Add-Ons and Warranties: Are They Worth It?
February 2019
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Add-Ons and Warranties: Are They Worth It?
Should you pay more for warranties or add-ons?

A car is a major purchase, and even with diligent saving and careful budgeting, most consumers will feel stretched thin when signing on the dotted line. So, it’s understandable that when questions of warranties and add-ons arise, you might feel overwhelmed. You just made a major investment; shouldn’t you do all that you can to protect it?

Pros

Extended warranties or add-ons such as prepaid maintenance plans, rust proofing and exterior/interior protection should give you confidence that the expensive car you just bought will run for a long time and look amazing while doing so. By purchasing extra coverage, service add-ons or protection plans, future repairs or maintenance issues could be covered either completely or little cost to you.

“If you plan on keeping your vehicle for many years and don’t want to worry about repair bills, it’s usually a good idea to buy an extended warranty,” explains RealCarTips.com founder Gregg Fidan. “Extended warranties take over after your manufacturer warranty expires (usually after three years or 36,000 miles). They cover pretty much everything except normal ‘wear and tear’ items such as oil changes, brake pads, etc.”

If you plan to crank up the miles on your vehicle at a quick rate or you plan to drive the car years after your manufacturer’s warranty expires, an extended warranty can offer some solace, says U.S. News & World Report writer John M. Vincent. And if you know you won’t be proactive about saving money for potential maintenance issues or the car you’ve chosen isn’t known for its reliability, an extended warranty can serve as your safety net, he adds.

Cons

Don’t let the “bargain pricing,” hard sell by dealership personnel or your emotions cloud the reality that most warranties are designed to benefit the seller more than the buyer.

“Extended warranties, like the products they claim to protect, are sold to consumers for a profit and can be big money-makers for retailers,” reports Investopedia writer Tara Struyk.

Plus, warranties and other agreements are complicated, may not be as comprehensive as you hope, vary widely in price and limit you to where you can service your car, notes Vincent. Some plans require you to pay for repairs and then submit paperwork for reimbursement, which can completely destroy your budget. Some plans may not travel with the vehicle, which can be problematic when you sell or gift your vehicle in the future.

Figuring out what a warranty covers requires serious research, and even though it may be convenient to purchase the warranty that the dealership is presenting, it may not be the most cost-effective choice. Be wary of marketing materials highlighting any policy or plan, notes Vincent; be sure you review the real contract before signing. It’s also crucial to discover who supports the warranty — is it the car manufacturer, the dealership or a third-party company? The person or entity behind the plan will greatly impact its value to you.

An extended warranty or additional protection plans can be worthy investments. However, the same thought and research you put into deciding what car to buy should be applied to your decision to purchase or not to purchase any kind of warranty or add-on.


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Disclaimer - All content contained in this newsletter is for informational purposes only and should not be relied upon to make any financial, accounting, tax, legal or other related decisions. Each person must consider his or her objectives, risk tolerances and level of comfort when making financial decisions and should consult a competent professional advisor prior to making any such decisions. Any opinions expressed through the content in this newsletter are the opinions of the particular author only.
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