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Home /  Auto Warranty / Extended Auto Warranty – Scam or Useful?
last_updated_date Last updated: July 8th, 2020

Extended Auto Warranty – Scam or Useful?

PUBLISHED: November 3rd, 2017 6 MINS READ

A new car does not simply cover the cost of the car. By simply going ahead with the purchase and not reading the fine line, a new customer is often left clueless. Since there are several auto warranties, he could simply end up agreed upon one. A common scenario where this arises is when it comes to auto warranties and extended auto warranties. Many vehicle owners often wonder if an extended auto warranty program is a really beneficial.

Extended Auto Warranty: Scam or Useful?

It’s good to understand what exactly an extended auto warranty is. It is a repair coverage policy that comes into play with the typical manufacturer’s extended bumper to bumper warranty has expired. Also known as “service contracts”, the extended auto warranty will take care of the costs of most breakdowns. It will normalize the cost of repairs, irrespective of fluctuations in labor price or the price of parts. If you intend to buy an extended auto warranty policy, it is advisable to buy one before the manufacturer’s policy expires.

You also have the option of buying a policy after the manufacturer’s warranty has expired, but the cost will be relatively higher then. The service contract or extended auto warranty can provide peace and calm to many owners and is liked just as much by many auto dealers because these extensions act as an additional profit center. It is important to consider the pros and cons of an extended auto warranty policy. You should use your judgment to decide whether you must opt for one or not. Ensure that you read about extended auto warranty reviews.

Here are a few points to think about while going in to buy an extended auto warranty policy:

1. Ownership of the Car

It is good to know how long you intend on keeping the car, and it is also a common question that your financier or insurer will ask you. If you intend on driving the car for as long until all its parts fall off, then yes, it is more than necessary to consider buying an extended auto warranty policy. However, if you tire out of a new car and usually upgrade within a span of say three to four years, an extended auto warranty might be an unnecessary expense – as a car would most probably still be within its warranty period. Extended warranties prove beneficial if you intend on owning and using the car for a long period of time.

2. Know the Insurer

Many dealers who offer extended auto warranty often offer third-party contracts. While opting for a policy, see if it is from an insurer that the manufacturer approves of. A manufacturer-backed extended auto warranty will be valid at any dealership across the country, whereas a third party warranty, backed only by your dealer, might be valid only at that particular dealer’s auto shop.

3. Extended Auto Warranty: Know What it’s Worth

Before you agree upon a policy with your dealer, it is good and advantageous to do an overall comparative study on extended auto warranty policies. While in communication with the dealer, the odds of your financer or insurer providing you with a comparative report of different service contracts is close to none. It is always best to have done your share of the homework, know the fair price of such a policy and to know who provides the best policy for your specific needs.

Do not be afraid to negotiate. Even if the finance desk at your dealer says that the policy price is non-negotiable, look around a bit more. You might find a better price for the same deal, online, or you might also find another dealer who is willing to negotiate on the asking price.

4. Extended Auto Warranty: Know What it Covers

Now, it’s important not to get fooled by the idea of an auto warranty. It really isn’t the one solution to all vehicle-related problems after warranty expiration. Most extended warranties do not cover wear and tear parts. Wear and tear parts i.e. parts that will naturally wear out over a period of time.

Reading the fine print is the key to know exactly what gets covered and what is avoided in the auto warranty program. You must also check if the cost of the policy is worth its content and make sure that you are paying only for its actual worth. It is also good to know how the payment procedure works. Check if the policy covers all repairs, or if a small deductible needs to be paid, or do you have to pay for the repairs and get reimbursed later?

5. Extended Auto Warranty: Is it Really All That Necessary?


An auto warranty policy isn’t an absolute necessity in all frankness. However, buying one is entirely up to the vehicle owner. If having an extended auto warranty policy covers your vehicle repairs then you should purchase one. It’s quite impossible to fix a price tag on security.

On the flipside, if you are confident of having purchased a reliable vehicle from a manufacturer, you can simply walk out of the insurer’s office without having to worry about not having an extended auto warranty companies’ policy for your new vehicle. While repair and maintenance are inevitable when it comes to any such purchase, there are quite a few manufacturers who are known and rated for their stellar customer and vehicle servicing and repair, which often makes up for the cost and hassle of extended auto warranties.

Most auto warranty policies send the vehicle to fairly reputable workshops or garages for repairs. There have been frightening stories reported about policies sending the vehicle to poorly run and unlicensed workshops. The best thing to do is to choose a policy carefully and scrutinize it for all the details. Ensure that the policy is valid at licensed repair shops across the country.

This proves beneficial especially if you are moving between states or relocating to a different part of the country. Further, understanding the cost and subjective feasibility is key. If a plan suits your financial position and need of the hour, just sign up for one. Lastly, if you have chosen to invest in a car that is not American, then look for specialized servicing shops. Through workshops and policies, both do work out cheaper if the company caters to all automobile manufacturers. But certain cars do require a little extra attention to detail. Therefore, you should get your free extended auto warranty quote and keep your automobile in the best condition possible.

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