Buying an Extended Car Warranty?

June 26, 2010

Woman Dealing with Broken Down CarI am going to buy a 2003 Honda CR-V from a none Honda dealer. It only has 51K miles on it, my question is how do I go about the warranty? They offered me warranty from their dealer of course, but my question is should I go to a Honda dealership and get that warranty or get some other type of warranty?


By yessy from Bossie City, LA


June 27, 20100 found this helpful

My husband is a warranty administrator at three dealerships (and is helping with a new store), and he says that banks, credit unions, and dealerships offer warranties from "a gazillion" (his words) different companies, but an important question to ask is if they pay with check or credit card. If you are travelling and need repairs, some dealerships won't want to work with you if the warranty company pays by check.

He says be sure to read the contract, because that'll tell you what's covered and not covered. Don't listen to the guy at the dealership when they say "bumper to bumper." Those guys aren't always right (I don't know if they're being dishonest, or are mistaken), and then the customer gets a nasty surprise when they get work done and find out that something isn't covered.


We bought our most recent car ('06 Accord) after we were rear-ended and our '95 Accord was totalled. The auto group my husband works for doesn't sell Honda, so we had do go to someone else. My husband knows his numbers and is good at what he does. He kept declining their extended warranty, until he basically got it for the same cost that he would through his own dealership. I don't know if he was able to get it that low only because they knew that he's a warranty administrator for a different dealership, or if other people could get that kind of price, too. But maybe if you suggest that you're going to check around or have already checked around they'll lower their price for you. It's worth a shot! Best of luck! And enjoy your Honda, we do!

June 27, 20100 found this helpful

Warranties are big money makers for car dealers. You can find out a lot of information by going to and typing in "buying a warranty for a used car." I would pass on the warranty.


Is an Extended Warranty on a Used Car Worth It? The Good, Bad, and Ugly of These Service Contracts

If you've purchased a used car from a dealership in the past few years, you've undoubtedly encountered the extended warranty option. To be clear, while most of these are described by the salesmen as warranties, most are actually service contracts. A warranty is built into the price of the vehicle, whereas a service contract costs extra and is purchased in addition to the vehicle itself. A warranty and service contract both generally achieve the same goal, just keep in mind that if you have to purchase it on top of the vehicle itself, it's probably a service contract.

On the surface, the added protection of covering your vehicle for an extended amount of time seems like a good idea, but before you jump in, make sure you understand what you're getting yourself into. These are products that are pushed because they make money for the dealer and salesperson. There are times when buying the service contract can be a great idea and save you money, but there are plenty of situations where it is completely unnecessary and will just end up costing you money. And worst of all, there are actually some companies that are little more than scams.


Consider Your Situation First
Before you decide on whether or not you could use an extended warranty or service contract, consider your situation. First, does the vehicle you're intending to buy have an existing manufacturer's warranty that will carry over to you? If so, how many miles or years are left before it expires? Many auto manufacturers are including longer warranties that in most cases are transferable. So, if you're buying a car with a 70,000 mile existing warranty and it has 15,000 miles on it when you plan on buying it, that's entirely different than buying the same car with 65,000 miles on it. In the first scenario, buying the extended warranty would be a bad idea with so much life left in the existing warranty, whereas the second scenario might point to an opportunity.


Consider the Cost
To be blunt, many of these service contracts are expensive. That doesn't automatically mean they are all a rip off, but you do need to consider the likelihood of needing repairs, what those repairs would cost, and then determine if it makes sense. Depending on a number of factors such as what is covered (i.e. is it comprehensive, or just power train?), the deductible, and the length of contract, prices can vary from just a couple hundred dollars to a couple thousand dollars.

What you're ultimately doing is placing a bet that you think your repair costs over the length of the contract will be more than you paid for the contract itself. For instance, if you paid $800 for coverage that will last you about two years, you have to ask yourself if there is a good chance that over the course of those two years you'll need to have $800 or more worth of work done. If it isn't very likely, you might as well save your money. But if you think that is clearly a possibility, it might make sense. It's like buying insurance. You never know if you're going to need it, and if you don't use it, it feels like wasted money. But if you do need it, you're sure glad you have it.


