Sunday, Aug. 24, 2014 | 2 a.m.
If you don’t buy an extended warranty, some experts recommend setting aside half of what you would have paid for the service plan so you have a rainy day fund to pull from if unexpected repairs do arise.
Deciding whether to buy an extended warranty for your vehicle can be difficult.
It’s a gamble: Do you bite the bullet now and breathe a sigh of relief if and when your radiator blows? Or do you resist the salesman’s pitch and cross your fingers that your car doesn’t turn into a money pit?
The process can be stressful and confusing. Opinion is split on whether extended warranties are a good idea.
• Warranties can be useful with less-reliable brands. Consumer Reports found that car buyers who owned vehicles made by less-reliable manufacturers were more likely to be satisfied with extended warranties. On the other hand, owners of more-reliable brands were less satisfied.
If you think you’re buying a car that may have reliability issues down the road, an extended warranty might be a good option.
• Warranties can save you money. If your car is past its manufacturer’s warranty date and disaster strikes, you’ll be in luck if you bought a warranty. Covered repairs often won’t cost you a dime.
• Warranties are convenient. One of the biggest reasons people choose to buy an extended warranty is peace of mind. You may not end up needing the coverage, but if you do, you’ll be grateful for being so forward-thinking.
• Warranties can be a waste of money.
If you paid top dollar for an extended warranty and your car never breaks down, you wasted your money. Consumer Reports found that 42 percent of extended warranties never were used.
It’s always a plus to have a working vehicle, but you’ll have lost the bet you wagered when you signed on the dotted line.
• Warranties don’t cover everything.
Just because a warranty claims to cover unforeseen repairs, that doesn’t mean it covers every repair. Some warranties exclude coverage for certain parts and services, which means you’ll have to pay for them out of pocket, even with a warranty. Other plans limit repairs to in-network shops.
• Warranties don’t always pay for themselves. The value of a warranty depends on whether the cost of repairs adds up to more than the cost of the warranty. If repairs aren’t frequent or expensive, you may end up paying more for the warranty than the savings you realize from the extended coverage.
Keep in mind
• The cost. Consumers should expect to pay about $1,800 for a standard extended warranty. Higher-priced vehicles demand higher-priced warranties, and prices can rise as the car ages and the initial manufacturer’s warranty comes close to expiring.
• Read the fine print thoroughly. Extended car warranties are notoriously confusing and unfriendly to consumers.
• Ask for an exclusion list, or a list of the parts and repairs not covered by the warranty.
• Be prepared for a sales pitch. Salespeople earn huge commissions from selling extended warranties, so don’t be surprised if they get pushy.
• Weigh the terms and conditions of the warranty against its cost. Factor in variables such as the make and model of the vehicle, the conditions you’ll be driving in and how long you plan to keep the car.
• Negotiate and shop around. Prices aren’t set in stone. The price tag for service plans isn’t regulated, so dealers can charge whatever they’d like, and a 100 percent markup isn’t unusual. There’s some wiggle room, and consumers often can get a better price shopping outside the dealership.