Deciding whether you should purchase a warranty for a used car can be tricky. With potential repair costs looming and budgets becoming more constrained, it’s a decision that pits reliability against risk.
This article will help you determine if a used car warranty is beneficial for you.
What Is a Used Car Warranty?
A used car warranty is a service agreement that provides coverage for repairs and maintenance on a used car. It serves as protection against unforeseen mechanical or electrical issues that may arise after purchasing a used car.
These warranties differ in terms of length, mileage limits, and the scope of coverage, so it’s essential for buyers to thoroughly examine the terms before committing.
What is a Vehicle Service Contract?
When buying a used car, it’s important to understand the differences between warranties and vehicle service contracts. A key difference between these two is the scope of coverage.
Vehicle service contracts include standard maintenance tasks like oil changes or tire rotations, whereas extended warranties take care of repair expenses in case of a breakdown, which are often much more expensive.
How Do Used Car Warranties Work?
Used car warranties generally provide coverage for specific parts or systems of the car, such as the engine or transmission. Depending on the type of warranty, you may need to pay a deductible when filing a claim.
Most warranties also require that you use authorized service centers or dealerships for repairs that are covered. The level of coverage varies depending on the selected plan.
What Repairs and Services Are Typically Covered?
Common repairs included in warranties typically cover problems with the engine, transmission, brakes and electrical systems. Standard warranties might also provide services such as towing, roadside assistance or rental car reimbursement in case the vehicle requires repairs. Extended warranties often deliver broader coverage for extra components like the air conditioning or suspension.
What’s Not Covered Under a Used Car Warranty?
Regular maintenance services such as oil changes, tire rotations or brake pad replacements are usually not included in used car warranties.
Cosmetic issues, including scratches, dents or wear on upholstery, aren’t included either. Furthermore, pre-existing issues or damage resulting from misuse, accidents or neglect are also not covered in most cases.
Types of Used Car Warranties
Manufacturer’s Warranty
- Covers repairs and services for a limited time or mileage.
- Can include comprehensive coverage.
- Often comes with additional perks such as roadside assistance.
- Transferable to the next owner, increasing resale value.
Extended Warranty Plans
- Provides additional coverage after the original manufacturer’s warranty expires.
- Available for both new and used vehicles.
- Can be purchased through dealerships or third-party providers.
- Offers various levels of coverage.
- May cover more components or services beyond the manufacturer’s warranty.
Third-Party Car Warranty Plans
- Offered by independent companies, not the vehicle manufacturer.
- Can be customized for different levels of coverage.
- Often less expensive than manufacturer warranties.
- May have more flexible tems, but can have more restrictions.
- Repairs generally must be done at authorized repair shops.
Powertrain vs. Bumper-to-Bumper Coverage
- Powertrain Warranty: Covers key components like the engine, transmission and drivetrain.
- Bumper-to-Bumper Insurance Coverage: Covers almost all parts of the vehicle, excluding wear-and-tear items.
- Powertrain is more limited in scope while bumper-to-bumper provides more extensive protection. Bumper-to-bumper warranties are also more expensive.
Pros and Cons of Buying a Used Car Warranty
Pros:
- Peace of mind if something breaks down.
- Saves money on unexpected repairs.
- Can increase resale value a bit.
Cons:
- Extra cost upfront.
- Might not cover everything you expect.
- Some warranties have tricky fine print.
Should I Buy an Extended Warranty on a Used Car?
When considering an extended warranty, it’s important to weigh the pros and cons. Let’s take a closer look at when a used car warranty makes sense and when it might not be necessary.
When a Used Car Warranty Is Worth It
A warranty is a good idea if your car is old or has considerable mileage, as the chances of needing repairs increase. It’s also beneficial if you prefer not to handle repairs yourself or plan to keep the car for a long time. Plus, if a dealer provides a reliable warranty with the sale, that's an added perk.
When You Might Not Need a Warranty
If the car is still under its original factory warranty, there's no need to pay for an extended warranty, so, avoid paying for it twice.
A warranty may not be necessary if you're skilled in car repairs or the model has a reputation for reliability and a strong track record. Similarly, short-term owners might not find the warranty worthwhile either.
Common Misconceptions About Used Car Warranties
Many people think warranties cover all possible issues, but there are almost always some exclusions—be sure to review what’s not covered.
Another common misconception is that all warranties are the same when in reality, they vary, so it’s important to compare them.
Some people also believe they will get scammed. While some warranties may have a reputation for being scams, that’s not always the case—just be selective and cautious in your choices.
Evaluating the Cost-Benefit of a Warranty
Let’s dive into how much an extended warranty typically costs and what factors influence the price.
