An extended car warranty can protect you from financial stress if your car requires unexpected repairs. But is an extended car warranty worth it? This largely depends on the details of the warranty and your needs.

How much does an extended car warranty cost?

When considering extended car warranties, cost is a major factor. Extended warranties range in price, averaging between $1,000 and $1,500 per year. The price tag hinges on a handful of factors, such as:

  • The provider.
  • What is covered in your existing warranty.
  • The make, model and year of your car.
  • Your car’s mileage.
  • Where you live and how much you drive.
  • The cost of replacing parts and labor.
  • Discounts you are eligible for.

Other factors that impact the cost of an extended car warranty include the extent of coverage, the level of coverage and your deductible. The higher your deductible, the lower the coverage’s cost. On the flip side, the lower your deductible, the higher your premium.

Remember: If you pay for your extended warranty with an auto loan, you will be paying not only for the warranty but also for interest on that amount.

What does an extended warranty cover?

An extended warranty on your vehicle typically covers unforeseen, expensive repairs involving major systems of the vehicle, including heating/air, the engine and brakes. Your exact coverage will depend on the warranty you purchase, and may include parts, labor or both. Some extended warranties offer optional coverage for roadside assistance, tires and other vehicle-related expenses you may encounter.

Extended car warranty drawbacks

While an extended car warranty can potentially help you save on the cost of expensive repairs, let’s take a look at some of the cons that might come with getting one.

Not all repairs are covered

Because an extended car warranty typically matches the new car’s warranty, it also mirrors the limits such as mileage and what repairs are included. Look at the fine print and the exclusions list when determining if the coverage offered is worth the cost.

There’s a time limit

Extended car warranties are only good for the period of the extended warranty. For instance, it might extend your original warranty by two years and 24,000 miles. If you started with a warranty that was three years and 36,000 miles, that would mean the full warranty is five years and 60,000 miles.

You might not use it

Among those who did hop on an extended warranty only 45 percent ended up tapping into their extended warranty, according to a Consumer Reports survey. The remaining 55 percent did not. Those who purchased one and used it suffered a net loss of more than $375.

You might not need it in the first place

Know the track record of the vehicle you want to purchase by doing your research, including looking at car reviews, recommends Renee Valdes, senior advice editor at Kelley Blue Book. “If the vehicle boasts a solid track record, think twice before signing on for an extended warranty,” says Valdes.

That money could be put toward emergency savings instead. Emergency savings can pay for any car repair, not just repairs covered under the extended warranty — and there’s no expiration date.

When it makes sense to buy an extended car warranty

An extended car warranty is only useful under very specific conditions.

Extended warranties might work well for luxury car buyers who plan to drive their cars for many years beyond the bumper-to-bumper and powertrain warranties, Valdes adds. “There’s nothing worse than getting stuck with a big bill for a broken item on your luxury vehicle when there’s no warranty to cover the item,” says Valdes.

If you’re buying a used car and the manufacturer’s warranty has ended, it might be a good idea to hop on an extended car warranty. Manufacturer warranting information can be found on the sticker tag on the car’s window. If you can afford to purchase a warranty, it can help pay for covered repairs.

It’s helpful to research what car maintenance costs will be during the first years of ownership. And to reduce instances of costly repairs, stay on top of your car’s upkeep.

“It’s always best to keep up with car maintenance so your overall repair costs remain low over the timeframe you own your vehicle,” says Valdes.

The bottom line

An extended car warranty is not for everyone. To see if an extended warranty is worth it, do your homework and get some quotes. Research what repairs your car may need in the next few years and make sure they’re covered under a particular warranty.