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After purchasing a new or used vehicle, you’ve likely thought about whether 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'll break down the ins and outs of extended car warranties, typical costs, if they're a sound investment, and some of the best extended car warranty companies to consider. Let’s dig deeper to find the answers you need.

 

 

In this article:

 

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 your vehicle's factory warranty expires, but there are times that the coverage might overlap.

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

 


 

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, according to Fool.com, over the course of five years, you should ask yourself if you are prepared to cover small repairs and the occasional larger, more expensive repairs that may come your way. If you decide you need additional protection, make sure to evaluate providers based on cost, coverage, and company reputation.

 


 

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.

What Is The Average Cost Of An Extended Warranty?

The price depends on several factors, but based on our research, the average extended car warranty costs between $1,600 and $4,500. 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 pricing 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 manufacturer's 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 coverage 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.

What Is The Average Cost Of Car Repairs?

For an extended warranty to save you money, you need to be paying less for coverage than you would spend on auto repairs. While all vehicles are different, we can get a sense of repair costs by looking at industry averages. 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 unexpected 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. However, there's no guarantee you will ever need such a repair.

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 return 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 Car Warranty?

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

Pros Of An Extended Warranty

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 car buyers: If you plan to sell your car down the road, a transferable warranty can make your car more appealing to prospective buyers.

Cons Of An Extended Warranty

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

  • Usage: Some car 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 service plan. 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 monthly payments with your loan.

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

  • Can choose your preferred repair shop
  • Low deductibles and affordable plans
  • Additional perks, such as roadside assistance and towing
  • Ability to shop for the best coverage and price
  • Can choose coverage that best fits your vehicle
  • Can purchase at any time

 


 

Top Extended Car Warranty Providers

We recently reviewed the best extended warranty companies in the industry, and in our research, these few 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.

Click below to get free, no-obligation quotes:

 

 
 

 

Endurance: Best Coverage

Instead of being a warranty broker and finding the best rate for you among partner warranty administrators, Endurance sells its own contracts. With Endurance, you’re working directly with the warranty administrator, so this is a great choice for car owners who don’t want a middleman.

 

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 six extended protection plans:

  • 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 warranty for high-mileage vehicles
  • EnduranceAdvantage™: Covers mechanical breakdowns as well as maintenance

When you purchase an extended car warranty from Endurance, you receive a one-year Endurance Elite Membership. The membership grants you 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'll still receive 24/7 roadside assistance, trip interruption coverage, and rental car reimbursement for the duration of your Endurance contract. Endurance also has a 30-day money-back guarantee if you are not satisfied with your coverage.

 


 

CARCHEX: Best For Used Cars

CARCHEX is our choice for used cars based on the company’s offerings for high-mileage vehicles. CARCHEX also has a strong reputation, dedication to customer service, 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 from the Better Business Bureau (BBB).

 

With CARCHEX, you have the choice of five customizable extended warranty plans:

  • Titanium: Similar to a bumper-to-bumper warranty. Coverage 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

Additionally, the provider offers the following benefits:

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

 

CarShield: Best Value

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 4.1 out of 5.0-star rating on Google based on more than 8,000 reviews. CarShield is endorsed by Ernie Hudson and Adrienne Janic and has had featured spots on CNN, ESPN, and HGTV.

 

With CarShield, you have the choice among six customizable warranty coverage plans:

  • Diamond: Bumper-to-bumper coverage
  • Platinum: Comprehensive plan for high-mileage vehicles
  • Gold: Powertrain coverage, plus protection for the air conditioner and starter
  • Silver: Basic powertrain coverage
  • Aluminum: Covers expensive electronics in modern cars
  • Motorcycle and ATV: Covers specialty vehicles like motorcycles and all-terrain vehicles

Other benefits to using CarShield include:

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

 

Methodology

In an effort to provide accurate and unbiased information to consumers, our expert review team collects data from dozens of extended auto warranty companies to formulate rankings of the best providers. Companies receive a score in each of the following categories, as well as an overall weighted score out of 5.0 stars.

  • Industry Standing: Warranty providers with a history of strong business practices and endorsements from experts receive the highest scores in this category.
  • Coverage: This rating is based on types of extended warranty plans available, coverage terms, and added benefits like roadside assistance.
  • Cost: Our research team reviews sample quotes for a variety of plans and vehicles. Companies with lower prices per year of coverage receive the best scores.
  • Transparency: This score takes into account contract transparency and the availability of a money-back guarantee.
  • Customer Service: We comb through customer reviews and perform our own shopper analysis to get a sense of the responsiveness and helpfulness of each warranty company.

 

 

Read our guides to other warranty providers: