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After purchasing a new or used vehicle, you’ve likely thought about whether or not you need an extended warranty. With the high cost of repairs, this topic is one that deserves some consideration. Are extended car warranties worth it? It depends on what you are looking for, and the answer isn’t always clear-cut.

In this article, we will break down what an extended warranty is, typical costs, and if you should have one. Let’s dig deeper to find the answers you need.

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What Is An Extended Car Warranty?

An extended car warranty is also known as a vehicle service contract. It’s optional coverage that you purchase to pay for mechanical breakdowns. Most of the time, an extended warranty begins once the factory warranty expires, but there are times that it might overlap.

Each extended warranty comes with its own terms and conditions. That’s why it’s essential to read through the contract carefully to understand what’s included with your coverage.

Extended Car Warranty Costs Vs Repair Costs

To determine if extended car warranties are worth it, you should look at both the cost and what it saves you from spending. Let’s start with the premium required to buy an extended warranty.

Cost Of An Extended Warranty

The cost depends on several factors, but Endurance Warranty estimates that the average consumer spends between $350 and $700 per year on extended vehicle protection. Keep in mind, when you purchase a car warranty from a dealer and include it in your financing, you are also going to pay interest, increasing the total cost.

When determining the cost of extended auto warranties, warranty providers look at several factors:

  • Type of vehicle: Driving a luxury model or sports car might raise the rate because the parts are more expensive.
  • Vehicle condition: The year and mileage of your vehicle are important. For many factory warranties, an inspection must also take place before coverage begins.
  • Type of coverage: Bumper-to-bumper coverage is going to cost more than simple powertrain coverage. In addition, the longer the term, the higher your bill will be.
  • Deductible: Some plans have the option of a $0 deductible, but that will raise the price of your warranty. If you can afford to pay a $100 or $200 deductible with each repair, you can lower your premium significantly.

Average Car Repair Costs

For an extended warranty to save you money, you need to be paying less than what you would spend on auto repairs. While all vehicles are different, we can look at the average cost of repairs in the industry. According to Liberty Mutual, here are a few repairs that cost between $500 and $1,000 on average.

Repair Cost
Water pump replacement $300 to $750
Radiator replacement $500
Timing or serpentine belt replacement $500 to $950
 

While many vehicle owners would be able to handle a bill of this size, what happens when a repair costs more? Ask yourself what you would do if faced with one of these repair bills instead:

Repair Cost
Airbag replacement $3,000 to $6,000
Transmission replacement $1,500 to $3,000
Suspension system replacement $1,500 to $3,500
Head gasket replacement $1,000 to $1,500
 

Are extended car warranties worth it after looking at some of those prices? Unless you have a large emergency fund, footing a hefty repair bill could do some damage to your bank account.

What Consumers Say

Online reviews vary depending on the warranty provider, but many customers of companies like CARCHEX and CarShield think that extended car warranties are worth the cost – even if the payback is just peace of mind.

“CarShield gives me [peace] of mind. I know no matter what happens with my vehicle, it will only cost me $100.”

-Paul via BBB

“Good, friendly service. No nonsense sales. [CARCHEX] offered the most affordable long-term option.”

-James via BBB

There are plenty of negative reviews for car warranty companies too. However, if you read through them, it’s evident that many of the complaints have to do with repairs not being covered. Most of the time, this can be avoided by reading your contract and making sure you have a thorough understanding of your policy.

Should You Buy An Extended Warranty?

After looking at the costs and potential savings, it’s important to consider some other benefits and pitfalls of vehicle service contracts.

Pros

Here are some of the advantages you can expect from an extended car warranty:

  • Saves you money: If your vehicle requires costly repairs, it pays to have an extended warranty. You simply pay your deductible for any covered repairs, and your warranty company will cover the rest.
  • Brings peace of mind: You won’t have to worry about the possibility of expensive auto repair bills. If your plan also incorporates roadside assistance and other perks, you won’t worry about breaking down or having transportation while your vehicle is in the shop, either.
  • Attractive to future buyers: If you plan to sell your car down the road, a transferable warranty can make your car more appealing to prospective buyers.

Cons

Before you decide that extended warranties are worth it, you should look at this short list of disadvantages as well:

  • Usage: Some vehicle owners will never use their car warranties. While this is a fantastic problem to have, you will have paid money for protection you didn’t use.
  • Lack of coverage: If you aren’t careful about what plan you choose, you might not receive the coverage you need. It’s important to read all of the terms, so you are never surprised by a repair bill.
  • Warranty overlap: You might have overlapping coverage between a new car warranty from the dealership and an extended warranty. While this seems redundant, signing up for an extended warranty while you still have new car coverage actually helps you save money in the long run.

Where Should You Buy An Extended Warranty?

You have several options if you decide to purchase extended coverage. If you are buying a new car, it’s almost a guarantee that you will hear a pitch for extended protection plans at the dealership. Manufacturer-backed plans are usually only available at the dealership.

