Extended Warranties: Do you really need one on your new car?

You’re in the process of buying a new car (or new to you, at least) and before you know it, you’re in the office of a sales manager talking about all the “extra” stuff you can add on to your bill, including the option for an extended warranty. It all sounds good to you—being able to prevent any issues that may arise in the future with a swipe of the pen now—but how important is all of that, anyway?

Well, let’s take a look at extended warranties, and whether or not they are worth that additional financed payment at all.

 

The 411 on Extended Warranties

A typical extended warranty is just that—a warranty that picks up after the manufacturer’s warranty has run out. In truth, they aren’t typically warranties at all; they are Service Contracts designed to protect you from certain hazards you might come across with your car. And while it’s naturally a much bigger topic of discussion when purchasing a used car, many dealerships will try to sell this package on new car purchases as well, touting their ability to prevent headaches for what the manufacturer’s warranty didn’t catch, or where coverage has lapsed.

What is covered?

There are a few different types of warranties you may be offered, so it’s important to understand what you are on the hook for and what you’ll potentially get out of it. A basic bumper-to-bumper warranty will offer general coverage, but typically only covers defects in factory-installed parts by the manufacturer. Powertrain warranties cover the major power systems—engine and transmission being the two major parts. Less common are roadside assistance, which covers tows and tires if your car breaks down on the side of the road; rust and corrosion, which covers rust damage; and emission warranties, which covers repairs needed to bring a car to compliance with EPA regulations, if necessary.

Will you have the car long enough to need the warranty?

If you’re in the market for a new car—or even one “certified” by the dealer—you’re probably going to already have a warranty in place, with most covering three years or 36,000 miles on a limited warranty, and 5 years or 60,000 miles for your powertrain.  So if you’re buying new and selling or trading in between three and five years, it’s worth questioning whether or not you’ll need the extended warranty at all.

Is the price reasonable?

Ultimately, the price of any extended warranty is determined by a number of factors: deductible price, term of coverage, and age of vehicle. Determine exactly how much the dealer is charging for their extended warranty, what kind of deductible you’re taking on (if any) and what it covers. Then, you have the option to find a same or comparable plan elsewhere, for cheaper. Without this information, you’re putting your decision-making power in the hands of a salesman, whose job it is to get as much money as possible from you.

Do you need it?

This is the big question, and one that only you can answer. If you feel like it’s a good purchase for you, based on your driving history and the type of car you are purchasing, by all means, get the extended warranty. Keep in mind that you might be able to purchase that extended warranty elsewhere for a cheaper price—but that’s only useful if you know the details of what you are buying, and are able to make an educated decision. In fact, SC Telco offers a three-tiered extended warranty that covers everything from basic components and roadside assistance through your engine, cooling system, and more, with no deductible on covered parts. Ask your local branch associate about the Route 66 extended warranty and how SC Telco can provide this service to you.

And for more information on warranties and the protections for you as a buyer, check out the Federal Trade Commission’s page on warranties.

Tony Weaver

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