Car Buyer Labs

Car Buying Advice, Tips, and Reviews

A row of wooden block spells out 'warranty.'

Should You Get an Extended Warranty?

The short answer to that question is: probably not, but maybe. Helpful, right? Honestly, it’s a complex question that doesn’t have a short and sweet answer, as much as I’d like to be able to provide one. In part, this is because people can mean a couple of different things when they refer to extended warranties. Additionally, since these warranties are provided by so many different companies, they vary significantly in terms of value and usefulness.

I also can’t give you a simple answer due to the fact that it really depends on your situation and the vehicle you’re driving. What I can do, however, is provide you with information about warranties so that you can make an informed decision. I can also give you some tips on how to spot a warranty that’s not worth it or that is an outright scam because, believe me, they’re out there. Let’s jump in…

What Is a Warranty?

Before we go any further, let’s take a moment to talk about what a warranty is and how it works because this is something that isn’t necessarily simple. First, let’s talk about what a warranty isn’t––a warranty isn’t car insurance, and it doesn’t help you after a collision; that’s a whole other thing you need to have by law. A warranty is coverage provided by a company for the parts on a vehicle that guarantees those parts will last for a certain amount of time and use under normal conditions. If the part fails within those terms, then the company will replace it free of charge.

That’s it––a warranty is just a fancy replacement plan for your car’s parts. Now there are a couple of very important details in my explanation, like “a certain amount of time and use” and “under normal conditions.” These two things are what people tend to overlook and where things can go wrong with a warranty or how someone thinks something is covered when it isn’t. Warranty coverage isn’t absolute and isn’t designed to simply replace everything forever––no company would ever make a profit with that kind of program.

First and foremost, there is a duration limit on every warranty, with the exception of ones that are sold as a “Lifetime Warranty,” but those are pretty rare in the auto industry. Your typical warranty has two limits: time and mileage. Coverage for three years or 36,000 miles, for example, means the warranty will last for three years from when it starts or for 36,000 miles of driving, whichever comes first. That last bit is important. If you drive 36,000 miles in just 18 months, then the warranty is over long before the three-year mark.

The other restriction is that warranty coverage is always for parts under normal use as outlined by the manufacturer (or whatever company offers the warranty). When it comes to cars, that means typical daily driving; anything outside of that could be considered excessive use rather than normal wear and tear, which means it’s not covered by the warranty. Tow too much weight with your truck or damage your suspension while going off-road, and you’re looking at wear outside of normal use, which means your warranty won’t cover the repairs or replacement.

Different Types of Warranties

There are two main types of warranties, and it’s important to know the difference between them:

  • Manufacturer Warranty: This is the warranty coverage that comes with the vehicle when it’s sold new or Certified Pre-Owned (CPO). It’s included in the cost of the car and is provided by the vehicle’s original manufacturer. Buy a new Ford F-150, and you have a manufacturer warranty from Ford.
  • Third-Party Warranty: This is what we’re talking about with most extended warranties––they’re from a third-party company instead of the vehicle manufacturer. You’ll often find these on used cars from reputable dealerships, or you can buy them directly from a warranty company.

It’s worth noting that most manufacturer warranties these days will transfer with ownership of the vehicle as long as there’s still coverage left. So a three-year-old used car with 50,000 miles on it that originally came with a five-year or 60,000-mile powertrain warranty still has what is essentially a two-year or 10,000-mile powertrain warranty. This isn’t always the case, so make sure to look at the specifics of any used vehicle you’re interested in buying and the terms of its manufacturer warranty.

Different Types of Extended Warranties

Extended warranties are not all the same––that would be far too simple. In order to make things clear, we need to look at what an extended warranty can be:

  • Extended Warranty: A true extended warranty, which isn’t what most people mean when they use this term, is an extension of the original manufacturer warranty. For example, a car might be sold with a three-year or 36,000-mile bumper-to-bumper warranty, with an option to extend that by another two years and 24,000 miles for a fee. These are typically only available while the vehicle is still under the original coverage.
  • Service Contract: This is, confusingly enough, what most people actually mean when they refer to an extended warranty. This sort of coverage is provided by a third party and is not in any way connected to the original manufacturer’s warranty. There are tons of companies out there offering these types of contracts, and many of them are disreputable.

The biggest issue with these kinds of extended warranties is how different they can be when looking at one company compared to another. Some warranty providers are legitimate businesses offering greater peace of mind for drivers. Many others are running scams that are just this side of legal and designed to take your money and never cover anything. How do you tell the difference between them? That’s the neat part; you can’t.

Are Extended Warranties Worth It?

While I’m not a financial advisor, I can give you my opinion: most extended warranties aren’t worth it. If you want to choose a true extended warranty from the original manufacturer, that’s not necessarily a bad investment, but it really depends on the reliability of your vehicle. A good vehicle that’s very reliable probably won’t need the covered repairs in the first place, so you might not ever get any value from it. However, the peace of mind from knowing you have that coverage could be well worth the expense.

That being said, most extended warranties are simply not worth it. Far too often, people pay for these service contracts––which can cost several thousand dollars per year––only to never have anything actually covered by them. You’re better off putting that money aside and having it there if you need repairs. If you don’t need the repairs, you can put those savings towards your next vehicle or hang onto the money for when the unexpected happens.

How to Spot a Scam

The easiest way to avoid scams involving extended warranties is to never pay for one in the first place. Telephone scams involving fake extended warranties are the most common type out there––they’re everywhere and incredibly annoying. Never talk to someone who calls you about your car’s extended warranty; just assume it’s a scam every single time. If you want to extend your warranty for a new vehicle, you should contact the manufacturer directly or work through the dealership you bought the car from. They will be happy to talk to you and offer you a chance to give them more money. With third-party service contractors, it’s a lot more complicated, and there are so many of them running scams that it’s just not worth it. So the simple answer here is to assume anyone calling you about your car’s extended warranty is a scam and to avoid third-party service contracts.