Shop around and check with an established mechanic on the reliability of the warranty you are considering.
  • Check the credibility of the firm offering the warranty on websites such as www.bbb.org.
  • It is possible to negotiate the price of the extended warranty just as you negotiated the price of the car.
  • Check if the warranty is transferable. Sometimes a modest fee is involved but it can be an added incentive when you are selling the car.



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