February 5th, 2019 | Updated on February 8th, 2019
Buying a used car is the best way to get the most for your car-shopping budget. Late-model used cars are very reliable, and depreciate more slowly than brand-new cars, so you can get a great vehicle for a low price.
But, once you’ve decided on your car and headed to the finance office to finalize the deal, you’re faced with a question. Do you want an extended warranty on your vehicle?
You’re not sure. It seems like a good investment, but will it really pay off? Is it worth paying the extra cash? The answer is not always obvious – so here are a few things you should consider before signing up for a warranty on a used car.
1. How Reliable Is The Car?
First things first, you should do a bit of research on the reliability of your selected car. Some cars are more reliable than others – and if you’re purchasing a car that has really good reliability ratings, an extended warranty may not be worth the investment.
What’s the best way to check? Consumer Reports has a large database of cars and their overall reliability rankings and ownership costs. RepairPal is also a handy resource, as it provides information about the most common mechanical issues facing each car – and the cost to fix each one.
2. Is It Still Covered By The Manufacturer’s Warranty?
If you’re buying a car that’s within 2-3 model years old, it may still be partially covered by the manufacturer’s warranty. Today, most cars are also sold with a powertrain warranty (which covers the engine, transmission, and other expensive parts) for between 7-10 years, or up to 100,000 miles.
If your car is still covered by the manufacturer’s warranty, investing in a third-party extended warranty will probably not be the right choice. However, on an older vehicle, which is out-of-warranty, a third-party warranty may be a good investment.
3. Who Is Issuing The Warranty?
There are hundreds of companies that offer third-party warranties, and not all of them are equally reputable. We recommend that you ask the used car dealer who is issuing the warranty, and then look the company up on a website like Consumer Affairs.
Try to learn more about the claims process, how quickly repairs are done, and other details about the warranty. If the warranty provider has bad reviews, you may want to reconsider purchasing an extended warranty, or find a different warranty provider on your own.
4. What Does The Warranty Cover?
This is, perhaps, the most important thing to consider when buying a warranty on a used car. Most car warranties are “exclusion warranties,” meaning that there are some parts of the car that are excluded from coverage.
Read the information you’re given about a warranty closely, and make sure you understand what’s excluded. In most cases, this will be “wear items” that are expected to need regular replacements, like brake pads and rotors, light bulbs, windshield wipers, and so on. But, in some cases, more major systems – like the electrical system – may not be completely covered by the warranty.
That means that if you’re buying a hybrid car, for example, you will want to check and make sure that the warrant you’re buying does not exclude repairs for the hybrid battery or powertrain.
5. Do You Have An Emergency Fund That Can Cover A Major Car Repair?
If your car does end up breaking down, do you have any cash set aside to repair it? If you can already pay out-of-pocket for most repairs, it may be a better idea to skip the warranty, and add the money you saved to this emergency fund.
However, if you cannot cover the price of a major repair, it may be safer to purchase the warranty. You’ll probably still have to pay a deductible if your car breaks down, but you’ll avoid the potentially sky-high costs of a serious engine or transmission failure.
Consider Your Finances And Preferences – And You’ll Make The Right Choice!
If you’re worried about your ability to pay for a major car repair, and you think you would like the peace of mind that a warranty provides, purchasing a warranty from a reliable third-party provider can be a great choice.
And, if you’re willing to take a bit more risk, and know you can pay for a major repair in the chance that you need to, skipping a warranty may help you save a bit more money, and this can be an equally good choice.
So take your time when purchasing a car from a used car dealer, and consider whether or not the warranty is right for you. If you follow these tips, you’re sure to come to the right decision!