The Benefits of a Used Car Warranty
How many times have you heard someone say, “Never buy the extended warranty”? For small appliances and home electronics, you can probably skip it. But if your vehicle’s original factory warranty is expiring, the coverage could be worth the cost — particularly if you plan to keep that vehicle for a while.
Extended car warranties are available from your vehicle’s manufacturer as well as a number of third-party providers; for the latter, they are more accurately referred to as vehicle service plans, or “VSPs.” Both are intended to protect the owner from having to pay for unexpected repairs when a covered part or system fails.
Different plans come with different costs, coverages and deductibles, so it’s important to shop around and work with your dealer to find an extended warranty or VSP that works for you. Most importantly, you must ask yourself two questions: Could you afford to pay for unexpected repairs, and could you afford to replace the car if the cost of said repair was higher than the car’s value?
Peace of Mind
The more vehicles age, the likelihood of a major component failing increases exponentially. A component can fail at any time, costing hundreds or thousands of dollars to repair. Such unexpected expenses can force drivers to drain banking accounts, max out credit cards or find alternative transportation to work, school and the grocery store while they save up to get their vehicle fixed.
Having the proper coverage in place brings peace of mind and ensures you never have to make those difficult decisions.
It doesn’t have to be one single, major repair, like a locked-up transmission or a cracked engine block. Your used car warranty could cover smaller issues like bad wiring, leaky sunroofs and failing onboard computers. The only parts not likely to be covered by any plan are those that are regularly replaced, such as brakes, tires and windshield wipers.
Repairs covered by extended warranties are typically completed at your dealership — or another dealership in your manufacturer’s network — and can be approved on the spot by your service writer.
Without an extended car warranty, expensive repairs you can’t afford might necessitate having to just buy a whole new vehicle. But that comes with its own costs.
First, whether you buy or lease, you will need to come up with a down payment. Your existing, nonworking vehicle is not likely to fetch much, if any, trade-in value. You can save by buying an older, less expensive vehicle, but it will be more likely to suffer its own failures in the next week, month or year.
An extended warranty for used cars renders this scenario nonexistent. Because you won’t have to pay out-of-pocket for the repairs, you won’t be faced with the choice of spending potentially thousands to get your vehicle up and running again — or selling it and facing a whole new set of fees, rates and problems.
Consumer Reports and other resources have conducted surveys of car buyers who added an extended warranty or VSP and found that many never used them or only cashed in part of the value. Their recommendation is to roll the dice and go without. Would they say the same for car insurance, homeowner’s insurance or health insurance? Probably not, but the same principle applies to extended warranties.
The only catch is that you have to sign up before your original factory warranty expires. So mark your calendar and visit your dealer or contact your manufacturer before it’s too late.
In the coming weeks, we’ll be taking a closer look at vehicle service plans, including the different VSP plans on the market and how to find the coverage that works best for you.
Did you know that many auto finance companies, including Innovative Funding Services, can roll the cost of an extended warranty or VSP into your auto loan? It’s true! Contact us today to learn how!