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Should I Purchase an Extended Automobile Warranty?

December 28, 2011

When you purchase a new vehicle, you will likely be asked if you want to purchase an extended warranty. While we generally do not recommend purchasing extended auto warranties, here are some things to consider if you are still thinking about it.

What You Should Consider

When you purchase a new automobile, you will generally be covered by a manufacturer warranty for 3-4 years.

You will want to consider how long you plan to keep your car past the period of the manufacturer’s warranty. If the manufacturer’s warranty is for four years, and you generally buy a car every five or six years, you would not want to buy an extended warranty.

Cars are generally built better than in years past, and they do not break down as much. You would want to check the reliability ratings for your model. If you subscribe to the online Consumer Reports website (, you can check ratings for both new and used cars.

Since some extended warranties limit where repairs can be done, you would want to check this part of the warranty. Are you limited to one repair shop, or can the repairs be done at other repair facilities?

Since the payment method for repairs can vary, you will want to find out how repairs will be made under the extended warranty. Will the warranty company pay the repair facility directly, or will you have to pay and then wait for a reimbursement from the warranty company?

You would also want to check the financial strength of the warranty company if this is a company different from the manufacturer. This can be done by checking the company through the A.M. Best ( and Standard & Poors. ( rating services.

You also want to look closely at what is and is not covered. Pay particular attention to how the warranty defines “breakdown”.

Our Recommendation

Because chances are good that the manufacturer warranty that covers your car in its initial years will be enough, the extended warranty would only be advisable for those willing to pay the extra amount for peace of mind.

3400 Bissonnet, Suite 145
Houston, TX 77005-2153
713.964.4028 Phone
713.963.2977 Fax

Filed Under: Sensible Insurance

Written by PartnersInWealth

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