Extended Auto Warranty: Should I purchase an extended car warranty?

So you've just been approved for your car loan and you've picked out your next car. The dealer politely asks you: Would you like to purchase an extended auto warranty? Here are some of the questions you should ask before making the extended auto warranty decision.

1. What does my extended auto warranty cover?

Before deciding on whether to purchase the extended warranty, make sure your dealer explains exactly what is covered in the warranty. The more items covered in the warranty the better it is.

2. How much does an extended auto warranty cost?

Auto warranty prices have been escalating over the years so it is best to make sure that you try and negotiate the best price before saying yes. Dealers will try to make at least a 100% markup on an extended auto warranty so its best to always ask for a better price.

3. How long is my manufacturer warranty?

Many new vehicles purchased today come with an extensive warranty. If your vehicle comes with a 7 year 100,000 mile auto warranty, but you plan to sell the car in 5 years, you obviously do not need an extended auto warranty.

On the contrary, if you only have a 4 year 60,000 mile auto warranty and you plan on doing a lot of driving plus keeping the car longer than 4 years – it may be worth it to buy an extended auto warranty.

4. Who is providing the extended auto warranty?

This may be the most important question to ask before purchasing your extended auto warranty. The reason being that a warranty can be backed by a car manufacturer or it can be provided by an independent company. The independent company's warranty is what is known as an “Aftermarket warranty”.

There may be an advantage to having a manufacturer warranty. First of all, most likely the manufacturer will be around in 10+ years. Your independent extended auto warranty company could disappear or file bankruptcy, which could leave you without a warranty and maybe without a car.

Your best bet is to MAKE SURE you ask the dealer whether the extended auto warranty is backed by the auto manufacturer or is it through a private company. If the extended warranty is through a private company, ask your dealer if he will cover any warranty repairs in the event the aftermarket company goes out of business.

It is very important to do your research before walking into to dealership and buying an extended auto warranty. Start by visiting one of the approved companies on this site and asking them all of the questions that you have just learned.

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