New Car Extended Warranties

As the weather warms up, many car buyers have their eyes set on a new vehicle. And at some point during the car buying process, your dealer will probably want to talk to you about purchasing a new car extended warranty. These warranties, sometimes marketed as service contracts or mechanical breakdown insurance, are designed to cover the cost of repairs after a manufacturer warranty runs out. Dealers typically sell them, but they can also be purchased from third-party providers.

The cost of a new car extended warranty varies depending on the make, model and condition of the vehicle (new or used), how much coverage you purchase and how long you want the contract to last. Dealerships may try to inflate the price of these warranties to make money, but you can often find better deals by shopping around. You should also figure out who is responsible for administering the warranties and read the fine print. If the company that is supposed to pay for the claims is reputable, you should be able to trust the warranty coverage.

Most OEMs offer one or more extended warranty plans, while third-party providers usually have many options to choose from. They can range from basic powertrain protection to bumper-to-bumper coverage, with the option of including or excluding various components. Generally, the more coverage you buy, the higher the cost will be. You will also have to decide if you want a plan that includes a deductible. Depending on your budget and how long you plan to keep the car, an extended warranty may be worth it.

If you do decide to purchase an extended warranty, be sure to shop around and consider different manufacturers. OEM warranties are a good choice, but they can be expensive. You should also look into other third-party warranty options and check out reviews to make sure the provider is reputable.

Most new-car shoppers want reliability, which is why 95 percent of car buyers rank it a top factor when choosing a vehicle. But it’s important to remember that a warranty won’t prevent your car from breaking down or deteriorating. And a survey of Consumer Reports members found that they often paid more for extended warranties than they received in direct benefits. Unless you have a particular reason to get one, you may be better off skipping the warranty and spending the extra money on other features or upgrades.