Whether you’re buying a new car or used car, an extended warranty is another type of contract that comes with the purchase. These types of contracts are designed to protect against future repair costs. However, they’re not for the faint of heart and should be used responsibly. An extended warranty is essentially a service contract that covers repairs and maintenance for a certain period of time after purchasing your vehicle. Depending on the type of warranty and the car’s purchase price, premiums can range from a few hundred dollars to more than $1,000. In addition to the cost of the contract itself, there are additional expenses to consider such as maintenance, inspection, and registration fees. The main benefit of an extended warranty is that it covers repairs that aren’t covered by the original manufacturer’s warranty. Although this added layer of protection comes at a premium, it can help reduce the financial impact of unexpected car repairs.
What is an extended warranty?
An extended warranty is a contractual agreement that provides extra protection for your car or truck if repairs are needed after the manufacturer’s initial period of coverage is over. Although the specific terms and conditions may vary, most extended warranties cover a specific period of time after purchase and offer coverage for repairs related to the car’s drivetrain, transmission, and major components. The warranty generally covers parts and labor, but you’ll still be responsible for deductibles and other out-of-pocket expenses. Extended warranties come in different forms. Some policies offer coverage for a set number of years, while others are for a set number of miles. With an extended warranty, you’ll also receive a service contract that covers up to a year’s worth of repairs.
How to negotiate the best price on an extended warranty
Before you sign on the dotted line, it’s important to understand that the cost of an extended warranty is almost always a one-time fee. You can’t negotiate the price once the contract is signed, so it’s important to do your research before purchasing. You can get an idea of what the average price for an extended warranty is by searching online. There are also a number of warranties offered through dealerships. Before you sign up, ask your salesperson to explain the details of each policy. The most important thing when negotiating the price of an extended warranty is to do your research. Find out what other people are paying for the same type of warranty, and ask the salesperson to explain any special conditions. When you find the warranty that’s right for you, ask how much it will cost. If the salesperson isn’t able to provide a price, you’re likely dealing with a broker who receives a commission from each warranty sold. Before committing to any warranty, make sure you understand all the details.
Key questions to ask during the sales process
What types of repairs are covered by the warranty?
Which repairs are not covered by the warranty?
How long does the warranty last?
Is there a policy for breakdown assistance?
Is there a maximum mileage for the warranty?
Is there an inspection fee?
Is there a deductible?
Costs and benefits of an extended warranty
The biggest downside of an extended warranty is that the premiums tend to be substantial. You can expect to pay between $300 and $1,000 for an extended warranty. The cost will depend on the car’s purchase price, the length of the warranty, and the type of coverage you select. You can expect to pay about $100 to $150 for a warranty covering the first year. The cost will increase after that, but it’s still significantly less than what you’d pay for a new car. The added protection offered by an extended warranty is worth the additional cost. According to data from the National Highway Traffic Safety Administration (NHTSA), about 8 million vehicles are repaired each year. Although most repairs are covered by the manufacturer’s warranty, about $1 billion is spent out-of-pocket on repairs. With an extended warranty, you’ll have peace of mind knowing that repairs will be covered even if the manufacturer decides not to fix the problem.
The risks of signing an extended warranty
The biggest risk of buying an extended warranty is that you’ll be spending a lot of money on something that doesn’t actually protect you. The average mechanical repair costs about $1,000. Depending on the situation, you might find yourself spending several thousand dollars more than the original cost of your car to fix a problem. If your car is out of warranty, you’ll have no protection from the manufacturer. If the car is out of warranty but you have an extended warranty, the warranty provider might choose not to repair the car. This could leave you with a car that isn’t roadworthy and unable to get to work. It’s important to understand that the extended warranty is not a warranty. It’s an insurance policy that covers you if your car breaks down and needs repairs.
Extended warranties aren’t for everyone, but they can help protect you from unexpected car repairs. Before buying one, you should do your research and ask the salesperson to explain the details of the warranty. If you find a warranty that you like, be sure to ask about the price and ask to see a breakdown of the different parts of the policy.