Repairs to cars are costly. Sixty-one percent of Americans can’t afford a $1,000 repair bill. Extended service agreements (also known as extended warranties) are very attractive.
Extended warranties don’t come with the same terms. Customers often fall for scams and end up paying more than they pay. We’ve all heard horror stories that prevent consumers from purchasing plans that benefit them long-term.
You don’t need to be an expert in extended warranties for cars, and here are the facts.
Who should be eligible for an extended warranty?
It would be best to consider your needs before you begin looking for an extended warranty. While extended warranties are helpful, 55 percent of those who purchase one don’t use it, making careful consideration essential.
Extended warranties are only available after the original manufacturer’s warranty has expired. Your extended warranty may only be valid for a limited time if you plan to keep the car for less than a year and you buy it new. It won’t have much impact in this instance.
This is particularly true for cars that have been leased. They are typically returned at the end of the comprehensive manufacturer warranty, so an extended warranty is unnecessary.
Extended warranties cover mechanical problems so that you don’t need to draw on your savings to pay for them. You might not need an extended warranty if you have the funds to pay for significant repairs or are good at budgeting.
If you have the means to save $70 per month for three years after buying a car, $2520 will be in your savings account once your original manufacturer’s warranty ends. This is roughly the amount you would have paid if you had bought the extended warranty. This money can be used to pay for a few major repairs, and you will become self-insured. You can save $70 per month by using a portion of that money each time you use it.
What should you look for in an extended warranty?
Extended warranties can be very poor. It’s easy for people to fall for scams or warranties that don’t cover the things they want. It’s crucial to know what’s worth your money before you shop.
You should look for policies that offer the following:
Exclusionary
Exclusionary policies include a list that excludes parts from coverage, and everything else is covered. Long advises against all inclusionary policies, and they only cover certain car components, so it is worth not paying up front.
There are many repair shops to choose from
You may not be able to get your car repaired at certain shops due to insurance policies. An extended warranty should allow you to repair your car at a mechanic you can trust. It is helpful to have a network of shops that are familiar with this extended warranty.
Full rate payment
Extended warranties may limit the amount they will pay for labor and parts, leaving you with the rest of the bill. You should look for policies that cover the charges your mechanic charges.
A good reputation
You can narrow down which policies offer excellent customer service and which ones jack you around and won’t pay for any repairs by doing simple Google searches or asking friends and family for recommendations.
Direct pay
It can be frustrating to discover that your warranty covers repairs. However, you will need first to pay the bill and then wait for reimbursement. Direct payment to your mechanic is the best option.
Extended warranties offer other benefits, including roadside assistance, rental car protection while your vehicle is being repaired, and locksmith services. These benefits may be important, so ask your extended warranty representative and read the policy carefully. You should only consider the best coverage available if you decide to purchase, and lower-level policies are rarely worth it.
Mechanical Breakdown Coverage
Long says, “If I were buying a new car or a used car, I would probably get mechanical breakdown insurance.” It’s a premium product that an insurance company backs up.
Geico is one of the few insurance companies that offer mechanical breakdown coverage. This insurance policy covers mechanical breakdowns that are not caused by car accidents or natural catastrophes like hail storms and flooding. These policies can be used as an alternative to extended warranties.
However, there are critical differences between a traditional extended guarantee and a mechanical breakdown policy. Extended warranties can be paid in one lump sum or monthly payments until the policy is paid off. The mechanical breakdown policy begins as soon as your car is purchased. It continues until you are no longer eligible for coverage or the insurance company stops covering you. This usually happens at 100,000 miles. Extended warranties have a higher deductible, usually $250, instead of $50.
Companies Worth Looking Into
While you can purchase an extended warranty from a dealership when purchasing a car, it is not the only option. Many dealerships do not offer an extended warranty policy but sell a product from one major insurer. Ask about the warranty administrator if you’re at the dealership to finance an extended warranty option.
You might also be looking for an extended warranty for your car or a private warranty, which will make things more complicated. If you’re willing to do some research, many great companies are out there.
Long says that Omega and Endurance are some of the best, and olive and 1-WARRANTY are good options. Credit unions may also offer extended warranties like Forever Car, and this subscription-based option is available.
Extended warranties that include the ones mentioned offer a monthly payment option. Compare the flat fee cost and the payment-based options before you make any decisions.
Buyer’s Responsibilities
The kicker is that you might not understand what your extended warranty covers. But, when you first use it, it becomes more complicated than you expected. The good news is that most extended warranties are reputable and allow for a prorated reimbursement. You can call the company to cancel your warranty and receive a check, although it may take some time. Be sure to read terms an conditions.
