Extended Car Warranties: 3 Things to Know

What's Hot

How a Mexican Tariff Will Boost the Cost of 6 Common PurchasesFamily

Report: Walmart to Begin Selling CarsCars

How to Protect Yourself From the ‘Can You Hear Me?’ Phone ScamFamily

Trump Scraps FHA Rate Cut — What Does It Mean for You?Borrow

This Free Software Brings Old Laptops Back to LifeMore

10 Overlooked Expenses That Ruin Your BudgetFamily

Protecting Trump Will Cost Taxpayers $35 MillionFamily

8 Creative Ways to Clear ClutterAround The House

8 Tuition-Free U.S. CollegesCollege

Study: People Who Curse Are More HonestFamily

Tax Hacks 2017: Don’t Miss These 16 Often-Overlooked Tax BreaksTaxes

The 3 Golden Rules of Lending to Friends and FamilyBorrow

Porta-Potties for Presidential Inauguration Cause a StinkFamily

12 Surprising Ways to Wreck Your Credit ScoreBorrow

These Are the 25 Best Jobs in the U.S.Jobs & Work

An extended warranty can provide protection against a budget-busting bill. But keep it in park until you understand what they do and how they work.

Here’s the back-story to the news story we just did on this topic: the lady in our video, Debbie, is someone I work with from time to time. She contacted me with this story so she could prevent others from running into the same extended-warranty ditch she did.

1. Know what it covers, and when it expires

When she agreed to be a part of this story, Debbie confessed embarrassment that she’d been paying for coverage that had long expired. But who among us is going to remember details of coverage six years after we sign up for it?

One way you might try is to make yourself a quick “crib-sheet” with your basic policy information and keep it with your registration and proof of insurance in your glove box. Then, every year when you replace your proof of insurance with a new one, a glance at your sheet will tell you if your extended warranty is still in force and get a reminder of your policies particulars.

And that brings up something crucial about extended car warranties: they’re not actually warranties in the technical sense: they’re really insurance policies. And like insurance policies, they can vary wildly concerning what’s covered, what’s not, deductibles and transferability. So when you’re shopping policies, you’ve really got to dig into the fine print and compare. Don’t have the time? Don’t spend a dime.

And be aware that newer cars with fancy gadgets often cost a ton to repair. Here’s a story I did on that: High Tech Cars Mean Costly Repairs, which steers us right into our next tip:

2. Shop an extended warranty like you shop a car

By this I mean don’t buy the first thing that strikes your fancy. Kick a few tires. You don’t have to buy an extended warranty from the dealer and you don’t have to buy it when you buy your car. You can buy them from insurance companies, companies that specialize in just these policies or even some credit unions. But wherever you shop, don’t forget the final tip…

3. Ask questions: lots of them

Is there a deductible? How much? Is it per visit or per repair? (In other words, if you bring your car in and they find three separate things wrong, is there a deductible for each, or just one for the visit?) Can you bring your car anywhere or just to the dealer? Do you have to pay the bill and submit it to the warranty company, or will they pay the repair shop directly? What’s specifically excluded? Is the warranty transferable? Is it a “break-down” warranty (covering only parts that actually break) or a “wear-and-tear” warranty (paying for parts that just plain wear out?). And then, of course, the ever important “How long will it last and how much will it cost?”

You should make sure the policy your purchase dovetails with the manufacturer’s warranty: in other words, if your manufacturer’s warranty is already covering something, there’s no need to pay for protection you already have.

And keep in mind that an extended warranty is only as good as the company that backs it. If it’s an insurance company, make sure they have at least an “A” rating from either AM Best or Standard & Poors. If I was writing this several years ago, I would have said this wasn’t a concern if you were buying your warranty directly from the manufacturer. These days, however, I’m not so sure.

Bottom line? Whether you should even buy an extended warranty depends on how afraid you are of the consequences of not having one. But if you do decide to travel this road, don’t end up wrecking both your peace of mind and your budget by failing to shop it properly.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: 6 Presidents Day Sales You Should Know About

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,853 more deals!