If you decide to go this route, be wary of including the coverage with your car loan. This might not be a good idea for multiple reasons:

  • You will likely pay interest on the warranty. Even if the company offers zero percent interest for a short time, you will eventually pay interest.
  • You raise your loan-to-value ratio. You might end up owing more than your car is worth.

If you want to purchase an extended warranty from a dealer, consider paying for it upfront instead of including it with your loan.

Another option is to purchase an extended warranty from a third-party provider like CARCHEX. Here are a few benefits of third-party warranties:

  • Choice of repair shop
  • Low deductibles and affordable plans
  • Additional perks, such as roadside assistance and towing
  • Ability to shop for the best coverage and price
  • Choice of coverage that fits your vehicle
  • Can purchase anytime

Top Extended Car Warranty Providers

We recently reviewed the best extended warranty companies in the industry, and in our research, four providers came out well ahead of the rest. If you want to get quotes from a few companies to help you decide whether extended car warranties are worth it, these companies are a good place to start.

Best Extended Warranty Companies
Motor1 reviewed the top car warranty companies to find the best.
Below are our top 3 picks.
Best Overall Best Direct Provider Most Popular
CARCHEX Endurance CarShield
★★★★★ ★★★★★ ★★★★☆
Get Quote Get Quote Get Quote
(877) 253-0058 (877) 374-1840 (800) 563-2761
     
 

CARCHEX: Best Overall

CARCHEX is our first choice for extended protection based on the company’s reputation, dedication to customer service, coverage options, and added benefits like roadside assistance. With a history going back more than 20 years, CARCHEX is well known in the industry and has an A+ rating and accreditation with the Better Business Bureau (BBB).

 

Best Overall

★★★★★

Get Quote

(877) 253-0058

No. 1 overall, beating the competition in company reputation, coverage options, and customer service.

If you choose CARCHEX, you have the choice of five customizable plans:

  • Titanium: Complete bumper-to-bumper protection for up to 10 years
  • Platinum: Covers hundreds of components for up to 10 years
  • Gold: Comprehensive coverage for vehicles with more than 60,000 miles for up to 10 years
  • Silver: Covers essential systems for high-mileage vehicles for up to seven years
  • Bronze: Basic powertrain protection for any vehicle for up to six years

CARCHEX has a 30-Day Money Back Guarantee if you are not satisfied with your coverage. Additionally, the provider offers the following benefits:

  • Claims paid directly to the repair shop
  • 24/7 roadside assistance
  • Towing and rental car coverage
  • Trip interruption service

Endurance: Best Direct Provider

The above providers are brokers, meaning they find the best rate for you among their warranty administrators. With Endurance, you’re working directly with the warranty administrator, so this is a great choice for vehicle owners who don’t want a middle man.

Best Direct Provider

★★★★★

Get Quote

(877) 374-1840

The best option for a direct provider, meaning you work with their team throughout every step of the process. 

Endurance has been around for more than 10 years and is backed by an AM Best A-rated company. By working with this direct provider, you may experience a quicker claims process, and you won’t ever have to wonder who to call.

Endurance has five levels of extended protection:

  • Supreme: Bumper-to-bumper coverage
  • Superior: Coverage for hundreds of components
  • Secure Plus: Vital car component coverage, plus brakes, steering, and electrical components
  • Secure: Vital car component coverage
  • Select Premier: Basic powertrain coverage for high-mileage vehicles

When you purchase an extended car warranty from Endurance, you receive a one-year Endurance Elite Membership. The membership grants you 24/7 roadside assistance, repair financing, key fob replacement, and more benefits. After the first year, you would be responsible for purchasing this membership again. With many other companies, these benefits are automatically included.

Whether you opt for the Endurance Elite Membership or not, you still receive ID theft protection and free tire repair and replacement with Endurance.

 

CarShield: Most Popular

The most popular extended warranty company by far, CarShield has protected more than one million vehicles since opening its doors in 2005. It has a 4.4-star rating on Google based on more than 2,500 reviews. CarShield is endorsed by Ernie Hudson and Adrienne Janic and has had featured spots on CNN, ESPN, and HGTV.

Most Popular

★★★★☆

Get Quote

(800) 563-2761

A great provider with a history of over one million vehicles protected and thousands of customer reviews. 

With CarShield, you have the choice between six customizable plans:

  • New Car Diamond: Bumper-to-bumper coverage
  • Platinum: A comprehensive plan for high-mileage vehicles
  • Gold: Powertrain plus, including the air conditioner and starter
  • Silver: Powertrain only
  • High Tech: Covers expensive electronics in modern cars
  • Specialty: Covers specialty vehicles like motorcycles and all-terrain vehicles (ATVs)

Other benefits to using CarShield include:

  • Towing and roadside assistance 
  • Claims paid directly to the repair shop
  • Rental cars included with some plans

Are Extended Car Warranties Worth It For You?

The choice is an important one. With the average American spending $1,986 on vehicle repairs and maintenance over the course of five years, you should ask yourself if you are prepared to take care of the small repairs that come your way and occasional larger, more expensive repairs. If you decide that you need additional protection, make sure to evaluate providers based on cost, coverage, and company reputation.