How Much Does an Extended Warranty Cost?
Cost is an important factor when considering an extended warranty for used cars. It typically ranges between $1,300 and $4,600 per year, depending on factors such as the provider, coverage details, the make, model and year of your car, its mileage, your location, how much you drive and the cost of replacing parts and labor.
Other factors that influence the expense of an extended warranty for used cars include the extent of coverage, the level of coverage and your deductible amount. A higher deductible results in a lower cost for the warranty, while a lower deductible leads to a higher premium for the coverage.
Comparing Warranty Costs vs. Potential Repair Costs
Understanding the cost of car repairs is important because many of these expenses may not be included in your warranty. So, when selecting a warranty for a used car, make sure to evaluate the costs against potential repair expenses, which can range from $100 for small repairs to over $4,000 for major issues like transmission failures. Average repair costs typically fall between $400 and $800 a year.
You should also consider your vehicle’s reliability using ratings and VIN history and set your budget. If the car has high mileage and you're on a tight budget, a warranty may be a smart choice. However, if it’s a reliable car and you don’t have financial constraints, you might want to skip the warranty.
We advise negotiating or looking into third-party options and comparing the warranty against a year or two of expected repair costs. A warranty could be beneficial for less reliable cars or for those seeking peace of mind. However, if you have a solid vehicle and sufficient finances, it might be unnecessary.
What to Look for in a Used Car Warranty
Understanding the Fine Print
When choosing a warranty, it's important to carefully examine the specifics. These details outline what is included, the duration of the coverage and the process for filing claims.
Look for clear terms regarding repairs, roadside assistance and whether both parts and labor are covered. Also, be mindful of deductibles and hidden conditions, as these could create difficulties down the line.
Before making a decision, ensure that the coverage aligns with your needs and preferences.
Key Exclusions and Limitations
Not everything is usually covered in a used car warranty, so be sure to review the exclusions carefully. Common exclusions include components subject to wear and tear, such as brakes and tires, damage resulting from misuse or any pre-existing conditions overlooked during the inspection.
Some warranties may also limit coverage by mileage or time, while others may not cover specific repairs if you skip regular maintenance. Being aware of these limitations helps you avoid unexpected issues later and allows you to plan accordingly.
Red Flags to Watch for When Buying a Warranty
Be on the lookout for potential scams or misleading offers:
- Extremely low-cost warranties that seem too good to be true
- Vague or unclear terms
- Unreliable customer service or complaints from other buyers
- Unreasonable claims processing times or difficult-to-reach claims support
- Providers with bad reviews or a questionable reputation
Tips for Getting the Best Deal on a Used Car Warranty
- Research Market Rates: Before entering negotiations, research the average warranty costs for your car's make, model and mileage. Resources like Consumer Reports can help to ensure you don't overpay.
- Ask for Quotes from Multiple Providers: Don’t settle for the first offer. Reach out to various dealerships, third-party warranty providers and your insurance company. Use competing quotes as bargaining chips and reference a better price you've received to negotiate a discount.
- Timing Matters: Consider negotiating toward the end of the month or during off-peak times when providers may be more flexible in their negotiations.
- Question the Coverage: Inquire about what’s covered and push back on unnecessary extras. Narrowing down the options can lower the cost while still maintaining essential coverage.
- Be Prepared to Walk Away: If the salesperson is unwilling to negotiate, kindly inform them that you'll consider other options. They may reach out with a more attractive deal to prevent losing the sale.
Checking the Reputation of Third-Party Warranty Providers
Prior to purchasing a used car warranty from a third-party provider, make sure to research their track record. Look for customer feedback, ratings and any records of claims that were denied. A trustworthy company will offer straightforward terms and reliable customer service.
Instead of simply choosing the lowest-priced option, check their financial stability to ensure they can cover claims when necessary.
Alternatives to a Warranty
- Savings: A warranty is not the only way to protect yourself. Creating a savings account for repairs provides flexibility and helps you avoid monthly payments.
- Add-Ons: Some insurance policies offer additional options, like mechanical breakdown coverage, which may overlap with the benefits of a warranty.
- CPO Built-In Protections: There are certified pre-owned warranty options available through dealerships, which often come with built-in protections.
Final Thoughts – Should You Buy a Used Car Warranty?
Ultimately, whether to purchase a warranty for a used car depends on your needs and expectations. If peace of mind is important to you, if you own an older vehicle that’s more likely to need repairs or if you don’t have enough savings to cover unforeseen breakdowns, a warranty could be a wise choice.
On the other hand, if you own a reliable car with a good maintenance history and prefer to set aside money for repairs, you may decide against it. Trust your judgment and do the math to determine what’s best for your situation.