You just bought the car of your dreams and are wondering if you really need an extended warranty. Read on to find out whether or not it’s the right thing for you.
Here are nine key things to consider before purchasing a plan:
1. Do you really need it?
First and foremost, you should ask yourself if an extended warranty is something that you really need.
If you’re purchasing a new car, it will come with a manufacturer’s warranty, whether you want it or not. If you only plan to keep the car for the duration of the original warranty, then it’s unnecessary to purchase an extension.
Knowing how reliable your vehicle is can help you decide whether or not you need an extended warranty. If your model is traditionally known to be reliable, opting out of the extended warranty seems like less of a risk. That being said, it’s never a bad idea to take a portion of what you would have paid for the warranty and put it away in case you encounter future maintenance expenses.
2. The sooner you buy, the better the price
The longer you wait to purchase an extended warranty, the more expensive it gets. Not only will there be inflation, but since you’ve already been driving the vehicle, the coverage will be considered more risky and therefore cost more. There is no need to wait until your manufacturer warranty is up before purchasing an extension, but don’t rush into it either. This is an expensive purchase, $2,000 or more in some cases, so make sure you know what you are getting yourself into before you go ahead and spend your money on it.
3. Shop around
Did you know that you don’t have to buy an extended warranty from the dealership?
There are many third-party companies that offer extended warranties. If buying an extended warranty is important to you, then it is a good idea to look into these options to give you an idea of the kind of coverage you can get and at what price. This information can be used to haggle with the dealer.
At the dealership, they are likely to offer you either an extension to the manufacturer’s warranty or a warranty of their own. Make sure it’s clear who is offering the warranty to know whom you should contact should something happen to your car.
4. Make sure the service is reputable
When it comes to choosing an extended warranty provider, you want to make sure that you are getting a reputable service, even if that means paying a little extra. Remember that the warranty provider is promising to potentially pay thousands of dollars in repairs, and you are likely paying them a significant amount to keep that promise. Make sure the company has solid financials, so they could actually pay for your claim, should they need to.
Financial status aside, it’s also important to have an idea of the quality of service that the company is offering. Sources like the Better Business Bureau can be used to check out reviews on a particular company and the service they provide. Getting real reviews from the company’s past clients will give you the best idea of its reputation.
5. Don’t be afraid to negotiate
When it comes to purchasing an extended warranty, negotiation is fair game. Call different providers and see what they can offer you in terms of discounts or added bonuses. Once you reach out to a few different places, you’ll have a true idea of what the policy should actually cost and proper leverage to negotiate. It never hurts to ask.
6. Check your perks
As with any negotiable purchase, you want to make it worth your while. If you are spending a lot of money on a policy, make sure you are getting as much out of it as possible. You may have already negotiated a great price, but there is always more than monetary value to look at. Some perks to look for in an extended warranty contract include the following:
- Car rental reimbursement.
- Towing to repair shop.
- Roadside assistance.
- Travel expenses (in case something goes wrong while you’re travelling).
7. Look for the right coverage
When purchasing an extended warranty, there is a lot to consider. Every warranty is different, however, there are a few things that any good warranty should have:
- $0 deductibles: Some auto warranty contracts charge deductibles for every part repaired. Try to avoid that with a $0 deductible plan.
- 100 per cent money back guarantee: If you are unhappy with your purchase and have not made any claims, you should be eligible for a 100 per cent refund within 30 or 60 days.
- Transferable extended warranty: Choose a warranty that allows you to transfer the warranty to a new owner, should you decide to sell your vehicle.
- Repairs: Ensure they can be done at any certified mechanic, not just the dealership where you bought it.
- “Breakdown” and “wear-and-tear” coverage: Make sure that all the vehicle parts are covered, so that the provider wouldn’t have an excuse not to pay for the issue.
- Bumper-to-bumper or exclusionary coverage: It’s better to buy a warranty that encompasses the entire vehicle rather than one that names specific systems or parts because a few key elements may be left out of the coverage.
8. Understand the claims process
A major thing to look for when purchasing your extended warranty is how your claims will be covered. Since you are buying this warranty to avoid paying for a claim out of pocket, it is imperative to confirm that you will never actually have to do so, even with the promise of reimbursement.
There are many things that can go wrong when being reimbursed, one of which may be the fact that the company never actually gets you your money back. Other problems can include long wait periods, partial reimbursements and dealing with paperwork and wasted time. Make sure that your policy pays the repair shop or dealership directly.
9. Spot the red flags
You may have read the small print, but should also make sure that you completely understand it. There are many things that a provider may put into your contract that should be deemed immediate red flags, and make you question the credibility of your contract:
- Contracts that sound too good to be true: Remember that you get what you pay for. If a policy is really cheap, it will likely end up costing you more in the long run.
- Contracts with reimbursement programs: This means that you pay out of pocket for repairs and the administrator reimburses you later. Walk away from this.
- Contracts with hidden costs: There is more to repairs than vehicle parts. Make sure your policy covers labour because that’s usually the most expensive part.
- Contracts with extreme maintenance requirements: It’s reasonable for a provider to request that you keep your receipts for routine maintenance, because it’s a sign that they are willing to take responsibility if something goes wrong. There should, however, be no requirements beyond scheduled maintenance recommended by the manufacturer.
Buying an extended warranty is a big decision to make, but the ultimate decision will come down to if you prefer peace of mind or money in your pocket.