Jul 11, 2013

Is An Extended Warranty Right For You?

When I was sixteen, I purchased my first car; a used Mazda 626 from a nearby dealership. Per typical sales interactions, I was offered an extended warranty. Being young and na├»ve, I just wanted to leave with my car and go pick up my friends. I didn’t have time to think about extended warranties with the open road waiting for me. About a year after I purchased the vehicle, and a few months after the dealership warranty expired, I began having trouble with my transmission. Four months, six transmissions and thousands of dollars later, I realized that purchasing an extended warranty upfront would have protected me from all of these unexpected costs.

What kinds of extended warranties are available?

           
There are two different types of extended warranties. The first type is an extended warranty offered by vehicle manufacturers. These policies often extend the original warranty for an additional time period, which allows to the customer to continue to take their vehicle to the dealership for service and repairs once the original warranty ends.
      
The second type of extended warranty is usually offered by an insurance agency or an independent service company. This type of warranty allows services on vehicles to be performed at multiple different locations, including the dealership.

What are the benefits of an extended warranty?
  • Purchasing an extended warranty gives you a buffer against unexpected repairs, ranging from engine or transmission replacement to repairing vehicle computer systems.
  • Extended warranties often pay for themselves after one major repair.
  • Many extended warranties are transferable to future owners, which increases the resale value of a vehicle.
  • Certain extended warranties offer other services such as car rental discounts, towing services, lockout assistance, etc.
Who is a good candidate for an extended warranty?
  • Anyone who wants to protect themselves against expensive repairs.
  • Anyone who purchases used vehicles or vehicles with higher repair costs. Foreign cars and cars of higher value tend to have higher costs for even small repairs.
  • Anyone that puts more than 15,000 miles on a car per year. The more wear a car receives, the more likely it is to need repairs.   
  • Anyone who purchases a vehicle and plans on re-selling it.
       Most consumers skip the purchase of an extended warranty to save a few bucks, only to be left with products, vehicular or electronic, that require expensive repairs or are completely obsolete. This often occurs because the consumer doesn’t see the value in spending extra money to protect the product. However, the consumer should take into consideration the cost of the product and the rate at which its value will depreciate. Purchasing a $40 warranty on a $100 DVD player isn’t practical, as the price of DVD players continue to drop with the release of competitive products.
      
       Although the value of a vehicle does drop the moment it’s driven off the sales lot, the rate of depreciation is much slower. Vehicles are also a long-term investment. You may drive a vehicle for several years without encountering any problems, but it is more than likely that you will run into necessary repairs, even during the time frame of your regular warranty. The best way to protect yourself from expensive repair costs is to purchase an extended warranty.


This article was submitted to us by Rebecca Hardy, a contributor for www.autowarrantyone.com, which offers vehicle extended warranties for all makes and models.