The debate rages on whether an extended warranty for a used or new car is worth the money. While naysayers point out that it's an added expenditure, car owners with little extra money for major repairs argue that it has saved them thousands. So, whether you want peace of mind or added protection, an extended warranty might be the perfect fit for you. Here’s what you need to know when making your decision.
Understanding the cost of common repairs can help you decide if an extended warranty is a good idea. While the model and type of vehicle you have will significantly influence the price of repairs, the bottom line is that repairs are almost inevitable with any vehicle.
Here’s an example of average repair costs for two top-selling models: the Mercedes-Benz GLC 300 and Toyota Camry:
Mercedes-Benz GLC 300
Any way you slice it, repairs aren’t cheap. It’s also worth noting that vehicles today with electronic systems are better candidates for extended warranty as these tend to break and can be costly to fix.
Also known as a vehicle service contract, an extended warranty provides a safeguard against unexpected or unforeseen expenses. It might seem like a marketing gimmick, but an extended warranty carries value if you don't have the budget for expensive repairs further down the line.
Two types of extended warranties exist: the manufacturer's warranty (also known as a factory warranty), which typically comes with the vehicle but can also be purchased, and a third-party or comprehensive warranty that's purchased as an aftermarket product.
Manufacturer's warranties are included in the vehicle purchase price of a new vehicle or certified pre-owned car, costing you nothing out of pocket. Provided by the auto manufacturer, these warranties come in either a powertrain warranty or a bumper-to-bumper warranty. These warranties typically come with a length stipulation, often stated in years or kilometres (5-year, 100,000-kilometre comprehensive or powertrain warranty, for example).
A powertrain warranty covers any mechanical defect as a result of the manufacturing process. This includes the engine, transmission, and driveshaft.
Sometimes referred to as a limited warranty, a comprehensive warranty covers the other components of your vehicle not included in the powertrain. Examples of what's covered might include the:
That said, a bumper-to-bumper warranty doesn't cover items that suffer from normal wear and tear due to driving or usage. Here are some things that aren’t covered:
An aftermarket extended warranty, or third-party warranty, is one you can buy to extend your coverage after the automaker's warranty expires.
If you want the peace of mind of full coverage for your vehicle after the original warranty expires, a third-party warranty is an ideal choice. But you should also conduct some in-depth research and do some critical thinking in this process. Below, we’ll look at when you should consider an extended car warranty.
Buying an extended warranty is beneficial for several reasons, but not everyone will find it advantageous. By assessing your current needs and some other factors, you can come to a well-rounded decision as to whether it's the right choice for you.
One of the foremost reasons to buy an extended warranty is if there is not much remaining manufacturer's warranty on the vehicle you are purchasing. You should also scour the internet for reviews on the car model you wish to purchase. If you consistently see that the transmission fails or the car has other issues just after the 60,000-kilometre range, an extended warranty makes sense.
Keep in mind that the likelihood of repairs can increase over the life of a vehicle. At around 100,000 km, the incidence of repairs goes up exponentially. That’s when an extended warranty gains value. Mechanical parts start to break down, and the likelihood that you’ll need repairs increases. As a result, an extended warranty can cover these repairs so you don’t have to pay out of pocket.
In other instances, the manufacturer's warranty may not extend to the model you purchase. Although Kia, Hyundai, and Mitsubishi tout some of the most generous warranties available, they don’t extend to the next owner, unless they’re certified pre-owned. This is a prime example of when an extended warranty would make sense.
In addition, extended warranties on used cars can help alleviate some of the stress of potential repairs. If you don't have the financial means to sock away thousands of dollars for repairs, an extended warranty can provide a worry-free alternative to an automotive emergency fund.
Not all warranty providers are created equal. Some come in high regard while others have unsavoury business practices. It's up to you to do the proper research and read reviews to find the best option and best price available. Once you settle on a provider, your due diligence shouldn’t stop there. Make sure to consider the following factors before you get an extended warranty.
When considering an extended warranty, two of the foremost aspects are maintenance costs and ownership length. On average, you can expect to pay about $1,500 in maintenance for every 20,000 km you drive, which typically takes place in one year of driving. (This price includes a back-loaded amount, as you probably won’t pay this much within the first 20,000 km of owning the vehicle.) Using this average cost, you can estimate how much you’ll pay in maintenance over the life of the car and weigh this against the cost of an extended warranty. You just might find that an extended warranty saves you money in the long run.
Another consideration when you buy an extended warranty is whether to pay for it upfront or roll the costs into your loan. If you decide to pay upfront, expect to budget somewhere between $1,000 to $3,000. If that's not an affordable option, you can often roll the price into the loan.
If you decide to purchase the Clutch Protection Plan, you won’t have to deal with any guesswork. While other dealers may make you haggle over the price, we offer a straightforward approach so you can avoid the stress and common issues associated with an extended warranty.
Although extended warranty companies throw out phrases such as "comprehensive coverage" or "full coverage," this isn't always the case. Most often, covered repairs are limited to the fine print within the contract.
While this may cover mechanical breakdown and other big-ticket items, it won't cover routine maintenance such as tire rotations or oil changes. To save yourself from surprises down the road, make sure to read every sentence of the fine print to see what your warranty covers.
You'll also want to see what the deductible of the policy is and the company's reimbursement method. Low-dollar or zero-dollar deductibles are more expensive than higher deductibles.
As far as reimbursement, you may find that the company pays the repair shop directly. However, some companies will only reimburse you for the cost of repairs after they receive the invoice or receipt. In rare cases, some extended warranty customers have stated that it takes a long time for reimbursement (sometimes weeks or months), putting them in a financial bind and causing them to chase payments.
Do you have a trusted mechanic? Before you buy an extended warranty, make certain that you can take your car to them. Some extended warranty plans stipulate that you can only take your vehicle to repair facilities on their list. While these repair shops may be reputable, you still don't have the peace of mind or confidence you might have with your preferred mechanic in terms of pricing or quality of work.
An extended warranty can cost a lot of money, so you might think it’s not worth it if you never use it. But in reality, a large chunk of people use their extended warranty to get out of expensive situations. That said, beware of traditional dealers that negotiate on warranty prices. This likely means they’re marking it up quite a bit and charging different people different markups.
Performing research and due diligence on an extended warranty for your vehicle is essential. It helps you weed out the disreputable providers to find the ideal warranty company to work with. But if all this seems overwhelming, don't stress. Just go with the worry-free Clutch Protection Plan.
Available on any used car in our inventory, the Clutch Protection Plan offers coverage for:
You can even add undercoat protection to ensure every bit of your car from wheel to wheel and top to bottom is covered. While our cars undergo a 210-point inspection and come with a 90-day, 6,000-kilometre warranty, the Clutch Protection Plan adds that extra peace of mind you deserve. So, the only thing you'll have to worry about is choosing the perfect used vehicle to fit your needs.