Pros and Cons of Extended Car Warranties (2024) (2024)

Pros of an extended auto warranty

First, let’s go over the main advantages of buying an extended auto warranty.

1. It can help cover the cost of expensive breakdowns

Here’s how an extended auto warranty works: If something breaks on your car due to a factory defect, you roll your car into the shop, ask them to file a claim with your warranty provider, and if it's approved, your provider covers the repair bill (minus your deductible).

That’s nice because car repairs aren’t cheap.

Data from Cox Automotive shows that the average car repair cost about $550 in 2023. However, some fixes, like a head gasket replacement, can cost thousands.

If you have an extended auto warranty, your cost for even a large repair could fall to $100 or less, depending on your deductible. That’s a relief, whether you’re looking to reduce your overall ownership costs or protect yourself from a single catastrophic bill.

» LEARN MORE: What does a car warranty cover?

2. Many plans include valuable secondary benefits

Outside of repair bills, there are plenty of secondary costs associated with having your car out of action. You may have to call a tow truck driver, rent another vehicle or even book a hotel if your vehicle breaks down out of state.

Thankfully, many extended auto warranties include bonus benefits to help with these problems. Plans from Endurance, for example, include at least one year of 24/7 roadside assistance.

3. You can choose your level of coverage

Sometimes, you don’t need coverage for every single part of your car. If you drive an aging work truck, for example, you may only want coverage for your engine, transmission and drive axles to ensure that your vehicle keeps running well past 100,000 miles.

In that case, you can simply purchase powertrain coverage for significantly less than bumper-to-bumper coverage. And if you want something in between that covers your sensitive electronics, many providers offer a “Silver” or “Gold” plan that’s still cheaper than their top-tier options.

» READ: How to choose an extended car warranty

4. Having coverage can provide peace of mind

Even before they’ve filed a claim, many extended auto warranty holders find that the reassurance they get from having coverage is worth the cost all by itself.

“Olive fit my budget especially for what I needed for my Ford that I have 120 something thousand miles on,” said Carlos in California. “It gave me that extra peace of mind for another three years. It had a great price and great options too. The customer service was excellent. I was on the phone and done in less than five minutes. Everything has been great. All of it was very easy, efficient and affordable.”

Cons of an extended auto warranty

Extended auto warranties aren't right for everyone, though. Before you buy an extended auto warranty, consider these cons.

1. A warranty may cost more than it saves you

In some cases, it makes financial sense to save the money you would have spent on an extended warranty and put it in a savings account exclusively for future repairs.

Think of it this way:

• Cost: The average extended auto warranty costs around $1,000 per year of bumper-to-bumper coverage.
• Benefit: RepairPal, a site that compiles automotive repair data, estimated that the average vehicle only cost around $652 per year to maintain and repair in 2019. Adjusted for rather steep inflation, that is $888 in January 2024 dollars.

Basically, the average vehicle likely won’t need enough repairs to justify the average cost of bumper-to-bumper warranty coverage. That may seem like a “gotcha,” but it makes sense if you think about it — if warranty companies lost money on most plans, they couldn’t stay in business.

You often have to get a good deal and be in the right situation to get your money back with an extended warranty. It can still be worth it if you value peace of mind or think that potentially losing money on coverage is worth being protected from a random $4,000-plus repair bill, but it’s far from a guaranteed financial win.

» MORE: Is an extended car warranty worth it?

2. Non-exclusionary plans are generally a poor value

Extended auto warranties generally come in three varieties:

• Powertrain plans cover your engine, transmission and drive axle(s).
• Silver/Gold plans add coverage for your electronics, cooling system and maybe a few other components.
• Platinum plans are essentially bumper-to-bumper plans, covering over 90% of the parts on your car except for a few specific exclusions. (That’s why they’re also called “exclusionary” plans.)

Broadly speaking, Powertrain plans are often around 50% cheaper than Platinum plans, and Gold/Silver plans are around 30% cheaper than Platinum plans.

Example: Extended warranty prices for a 2019 Chevy Equinox

That may sound like a bargain at first, but Platinum plans still remain the best relative value by far. That’s because Gold/Silver plans typically only cover around 10% of the 5,000-plus parts on a vehicle, while Powertrain plans cover less than 5%. Platinum plans can cover 90% or more. That means you’re usually getting the most coverage for your money with a bumper-to-bumper warranty.

3. Even the most robust bumper-to-bumper plan has exclusions

There’s an old industry saying that auto warranties “cover most of the parts, some of the time.” Basically, even a top-tier bumper-to-bumper plan won’t cover things like:

• Cosmetic parts
• Glass and body panels (unless they rust)
• Wear-and-tear parts (like brake rotors and tires)
• Any parts listed under “Exclusions” in your contract
• Parts that failed due to neglect (like missing an oil change)
• Repairs needed due to damage (like from a collision) or misuse/abuse (like off-roading, racing or towing too much)

Plus, extended auto warranty companies aren’t always upfront about precisely what is — and isn’t — included in your contract, so it’s best to read your chosen plan carefully before committing.

4. Some plans can be difficult to cancel

While most extended auto warranty companies should offer a full refund within 30 days of purchase — and a partial, prorated refund after that — many ConsumerAffairs readers have still reported difficulties trying to cancel their plans.

“Cancelling was a nightmare,” wrote Sharry in Utah. “I had to call multiple times, their customer service is outright disrespectful. The guy actually hung up. I got so fed up I eventually called my bank and cancelled my credit card so they would stop charging it. Turns out, even with a cancelled card they were still adding up the costs every month and mailing it. After multiple tries, and getting the runaround, and being on hold so many times, someone was honest enough to tell me how to REALLY cancel.”

Before committing to an extended warranty, be sure to get the provider’s exact cancellation policy in writing. While you’re at it, be sure to avoid the worst extended auto warranty companies as well.

Weighing the pros and cons of an extended auto warranty

While extended auto warranties can provide peace of mind and protect your savings, they’re still not for everyone. Here’s a recap of the pros and cons to help you decide whether purchasing a plan makes sense for you and your vehicle.

Is an extended auto warranty right for you?

Assuming your vehicle is no longer under factory warranty, an extended auto warranty is generally more likely to be worth it if you either:

1. Drive a car that is less reliable than the average vehicle
2. Can’t afford a big, unexpected repair bill
3. Expect to spend more on repairs than your warranty costs
4. Don’t mind paying a few thousand dollars just for extra peace of mind

Every situation is different, so it’s up to you to decide whether an extended warranty is the right choice. If you have a used car that you want to drive for the foreseeable future and you fear high repair costs, it could be wise to look into an extended warranty. But if your vehicle is reliable and you don’t plan to own it long-term, you might be better off paying out of pocket for the occasional repair.

Be sure to weigh the pros and cons listed above — and read any contract carefully — before you buy. If you decide that an extended warranty is right for you, check our picks for the best extended car warranty companies.

» LEARN MORE: Where can you use an extended auto warranty?