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Extended warranties: are they worth it?

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Updated 11 Oct 2019

Lindsay Saunders

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You’re in the final throes of purchasing your new wheels and the dealer asks: ‘Would you like an extended warranty?’

Um . . . good question. Before you answer, let’s take a look at what they are, what you need to look for and if, indeed, you need one.

So, What Is An Extended Warranty?

In this age of massive warranties on new vehicles - five years and unlimited kilometres in some cases - you may think the need for an extended warranty is as dead as velour seat covers.

But there’s still a case to argue for these warranties, which kick off when the original warranty runs out.

Basically, they cover unforeseeable defects and the cost of repairing faults, usually mechanical or electrical, during their valid period.

Depending on your car’s original warranty and how long you foresee owning the vehicle, they can bring peace of mind into the future.

If it’s a second-hand car which will come with a three-month warranty, the advantage to an extended warranty is obvious, especially if you’re buying a model known to be notoriously expensive to fix. Why do certain

European marques spring to mind?

OK, cool, so sign me up! Hold on there, amigo! Before you commit pen to paper, you need to be across what this warranty does and does not cover, and how much it’s going to cost you in the long run.

What Do They Cover & How Much Do They Cost?

For warranties at the bargain end of the scale, it’s common for them to cover selected parts of the engine, transmission and differential, and for repair costs up to $500 or $1000.

At the big end of town, you’ll be looking at coverage akin to that which the manufacturer offered and can cover repair costs up to the market value of the car – handy if you’re slapping down $90k for a dream machine. Some also cover towing and rental car costs. Nice.

But guess what? Just like in real life, you get what you pay for, so expect more coverage for more money.

At the lower end, expect to pay around $300 and more than 10 times that for the top cover. How long the coverage is for – generally less than five years – will also play a part in the cost, naturally.

Also, these warranties do not cover wear and tear, so, for example, if your fuel pump fails because a seal wore out, you’re not going to be covered.

And therein lies the rub. Life, my friends, is something of a gamble at the best of times. Taking out an extended warranty makes sense as a line of defence as your car ages, but it isn’t a magic bullet. It’s possible you’ll pay that premium and then have to pay a similar, or larger, amount later if a repair is put down to wear and tear. You pays your money, you takes your chances.

Know The Details

Cancelling the warranty, in the case of the car being stolen or, more happily, you sell it, also varies from provider to provider, so ensure you know what the rules are for that. Getting some cash back on the warranty when you move the car on makes for a happy ending.

As with all insurance products, the key is knowing what’s contained in it. Get it all in black and white and take the time to suss out what’s in, what’s out and all the nitty gritty you need to know.
Don’t be pressured into taking out an extended warranty by the dealer. They’re not actually insurers, but rather are agents, and you know they’re not offering it purely out of the goodness of their hearts – they get a commission.

And remember, if you say no to the dealer, you can always say yes to another insurer down the track.

If you’ve just opted for the manufacturer's warranty for your new car, AutoGuru can help connect with you with an awesome local mechanic that can service and repair your new car without affecting your warranty!

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Written By

Lindsay Saunders

Lindsay Saunders has been writing, editing and producing words and photos for more than three decades, starting back when he drove a 1971 VW Type 3 fastback.

Now he’s got a Hyundai I30 diesel, a 1999 LWB Hi-Ace (camper project) and wishes his wife’s EJ Holden station wagon was actually his.