The Truth About Used Car Extended Warranties

about 1 month ago
So we're going to talk about extended warranties. Many people like the peace of mind of having an extended warranty, it gives them some comfort to know that if ...

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So we’re going to talk about extended warranties.
Many people like the peace of mind of having
an extended warranty, it gives them some comfort
to know that if something goes wrong with
the car they’re purchasing and generally
these are offered on used cars, that it’s
going to be taken care of, there’s nothing
to worry about.
Any often the person selling the car to you
will say, well we offer you this warranty
to you and you don’t have to worry about
anything, it’s $2000 or $3000 or $4000 and
you’re covered for X amount of time, next
3 years you don’t have to worry about anything,
if something breaks you’re covered.
So are these really, do they really offer
the peace of mind that most people think?
And I’d say not always.
First of all, I think these are actually not
warranties in the true sense of what a warranty
is, there more like break down insurance.
It’s a policy that covers you in the event
of something breaking and they’re very specific
as to which components they cover.
A vehicle warranty, you know the one you get
when you buy a car, it’s offered by the
manufacturer and I think they have a different
interest in mind than the warranty company
does, a so called “warranty company”.
The manufacturer, say Ford for instance, they’re
going to offer a warranty saying we guarantee
this car is going to be problem free for the
next three years, if there is anything wrong
with it, we’re going to fix it for you and
they’re doing so partly in good faith.
They want you to buy another Ford product
down the road, I mean that’s the theory
if everything works out.
Whereas a third party warranty company has
no vested interest at all, all they do is
they sell the warranty they make their money
by paying the least amount of money out in
So it is necessarily bad to buy an extended
Well no, it’s really a matter of doing your
research first and I think the biggest thing
is, what kind of car are you buying?
Are you buying a car that is known to very
reliable such as a Toyota or a Honda.
I mean very few things go wrong with these
cars, they’re very predictable.
If you’re buying a three year old Toyota,
chances are nothing is going to go wrong with
that car for the next ten years.
I mean, the odd case something will but really
for the warranty company they’re probably
making a fair decent amount of money on these
If you’re buying something like a BMW or
a Mercedes, well more stuff goes wrong, not
saying they’re not bad cars, but they’re
just more complex, more things go wrong so
that might be a car you want to look at for
a warranty.
The third thing to look at is who can fix
your car?
Most third party warranties will allow you
to take it a shop of your choice but there
are some that specify only a specific either
independent shop or dealership.
So it’s important to look at that, if you
don’t care where you go well then great,
but if not, I think it’s really important
to know who can fix it, especially if you’re
having to be out of town somewhere and your
vehicle breaks down you don’t want to have
to have it towed back 500 miles to get it
So it’s really important to look at the
fine print in a warranty, what’s covered
and what’s not.
Now first off maintenance items are never
covered, so things like oil and filter changes,
air filters, cabin air filters, brake pads
and rotors are not covered, clutches are not
These are considered wear out items so these
items are not covered.
Now I say brakes, the brake pads and rotors
are not covered but a lot of them don’t
cover callipers, they don’t cover anti lock
brake components, wheel speed sensor and certain
things but the main thing is the wear out
parts are not covered.
A lot of warranties, you have to follow your
manufacturers maintenance schedule, there
are some that actually have a ridiculous schedule
of oil changes have to be done in a certain
amount of time, you know you have this tight
window and if you do anything wrong they’ll
void the warranty coverage, you know, especially
on the engine part of it, say if anything
were to develop.
Some other items that aren’t covered that
surprise people sometimes are things like
fluids, sometimes say the radiator needs to
be replaced, a lot of times they won’t cover
Also diagnostics are not usually covered as
So say there’s a problem with the engine’s
not running right, you will have to pay for
the diagnosis and some will reimburse you
and some won’t but a lot of times they won’t
cover for diagnosis.
They won’t cover for things like, a lot
of shops charge a shop supplies and material
and environmental fees, they won’t cover
those items as well.
As far as a shop dealing with a warranty company,
I find they can be a little bit difficult
to deal with and I find they don’t necessarily
offer the consumer the best service.
Many times I’ve had say a transmission failure,
what they’ll do is they’ll insist on the
transmission being torn apart, they’ll have
an assessment done and find out what the actual
failed part is and they’ll just replace
that particular piece.
On an automatic transmission generally when
something fails the whole unit has to be disassembled
so while you’re in there, there are standard
components that are replaced like clutch discs
and items that are, basically the transmission
is overhauled complete you don’t have another
problem for a long time.
But the warranty company won’t do that,
they’ll only pay to take it apart, fix the
one piece and put it back together.
So it’s up to you whether you want to spend
the extra money to really have what I consider
a proper job, and most people do.
But there are many instances where they won’t
cover things fully.
Another item they won’t often cover, things
like coolant hoses which is kind of ridiculous
because often hoses will last longer than
things like water pumps, but for some reason
they won’t cover them.
There’s an added level of bureaucracy in
dealing with a warranty company which will
tend to slow the repair process down because
first of all we have to diagnosis it, we have
to get authorization from the warranty company
and often if there’s a major repair they’ll
actually send an inspector out to actually
look at before they’ll actually say yes
or no.
So this can delay the process of your repair
by a couple of days.
So in conclusion, should you buy a warranty
or shouldn’t you?
Well first of all, my biggest thinking on
this is don’t let someone sell you a warranty
as it’s an end all solution to peace of
mind, you’ve spent two or three or four
thousand dollars and you don’t have to worry
about anything on your car because the answer
is that’s not true.
You will have to spend some money and a lot
more than your deductible generally to have
repairs done.
Really do your research, find out what kind
of car you’re buying and just look at yourself,
what kind of risk tolerance do you have.
Do you want to plunk down two or three or
four thousand dollars on a warranty with some
peace of mind or do you want to just take
a chance and see what happens because a lot
of times nothing does.