Other Benefits to Consider
Another thing to consider with these types of service contracts or warranties are the possible other benefits. Many will offer a free loaner car when you have to bring your vehicle in for service. That can be extremely helpful if you're in a situation where you need a car or don't have many options for sharing a ride. Some may also pay for the cost of a rental car as well. So, if you're in the shop for a few days, this can be a nice benefit to have.

In addition to getting a spare car when yours is in for repairs, some contracts also provide free towing service in the event you break down. While this isn't as big of a concern if you have AAA or some sort of roadside assistance, if you don't have these, it can be a fantastic benefit. Again, it's something you hope to never have to use, but if you do, youll be thankful you have it.

Dealership Repairs vs. Mechanic
One thing you need to consider is the cost difference between dealership repairs vs. having your local mechanic handle it. Obviously, the dealership is going to charge more for parts and labor. It's what they do. And if you buy a service contract, that generally means you have to take it to the dealer, or at least an approved location in order to have the work covered. Of course, if you have the coverage, you're not paying for it out of pocket, so you don't think much of it.

But, that's where you have to decide if it's really a value or not. If you're shelling out money for additional coverage, what would happen if you took your vehicle in to a local mechanic instead? You would have to pay out of pocket, but since you'd be paying less for the same repairs, it still might end up cheaper than buying the service contract to begin with.

My Personal Experience
I'll give you an example with a personal experience I've had with used cars and service contracts. We have two used vehicles. In one case, it was clear that buying additional coverage would be a waste. With the other, it was a little bit harder of a decision. With the second car, it had 23,000 miles, and the manufacturer's warranty only went to 30,000. Since I would be the one driving and I put on around 18,000 miles a year, the prospect of running out of coverage after just three months from the purchase was the first indication we might want to consider adding coverage.

Then we had to decide what type of coverage we wanted. Just power train coverage, or something more comprehensive that covered everything from a broken door latch to the electrical system. Looking back at my scenario, I do a lot of driving, on rough roads, and harsh winters. The chances are pretty good that there will be more than a couple repairs needed over the coming years, so comprehensive was looking like a better option, but that all depends on price.

After all said and done, we were able to get a 100,000 mile service contract for $1,500 with a $50 deductible. Sound expensive? Yep. But, that's where you have to decide whether or not you think youll need $1,500 or more in repairs over the course of 77,000 miles, or in my case, a little over four years. If you've ever had to pay for car repairs out of your own pocket, you know just how fast things can add up. So, I felt it was a pretty safe bet given the situation.

Sure enough, after about 8 months, we had a problem with the transmission. Total bill? Around $1,200. A year later, a few more problems developed. The radio wasn't working right, the seat didn't recline properly, and just a few other little misc. problems. Another $500. And just a few weeks ago, took it in for a terrible clicking problem with the master relay, a rapidly deteriorating wheel bearing, a leaking axle seal, and a leaking exhaust manifold, for another $1,800.

Now, that $1,500 + $150 in deductibles doesn't look so bad considering the $3,500 in repairs, and the loaner car for about the 10 total days it's been in the shop. Could the work have been done cheaper than that by taking it somewhere other than a dealer? Probably. But I also would have been in a situation where I would have had to rent a car, and a small shop may have required more time to get the repairs done. Of course, we could have been "lucky" and the car could have never had any problems, and it would have felt like throwing money away. You just never know.

The Verdict?
You have to be very careful. Any dealer is going to try and sell you one of these. They will make it sound like a great deal, but it's up to you to do the research to determine whether or not it's really worth it. I'd say that for most people, given the cost, these warranties or service contracts aren't going to be worth it. But, if you do the math and find out that it could be beneficial, then it might be worth considering. But don't let the salesman bully you into a contract.

A better option for most people would be to set aside a "vehicle fund" to work as your own extended warranty. If you put $1,000 or $2,000 into a high-yield savings and sort of earmark that for unexpected vehicle repairs, your money can actually earn interest while it's there and ready in the event you need it. While you might miss out on some of the added benefits of buying coverage, you're in better shape if you're fortunate enough to have a car that doesn't need any, or only minor repairs.

