Should I Buy an Extended Warranty On a Used Car?

An extended warranty on a used car can provide peace of mind for a set time. But it comes at an extra cost that might not be worth it for every used-car owner.

Jessica Martel
Written byJessica Martel
Jessica Martel
Jessica Martel

Jessica is a freelance writer, professional researcher, and mother of two rambunctious little boys. She specializes in personal finance, women and money, and financial literacy. Jessica is fascinated by the psychology of money and what drives people to make important financial decisions. She holds a Masters of Science degree in Cognitive Research Psychology.

Jessica has been a contributor at Insurify since July 2023.

Ashley Cox
Edited byAshley Cox
Headshot of Managing Editor Ashley Cox
Ashley CoxSenior Managing Editor
  • 7+ years in content creation and management

  • 5+ years in insurance and personal finance content

Ashley is a seasoned personal finance editor who’s produced a variety of digital content, including insurance, credit cards, mortgages, and consumer lending products.

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An extended warranty — also known as a vehicle service contract or protection plan — can help cover the cost of repairs and replacements to your used car after the manufacturer’s warranty ends.

An extended warranty is an add-on you can purchase from a dealership or car insurance company. Buying an extended warranty for your used vehicle can provide peace of mind that your car has protection. But you’ll have to decide if an extended warranty is worth the up-front cost.

Below is the information you need to decide whether to buy an extended warranty. This article covers how it works, what it covers, and the factors to consider before you make a decision.

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How do extended warranties work?

Some used-car owners purchase extended warranties to help manage the cost of covered repairs. You can typically buy an extended warranty as an add-on from a dealership or insurance company when you purchase your used vehicle or sometime after. 

The warranty will usually cover your car for a certain amount of time or miles. The cost varies based on factors like the make, model, and mileage of your vehicle and the length of the warranty. You’ll pay anywhere from several hundred to several thousand dollars for an extended warranty.[1]

Good to Know

If your used car requires a covered repair, you can file a claim. If your claim is approved, the warranty provider will pay for the repairs. Before purchasing a car warranty, read the fine print. You want to know what repairs the warranty includes and excludes if you have to go to a particular repair shop and if there’s a limit to how many claims you can make.

What an extended warranty covers

An extended warranty typically covers certain mechanical and electronic components for a certain time or number of miles. Exactly what’s covered can vary greatly between providers.

In some cases, an extended warranty will only cover your vehicle’s powertrain, which can include problems with your driveshaft, axles, or engine. In other cases, it can offer bumper-to-bumper coverage, covering a selection of manufacturing and design faults.[2] Some warranties cover extras, like the cost of towing your vehicle or renting a car.

What it doesn’t cover

Most extended warranties don’t cover normal wear and tear or regularly scheduled maintenance, such as oil changes, brake-pad replacements, windshield repairs, or tire replacements.

Similarly, most warranties won’t cover your vehicle for abnormal use, like if you use your car to haul or tow more than it was designed to.[3] It’s important to recognize that an extended warranty isn’t the same as car insurance, so it doesn’t cover damages from an accident, theft, or a hailstorm.

Should you purchase an extended warranty for your used vehicle?

Whether an extended car warranty is worth it for your used vehicle depends on your needs and budget. If you put a lot of miles on your car, and you’re worried you can’t afford an expensive repair, an extended warranty might make sense. It can also provide peace of mind knowing you’re protected for your coverage period. But an extended warranty comes with an added cost and often has many exclusions, so it’s important to read the fine print.

If you purchase a reliable used vehicle, don’t drive very much, and have money set aside in an emergency fund for potential repairs, you might choose to skip an extended warranty.

Factors to consider

When deciding if you should purchase an extended warranty for your used vehicle, consider the following factors:

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    Cost of warranty

    Can you afford the extra coverage? The up-front cost can range from a few hundred to several thousand dollars. You may also have to pay a deductible each time you need vehicle repairs or replacement.

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    Length of warranty

    How long will the extended warranty last? Also, consider how long you plan to keep your used car.

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    Limited coverage

    Exactly what problems and repairs are covered? Read the fine print to see what problems are covered and what repairs are excluded.

