Extended Warranty on a Used Vehicle: The Pros and Cons
An extended warranty on a used vehicle is like an insurance policy: if you never have to perform repairs, it's money down the drain, but when expensive work is required, you're thankful to be covered.
Generally speaking, the relevance of the extended warranty depends on its duration, the items it covers, the reliability of the covered vehicle, and the cost of repairing or replacing the various parts compared to the price of the protection. Before making a decision, do some research on the web - road tests, owner forums, independent studies, Automobile Protection Association (APA) reliability reports, etc. - and check the history report.
There are two possibilities: a manufacturer's warranty at a franchised dealership prior to closing the sale, or a warranty from an independent company through a used car dealership. The latter is often more limited than the former.
According to the APA, extended warranties are recommended when their coverage extends to vehicle components that are likely to require repair during the warranty period. If you are buying a used vehicle and your budget is limited, a comprehensive warranty will take care of the unexpected, even if there are major breakdowns and repairs to be conducted.
Below is a list of questions the organization recommends asking the dealer when purchasing an extended used vehicle warranty:
- Is the warranty from the manufacturer?
- Will there be a deductible to pay?
- Is there a maximum claim amount?
- Is the warranty comprehensive or only for certain parts?
- How long does the warranty last and how much mileage does it cover?
- Does the warranty cover the electronic system as well as the air conditioning system?
Ultimately, the extended warranty is worth it if you are buying a used vehicle that can be very expensive to repair (luxury or European models, among others) and whose reliability is below average. Often, one major mechanical failure is enough to justify the price. It's also a way to have peace of mind and, for some, that's worth everything.