The bottom line? Generally, these are unnecessary and costly. In some cases, if your situation warrants it and the price is right, it can be worthwhile. Just make sure you know what you need, how much it will cost, and what you'll actually get out of it before rushing into a decision. And most of all, read all of the fine print! Make sure you know what's covered, what isn't covered, and what all of the limitations are. This is where a lot of inexpensive contracts snag you. They offer a good price, but you find that a lot of stuff isn't really covered and you really are just throwing money away.

June 28, 20100 found this helpful

I would skip the warranty. They are big money makers for the dealer. I would get a carfax report. They will tell you if the car has been in a flood or fire and how many owners and miles.
You can also go to and type in "used car dealer warranty" or words to that effect and a lot of information will come up.

July 4, 20100 found this helpful

I used to work for Ford Credit and will tell you these warranties are big scam. Please avoid; they're worthless when needed, not cheap and a big money maker for dealerships.

April 5, 20110 found this helpful

If the warranty don't cover seals and gaskets it is not worth the paper it is written on, a zero deduction and a free loan car should be part of the warranty. Be very careful. I write articles on Yahoo Community Network and have written one about that as well.

November 15, 20110 found this helpful

On the surface, the added protection of covering your vehicle for an extended amount of time seems like a good idea, but before you jump in, make sure you understand what you're getting yourself into. These are products that are pushed because they make money for the dealer and salesperson. There are times when buying the service contract can be a great idea and save you money, but there are plenty of situations where it is completely unnecessary and will just end up costing you money. And worst of all, there are actually some companies that are little more than scams.

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More Questions

Here are the questions asked by community members. Read on to see the answers provided by the ThriftyFun community.

May 27, 2004

Are extended services warranties worth the cost for cars? I'm overwhelmed with conflicting information regarding coverage, limitations, and fees. The more research I do, the more wary I become. What do you think?



By Cheryl (Guest Post)
May 28, 20040 found this helpful

If the car is brand new, I wouldn't buy the extended warranty. Ask the salesman selling the warranty, "If your car is such a great product, why do I need to purchase the extended warranty?" They don't usually have a good answer.

A new car shouldn't break down and you're covered by the manufacturer for the first 36,000 miles anyway. So if the extended warranty covers up to 60,000 miles, then you're really only receiving coverage for 24,000 miles.

If however you are physically unable to walk should you break down and can afford the warranty, the peace of mind it brings may be worth the price paid.

By Chel (Guest Post)
May 28, 20040 found this helpful

No. Please check out this:


Bronze Feedback Medal for All Time! 104 Feedbacks
May 28, 20040 found this helpful

Do you read the Dollar Stretcher newsletter? Gary is a pretty smart guy. Here's a link to some of the replies to a similar query to yours but if you do a search on the Dollar Stretcher site you will get a lot more info.




Silver Post Medal for All Time! 263 Posts
June 5, 20040 found this helpful

We've never needed the extended warranty, after purchasing it. My hubby thinks it's a waste of good hard earned money. But I think if we'd ever really had trouble with the vehicle we'd have been glad we'd gotten it. This is one question that I think the answer would be truly up to you.


Silver Post Medal for All Time! 263 Posts
June 5, 20040 found this helpful

I hope you're going to be taking a guy with you when you buy your car, even if he's a co-worker, a neighbor, your brother, just someone to be with you to point out and ask questions that you might not think of asking. Those car salesmen are well known to sell a female a car much higher than they'd do to a man and worse. I recently talked with a lady who bought a used car from a dealership & the troubles she's had with it in the last few months. It was probably the worst car on the sales lot!! As she said she's put in $12,000. into it's repair and that wasn't even counting the price she paid for it!!!! So she's got a 1998 Camaro, costing the same as a brand new one!! Beware, Ladies, of going car shopping alone, take a man with you!! She sure wished she had!!

By Kim (Guest Post)
May 26, 20050 found this helpful

I purchased the extended service plan on my used van (we had heard that there were transmission problems). The transmission started leaking and they fixed it. Then the air conditioning went out and that got fixed. It's been a really good van except for those two problems, but for me to pay for them to be fixed would have been over $2000. I only paid $1400 for the plan. So it saved me money in the long run. On the other hand you could be out money if your car never breaks down. I agree with the person who said not to bother on the new cars.

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