  • illustration card https://a.storyblok.com/f/162273/150x150/e7229a85e7/transport-96x96-yellow_012-bicycle.svg

    Vehicle use

    Do you plan to drive your car every day? Do you rely on your vehicle to get around? If so, you might find an extended warranty more useful than someone who drives infrequently and can take public transit as a backup.

  • illustration card https://a.storyblok.com/f/162273/150x150/7d6bccfe65/car-and-driving-96x96-blue_019-car.svg

    Vehicle type

    What car are you purchasing? Are there common issues associated with the vehicle? How reliable is the vehicle? You can check its J.D. Power dependability score to get a sense of how many problems you can expect.

Extended warranty pros and cons

As with any financial product, extended warranties have pros and cons to consider when deciding if this protection is right for you.

Pros
  • Peace of mind: With an extended warranty, you don’t have to worry about paying out of pocket for covered repairs for a set period.

  • Financial security: An extended warranty can help you save money on covered repairs and replacements.

  • Added perks: Some extended warranties offer additional benefits, such as roadside assistance or rental car reimbursement.

Cons
  • Cost: Adding an extended warranty can come with a high price. You’ll generally pay anywhere from a couple hundred to several thousand dollars. In some cases, you may pay a deductible any time your vehicle requires service or repair.

  • Exclusions: An extended warranty doesn’t cover everything. Make sure you read the fine print to understand what’s included and what’s excluded.

  • Repair restrictions: Some policies limit where you can get repairs to certain repair shops in their network.

How to cancel your extended warranty

Let’s say you purchase an extended warranty, and a few months later you decide it’s not worth the cost. You can cancel at any time.[4] To do so, you’ll have to send a cancellation notice to the car warranty provider. Depending on when you cancel, you may have to pay a cancellation fee.

For example, in California, if you cancel within 30 days and haven’t gone through the claims process, you’re eligible for a full refund. If you cancel after this time frame, the vehicle service contract provider may keep some of your premium, based on how much time has gone by.[5]

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Used car extended warranty FAQs

If you’re looking for more information on extended warranties for used cars, check out the following answers to some of the most frequently asked questions.

  • Is it worth buying an extended warranty on a used car?

    It depends. An extended warranty can provide peace of mind knowing you won’t have to pay out of pocket for covered repairs. But you’ll have to determine if the up-front cost of an extended warranty is worth it or if you’d rather forgo the car warranty and pay out of pocket for repairs.

  • When is an extended warranty for your car not worth buying?

    If you purchase a reliable used car, have money set aside for potential repairs, or your used car is still covered by the manufacturer’s warranty, you might consider forgoing an extended warranty.

  • What should you look for when buying a used-car warranty?

    When you buy a car warranty, you’ll want to look at cost, the length of the warranty, exactly what it covers, and what’s excluded. You also want to ensure you’re purchasing an extended warranty from a reputable company.

  • Do car dealers make money on extended warranties?

    Yes. Car dealers can make money on extended warranties. The price of an extended car warranty isn’t regulated, meaning the seller can charge the price they want. This is why it’s important to compare the cost of warranties among multiple companies and to only purchase from a reputable warranty provider.

Sources

  1. Federal Trade Commission. "Auto Warranties and Auto Service Contracts."
  2. J.D. Power. "The Difference Between A Powertrain And Bumper-To-Bumper Warranty."
  3. Kelley Blue Book. "Car Warranty Guide: Everything You Need to Know."
  4. Consumer Financial Protection Bureau. "What is an extended warranty or vehicle service contract?."
  5. California Department of Insurance. "Guide to Automobile Service Contracts, Extended Warranties and Other Repair Agreements."
Jessica Martel
Jessica Martel

Jessica is a freelance writer, professional researcher, and mother of two rambunctious little boys. She specializes in personal finance, women and money, and financial literacy. Jessica is fascinated by the psychology of money and what drives people to make important financial decisions. She holds a Masters of Science degree in Cognitive Research Psychology.

Jessica has been a contributor at Insurify since July 2023.

Ashley Cox
Edited byAshley CoxSenior Managing Editor
Headshot of Managing Editor Ashley Cox
Ashley CoxSenior Managing Editor
  • 7+ years in content creation and management

  • 5+ years in insurance and personal finance content

Ashley is a seasoned personal finance editor who’s produced a variety of digital content, including insurance, credit cards, mortgages, and consumer lending products.

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