Should You Buy an Extended Warranty When Purchasing a Used Car?
Should You Buy an Extended Warranty When Purchasing a Used Car?
I know there are lots of online opinions written by “experts” telling you whether it’s a good idea to purchase an extended warranty. Add my opinion to this long list. However, understand that mine is an opinion I would give my children if they were buying a used vehicle.
First, let’s be clear, I never recommend buying an extended warranty from some unknown third-party that sends you a solicitation after you’ve taken your vehicle home. Never. Never. Never.
In my experience, most of these are scams. You’ll pay a few hundred dollars and then discover the warranty company only covers a few things, has an outrageous deductible, doesn’t work with your service center of choice, or is out of business when your vehicle breaks down.
Why You Should Always Buy an Extended Warranty on a Used Vehicle
Well… let’s say you should “almost” always buy an extended warranty on a used car. Unless you’re buying a late model vehicle with ample manufacturer’s warranty remaining, or a certified pre-owned vehicle with a warranty that covers the entire time you believe you’ll own the vehicle, or you’re paying cash and have plenty of savings to cover an unexpected $4,000 repair, you should always buy an extended warranty on a used car.
Yes, extended warranties – like all insurance policies – generate profit for the agents who sell them and the insurers. If they didn’t, no one would offer them. Your local dealer is, in effect, the agent for the insurer (the extended warranty company).
The greatest downside with buying an extended warranty on a used car is that you may never need it. In these cases, it seems, you’ll feel like you wasted your money; you overpaid for something. However, just like auto and health insurance, you understand you’re “overpaying” for something… that is, until you need it!
The financial “experts” online sometimes tell you it’s a bad idea to buy an extended warranty, but they’re not the ones stuck with a huge repair bill, are they? They think it’s a waste because most people are never forced to use their extended warranties. I look at this as great news, not as a waste.
Seriously, is it a waste if you have collision coverage on your car and never get into an accident?
For 99% of you reading this article, I recommend you buy an extended warranty when buying a used car! Oh, and always buy the extended warranty at the dealership!
Take the time to read the fine print, make sure it covers the most common major repairs you might encounter, ask what it doesn’t cover, ask about the deductibles (if any), and be certain your extended warranty covers you for the length of time you plan to own the vehicle.
If you’re financing your car, then the extended warranty you buy should at least cover the time you’ll be making payments.
Buy an Extended Warranty to Avoid Financial Ruin!
It’s interesting the financial “experts” often tell you not to buy an extended warranty, since not having one can truly lead to financial ruin for many consumers. Are these financial gurus going to pay for a major repair when you take their advice and pass on the extended warranty? Protection, by the way, that costs relatively little given how much most policies cover.
Let me share a heartbreaking, real-world situation where the consumer was offered an extended warranty at the dealership but declined. The warranty she was offered would’ve added a small amount to her monthly payment, but also would have covered the repairs her used vehicle ultimately needed.
Here’s an abbreviated version of an email this buyer sent to the dealer about her issues:
“I bought my vehicle a little over 2 years ago… shortly after my tire went flat and rim bent because it had been patched previous to me purchasing it and had a foreign object on the inside that shredded the tire from the inside out. I figured that was impossible for the dealership to know and was pleased with how it was handled… Now, having 83xxx miles on it, my vehicle is sitting in the shop, and I was told the transmission is completely shot. I still owe over $8,000 on this vehicle and am now looking at a $4,200 bill for towing, labor, and a used transmission. I am so absolutely gutted by this.”
While I’ve read dozens of similar emails and online reviews from consumers who also declined the extended warranties offered by their dealers, it was this woman’s story that made me want to write this post. My heart truly breaks for her. I cannot imagine the stress, fear, and anxiety she must feel faced with this kind of financial burden.
It’s important to note this consumer’s ownership experience is not an anomaly. This likely happens hundreds of times a day across America. The dealer sold a vehicle that was in good working order… and then the unexpected happened.
Although this dealer repaired the early tire issue – even though they weren’t obligated to do so – there’s no way any dealer could stay in business if they paid for unforeseen major repairs two years after purchase! No business could. This consumer is out over $4,000 for a repair no one could’ve predicted. (Of course, if she could’ve predicted it, she would’ve bought the extended warranty offered to her at the time of purchase.)
Car Dealers Are Not Fortune Tellers
Franchised dealers (those who sell both new and used vehicles) do a great job of inspecting, repairing, and reconditioning the preowned vehicles they offer for sale. They have to, because their reputation is literally on the line with each vehicle they sell.
If a vehicle does not meet their standards, they’ll send it to a dealer auction (where it’s usually bought by a used car dealer) or sell it as a “title” or “mechanic’s special” vehicle – with full disclosure of the issues.
Today’s franchised dealers think for the long term. They would never intentionally sell you a vehicle they knew to be unreliable or unsafe. Of course, the minute something goes wrong with a used vehicle, the buyer wants to blame the dealership. It’s human nature.
But dealers are not fortune tellers. They cannot predict what will happen to your used car next year, next month, or even next week. They also cannot guarantee you’ll take good care of your vehicle after purchase. They can – and do – offer you peace of mind and protection against unexpected repairs via the extended warranties they offer.
Do yourself a favor and purchase the extended warranty offered by your dealer when you buy a used vehicle. If you’re on the fence about it because some “expert” said it was a bad idea, ask that “expert” if he or she will pay for your unexpected repairs.
Of course, we already know the answer to that question.