Are Extended Warranties Worth It?

March 24, 2021
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There are examples all over the internet of buyers getting screwed over by the fine print of dealership warranties and luckier owners that had their warranty cover large mechanical failures. 

Unfortunately it's not so simple to say dealership warranties are good or bad; determining their worth depends on what the warranty covers, the dealership's reputation and even the car that's being purchased. 

Exclusionary Coverage

So how do you determine whether a dealership's warranty is good or bad? There are a few keywords to look out for when reading through the specifics, the first of which is "Exclusionary Coverage." 

Exclusionary Coverage is the most comprehensive warranty for your vehicle. It should cover everything that is not a consumable (lights, wiper blades, battery etc).

It's called "Exclusionary Coverage" because it's easier to list parts that aren't covered than what is.

Non-Exclusionary Coverage

On the other hand you have "Non-Exclusionary Coverage," which only covers specific parts of the car. As the opposite to Exclusionary Coverage, Non-Exclusionary Coverage lists parts that are covered compared to parts that aren't.

For example, if you take an extended warranty with Non-Exclusionary Coverage for just your power train, your A/C could break and not be covered or vice versa.

So You Want a Warranty

Now, let's say you have a car in mind and you're considering an extended warranty, but don't know what option to choose, or if you even need an extended warranty at all. Again, there's no easy answer and it depends on a multitude of factors.

First, look at the dealership's reputation online. If multiple customers report good interactions with the dealership, chances are yours will be too.

So you're getting an extended warranty, what type should you get now? This step mostly depends on the vehicle you are looking at, but sometimes that decision is made for you.

For example at Car City Wholesale, we only offer Non-Exclusionary Coverage, but if the dealership has multiple options for you, first check if the vehicle already has a warranty. Look out for brands like Kia, Volkswagen and Hyundai that have particularly long warranties that cover almost everything for at least five years.

What If It Has a Factory Warranty?

But even if the vehicle is still covered by the factory, it can still make sense to opt for an aftermarket extended warranty. This should be decided upon how long you expect to keep the vehicle and how many miles you expect to drive. 

If you're going to drive the vehicle out of its current factory coverage, you may still want it covered in some way. 

Even more importantly, due to the coverage, warranty companies know that vehicles under factory warranty are much less likely to have pre-existing issues, so pricing for extended warranties is generally much cheaper while the vehicle is still under its factory warranty. 

If the original warranty expired, next look up how reliable that particular vehicle is and determine if the warranty would potentially save you money.

Getting a Warranty for a Reliable Car

For example, If you are buying a Toyota Corolla with 50,000 miles, an extended warranty might not seem as necessary. However, on a used German car or on more luxurious marques (Land Rover, Jaguar, Porsche) that warranty could come in handy.

However, if you've done the research on your car and know for example its differential is likely to break in 20,000 miles, it might be worth it to get a warranty to cover that exact issue.

An often overlooked aspect of considering a warranty, even on a historically reliable vehicle (or if you're handy!) would be parts cost. With the vast amounts of technology our vehicles come with, the engine and transmission might not give you issues.

However, If your navigation goes out, that might be upwards of $2,000+ in just parts alone. So, think about more than your drivetrain.

A warranty in many ways is like health insurance - hopefully you never need it, but it's there if you do.

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