Is an Extended Warranty Worth It?

by Jim Thompson | Last Updated: January 15, 2021

Car ownership can be much more worry-free if the car comes with a warranty. Virtually every new car comes with a warranty, and some used car dealers offer them as well, either as part of the deal or as an add-on with a fee. Additionally, individuals can purchase extended third party warranties. While this type of warranty can be beneficial, many come with a high cost and limited coverages, so shop carefully.

Many people enjoy the peace of mind that comes with knowing that if a problem does arise with their car that a warranty will make it go away. Most manufacturers provide a car with a 3 year or 36,000-mile warranty on all components of the car and a longer period for the engine and drivetrain. Besides the warranty options mentioned above, an owner may choose to extend the manufacturer’s warranty at time of purchase in the event that a covered component decides to conk out at 36,001 miles.

The Perks and Problems With Extended Warranties

Of course, an extended warranty comes with the benefit of extended peace of mind. It only makes sense that things will start to go wrong with a car the more miles that have been traveled in it and often these are components that come with a much higher cost of repair. Again, this is where smart shopping is of vital importance. While many extended warranties promise coverage for engine and drivetrain, the statement may be only general in nature. The fine print might contain language that includes clauses like “engine and drivetrain except for ______, where “_____” is filled by the thing that has broken on your car. Make the wise choice by reading the fine print for exclusions.

Further, some car owners are greeted with the unpleasant news that the problem is not covered by the warranty because they themselves have voided the warranty by not properly holding up their end of the bargain. Now the cost of the repair has been significantly inflated because it includes the purchase price of the warranty as well. Most warranty companies protect themselves by denying coverage in certain circumstances like the ones listed below. While some of these conditions are out of the car owner’s control, many are not. Like any contract, it is important to know what circumstances can void all or part of your warranty. These conditions might include the following:

  • Salvage title – If the covered vehicle was involved in an accident severe enough to be declared a total loss the entire warranty is voided.
  • Misuse of the vehicle – Intentional misuse by the driver might include engaging in activities such as racing or performance competition of any type, overloading the vehicle, off-roading or using a vehicle not designed to tow to do so.
  • Environmental damage – While out of the car owner’s control, a car damaged by environmental disasters such as fire, flood, earthquake will not be covered by warranty.
  • Altered odometer – Clearly, since an altered odometer makes it impossible for the warranty company to know if the car is within the coverage term, the warranty is automatically voided.
  • Neglect – If a car has gone an extended period of time without regular maintenance, a warranty company has no reason to honor a warranty.
  • Use of improper fluids – Examples of this would include using standard oil in a car when synthetic is called for or filling the tank of a gasoline-powered car with diesel. A quick check of the owner’s manual will detail the fluid types that should be used in the operation of the vehicle.
  • Modifications – While some modifications are permissible, others are not and these distinctions are often warranty specific, so this is another opportunity to comb the coverages carefully prior to making changes or buying the warranty.

To avoid the possible voiding of a warranty, follow these tips:

  • Carefully follow the manufacturer’s recommended service schedule as detailed in your owner’s manual.
  • Retain all records of service, including receipts. This will assist in disputing any claims of neglect made by the warranty company. It will also bring assurance to a potential buyer should you choose to sell your vehicle.
  • Read your owner’s manual and warranty agreement, especially the sections pertaining to “what is not covered”!