Extended warranties function as an added form of insurance on any high-value item. When deciding whether to purchase an extended warranty, you'll usually need to answer one straightforward question: are your repair costs likely to exceed the warranty price? While there are plenty of complex edge cases, some situations are substantially more clear-cut.
If you're deciding whether to purchase an extended warranty for a new-to-you car, you'll need to take plenty of factors into consideration. However, if your purchase falls into one of these three scenarios, you're likely to get far more value from your warranty than the purchase price.
1. Relatively New Vehicles Without CPO Warranties
Many dealerships sell used cars that are only a few years old with certified preowned (CPO) warranties. These warranties typically work like the warranty you'd receive on a new car, and they cover many of the same things. CPO warranties are extremely valuable since these cars often represent a substantial investment, and parts for a relatively new vehicle may be expensive.
If you're buying a vehicle that's only a few years old with an existing factory warranty or CPO warranty, an extended warranty may be a great option. This warranty will help protect you from unexpected expenses, which can be helpful after paying a high purchase price or committing to a relatively large monthly payment.
2. High-End Luxury Cars
You may have heard that there's no such thing as a "cheap" luxury car. Many high-end vehicles depreciate relatively quickly, but their long-term running costs can be high. Even with vehicles that may be reliable, a single repair may set you back a large amount of money for expensive and specialized parts. Labor costs at specialty shops can also be higher than you may be expecting.
An extended warranty is more likely to pay for itself over the car's life in these cases. Instead of worrying about a wallet-busting trip to your local dealership or specialty mechanic, you can enjoy your luxury machine with the peace of mind that comes from knowing you've got your repairs covered.
3. Long-Term Ownership
Extended warranties also tend to offer plenty of value if you're looking to keep your car over the long term. If you've owned your car since new, buying an extended warranty as your manufacturer coverage runs out can be an excellent way to get much more life out of your vehicle. By prolonging your coverage, you'll be able to take care of any issues that crop up as your car ages out of its manufacturer warranty.
Not only will this approach mean that you'll be off the hook for potentially expensive repairs, but it also improves the odds that your car will live a long and reliable life. Since you won't need to worry about the upfront cost of repairing failures, you can address problems before they can impact your vehicle's long-term reliability. A company like Safeguard My Car has more information.