Extended warranty on new cars : is it worth the cost ?The basic warranty offered by a car manufacturer is very important. What about the extended warranty on new cars ?
It does not seem to be well evaluated by many car buyers. For some reason, many dealers do not promote their extended warranty plan and the car buyer fails to evaluate the pros ans cons of such a plan.
An extended warranty on new cars is like buying insurance. You get the peace of mind and avoid bad surprises. The decision to take an extended coverage will usually be based on the following :
1) Your tolerance in assuming "full risks" Once the basic warranty has expired you are on your own ! As time goes by the risk of major breakdowns increases. So it is important to determine how much risks you are prepared to assume. 2) The importance of preserving the resale value An extended warranty on new cars will help maximize the resale value. A potential purchaser will certainly have a greater interest in a vehicle still covered under warranty. 3) The cost The equation is simple ! The calculation not easy !! You have to estimate the cost of repairs under warranty and compare to the cost of the warranty over the period of the coverage. 4) Your average annual milleage If your average annual milleage is 30,000 km (20,000 miles) and your basic warranty is 3 years/80,000 km, the coverage will be expired before the end of year 3. This may be short of your expectations. On the other hand, if your annual milleage is low an extended warranty plan is not as important.
5) Your ability to minimize repair costs If you are a do-it-yourself person and you don't have to go to the garage for major repairs, an extended warranty on new cars may not be a good investment for you. 6) Hidden warranties An extended warranty on new cars is a good way to eliminate the risk of missing on hidden warranties.
Occasionally manufacturers will make exceptions in their warranties to cover special problems
or defects with their products. Such exceptions are referred to as hidden warranties and
they are different from vehicle recalls which are items that relate directly to the safety of a
vehicle. Like to get a quote for a new or used car ? Click here. Buying an extended warranty on new cars is a tricky decision. Choosing the right plan is no less ! Here is a checklist to consider before investing in an extended coverage.
Ask who is really providing the warranty. The dealer, manufacturer or other administrator ? A reliable warranty should be maintained by a company, financially solid, that maintains appropriate reserves to cover warranty risks. Buying a plan maintained by a dealer or a new manufacturer is more risky. The ideal extended warranty on new cars, or used cars for that matter, should cover both breakdown and wear & tear failures. So, if shock absorbers need to be replaced after 10,000 km, due to poor quality and resistance to wear & tear, check if this is covered by the warranty. Most manufacturer's warranties do not cover such an event. One other example of such "exclusions" is overheating. You should check if you are covered if your engine overheats, and you perform due-diligence in protecting the vehicle from further damage. The deductible is an important feature of any extended warranty for new cars. It's part
of the cost ! ... and the risks you are assuming. Check if the plan has a deductible per
part repaired (motor, transmission, radiator, etc) versus per single repair visit.
One last check point : see if the plan contains restrictions on the repair facility you
can use. Some programs, particularly those maintained by dealers, force you to go their
repair shop. Read the fine prints before signing on the dotted line !!
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