Are Extended Car Warranties Worth the Expense?
Owning a car can be a very expensive proposition. In addition to your auto financing, there is also fuel costs, insurance and maintenance to consider. Even if you do take on some of the routine vehicle maintenance tasks, the costs of repairs you can’t perform yourself can really add up over time. If you are securing auto financing with a no credit or bad credit car loan, it is in your best interest to make sure you keep your ongoing vehicle operation costs as low as you can.
In some cases, you may be best served by protecting yourself from unexpected auto repair expenses with an extended warranty for your vehicle. No matterwhere you buy your car or truck, you may be offered the option of an extended car warranty. It’s certainly tempting to save yourself some of the worries that can come with unexpected car maintenance expenses. But what do financial experts have to say about the advantages and disadvantages of extended car warranties?
Advantages of Extended Car Warranties
An extended car warranty is expensive, there’s no two ways about it. The average cost of this warranty coverage is about $2,000, a hefty sum for anyone to absorb when they’re already making a major purchase. Is that a good deal? Think of an extended warranty like another type of insurance for your car. You pay your insurance premium every month, and you don’t feel like you have missed out if you don’t get into a terrible accident to get some value out of your coverage. You should view your car’s warranty in a similar light. They are not all created equally, and the types and levels of warranty coverage can vary greatly depending on the option you choose.
A basic warranty may cover the power train including the engine, transmission and CV (constant velocity) joints along with some major components such as the radiator and the steering system. A more comprehensive warranty can offer repair or replacement protection for additional components like the air conditioning and the electrical systems. A deluxe warranty, sometimes known as “bumper to bumper” coverage, will cover all of the above and the brakes and shocks too. A failure of any one of these systems will constitute a major (think: very expensive) repair expense. If or when it happens to you, you will be extremely happy you invested in that additional warranty coverage.
The main advantage of an extended car warranty is the financial certainty that comes along with that purchase. Having your car in the shop for a lengthy repair is a massive inconvenience, but that’s nothing compared to the discomfort of a hefty repair bill. Murphy’s Law being what it is, you can bet your bottom dollar that when something does go wrong with your vehicle, it will be at the worst possible time. The week right before Christmas comes to mind, and so does the time right after you pay for an expensive home repair. An extended warranty is a fixed cost that allows you to budget more effectively.
When Extended Car Warranties Don’t Make Sense
Warranties are expensive, there’s no question about that. Remember a little while ago when we told you to think of an extended car warranty like another type of insurance similar to your vehicle? Good, keep that in mind. Like an insurance policy, not everything is covered. It can be very annoying to have to pay out of pocket for a repair that falls just outside of what is covered by the warranty, or that your warranty includes a price cap that is lower than the estimated cost of your repair. And the feeling of frustration when something conks out right after the warranty period ends is a very valid one.
To get the most out of any warranty, it has to be viewed as a long-term plan. You are more likely to get value out of it the longer you own your car. If you have plans to sell or trade-in your vehicle in the not-too-distant future, you might be better off passing on the extended warranty at the time of purchase.
The Bottom Line
Most people are completely unaware of how expensive a major repair can be, especially if they are new to car ownership. They bring their vehicle in for service and are totally shocked when reviewing the repair estimate, especially when it is nearly always an unexpected expense. When you have no credit and are hoping to build it, or you have bad credit and you’re hoping to repair it, one of the terms you are going to learn to know and love is “fixed costs.” Surprises are the common enemy of all those who are working on their credit history. A warranty on a new or used vehicle is a fixed cost that you can often pay off as part of your car loan. Yes, this means that it increases the total amount of interest you will pay over the term of the loan. The difference on a monthly basis is fairly negligible and it will avoid having you make payments on a car you can’t use because you can’t afford a necessary repair.
For your own peace of mind, an extended warranty may one day mean the difference between a minor inconvenience while your car is in the shop for a covered repair, and a major financial hurdle to clear for one that is not.
Your less-than-perfect credit history doesn’t have to stand between you and a new set of wheels. When you are ready to make the move to vehicle ownership, Auto Loan Solutions can help. Whether or not you’re planning an extended warranty purchase, our easy online application form is quick and painless to complete, and you will have your answer in only a few minutes!
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