Once you’ve found the car you want to purchase, it’s time to do some paperwork before leaving the dealership with your new car. While doing paperwork, you’ll be required to make decisions about your car and there are some extra options you can choose to purchase, including an extended warranty.
An extended warranty is a service contract that will cover the cost of certain services and repairs after the factory warranty expires.
Before you commit to an extended warranty, you should do some research to make sure it's the right choice for you. If an extended warranty isn’t right for you it could end up costing you extra money in the long run.
So how do you know if you should choose an extended warranty? Here are a few things you should know about them before making a decision.
- You don’t actually have to purchase one at the dealership when you buy the car. You have time to shop around and find a warranty that appeals to you, but it’s best to get one within your first year of ownership when prices are lowest.
- An extended warranty starts on the purchase date, not the day that the factory warranty expires. This means you could be paying for double coverage until your factory warranty ends.
- There are three suppliers of extended warranties: the car manufacturer, the dealership, and independent entities.
So how do you know if an extended warranty is a good idea for your new purchase? Here are a few factors to consider when deciding on purchasing an extended warranty:
How Long you Plan to Keep the Car
If you’re planning to drive the car until it dies, then you’ll probably benefit from the warranty. But if you buy and trade-in cars frequently - say after only three or four years - then you don’t need the extended warranty because your repairs will generally be covered under the original warranty.
Peace of Mind
Do you hate surprises like pricey auto repairs? Then you may feel more secure knowing that major repairs are covered under an extended service contract. But if you’d rather just pay for repairs when they are needed, then an extended warranty might not be for you.
The Age of the Car
Newer cars are more reliable than ever, and owners are expecting to pay less in repairs. So a warranty is unnecessary, right? Well, that depends on how you look at it. You won’t be doing as many repairs, but the few that your car may need could be quite costly. Newer cars are generally more expensive to repair because of the complex computer circuitry and electronics that make them run so well.
Where to Get Your Warranty
If you decide to purchase an extended warranty, your next step is deciding where to purchase it from. Warranties offered by the car’s manufacturer will cover the largest range of services and repairs, but one from the dealership may be cheaper. You can also get great deals from independent entities, but beware of what you’re purchasing and the fine print with any offer you sign.
An extended warranty may be great for you or it might be something that you decide against. It’s important to do your research, know your options, and avoid getting rushed or pressured into purchasing something that isn’t the best choice for you.
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Editor's note: This blog was originally published on 11/24/2015 and has been updated for content and clarity.