One really popular question that I often get asked by my clients after I've helped them get a really good deal on their new car purchase is should I be buying the extended warranty? I often caution buyers against dealer add-ons and accessories because some of them are really just overpriced and unnecessary.But about car Extended Warranty,the reality is that it can make some sense, but it's not always the case. If you have an extended warranty plan that's a good deal for certain buyers and under certain circumstances. In this article I'm going to explain when it makes sense to consider an extended warranty plan, the different types of extended warranties that exist, including their pros and cons, and how much you should be paying for one to make sure that you get a really good deal. So if you want to know everything there is to know about extended warranties. So whenever I have a client who's purchasing a new car and they're interested in buying an extended warranty plan, I take a look at a few things, including what type of car they're buying, how much driving they do, and how long they've planned to keep their car for. It's important to remember that although modern cars are more reliable now than ever before, they can still be problematic from time to time and all the advanced technology means that they can be very expensive when they do fail. So even if you're buying a car that has a really strong reputation for long term reliability, like say a Toyota or a Lexus, it might be a good idea to consider that extended warranty because it provides you with peace of mind in case there is a failure, especially if you can get it for a really good price.
But if you're buying a car that doesn't necessarily have a strong reputation for reliability or it's known for having high repair costs, then buying an extended warranty does make a lot of sense, especially if you're planning on keeping that car beyond the original warranty period. Generally, I do recommend extended warranties for a lot of European brand cars including Volkswagen, BMW, Mercedes, and Audi because all of these companies are known for being problematic as they age and they're also known for very high repair costs when they do have problems.
If you're a high mileage driver that drives say upwards of 20,000 to 30,000 kilometers a year or 15,000 to 25,000 miles, then you're probably going to want to consider an extended warranty.
Remember, cars generally wear out based on mileage, not time. So if you're a high mileage driver and you do a lot of driving, then you're more likely to take advantage of the extended warranty and get your money's worth.
So if you've decided that you're buying a car that needs that added bit of protection and you do a lot of driving to justify the coverage, now it's time to decide what type of warranty you should be buying and how much you should be paying for it.
There are two basic types of extended warranty plans that a dealership can offer you. The first type is an OEM warranty, which is an original manufacturer warranty that comes from the car company itself. The second type of warranty is a third party warranty. Now this is an extended warranty that comes from a third party company that the dealership is offering.
Both of these types of warranties come with different levels of coverage depending on how much protection you want and how much you want to pay. The coverage level usually comes in at least two or three different levels. The most basic level of coverage is usually a powertrain warranty that just covers the engine and transmission of the car. The higher level of coverage however, which is often called the comprehensive or limited warranty, covers a lot more parts of the car, usually covering things like all of the electronics, the air conditioning, the touch screen, sensors, cameras, and a wide range of other things.
Now a lot of people often confuse a comprehensive warranty with a bumper to bumper warranty, and I just want to clarify that there is a difference between a bumper to bumper warranty and a bumper to bumper warranty. There is actually no such thing as a bumper to bumper warranty. It's a term that really shouldn't exist because it implies that absolutely everything on the car is covered from bumper to bumper and that's just not true. There's no such thing and you're never going to find a warranty that covers absolutely everything on the car including maintenance items like brakes and tires and that sort of thing. So it's far more accurate to refer to this type of warranty as a comprehensive warranty or a limited warranty because that's exactly what it is. Now obviously a lot of buyers are using the term comprehensive or limited warranty because that's exactly what it is. Now obviously a lot of buyers are using the term comprehensive or limited warranty because that's exactly what it is.
are usually more interested in going with the comprehensive extended warranty because it gives you a lot more coverage and better protection. The only issue is that it does cost more money than the basic powertrain warranty. Now when it comes to pricing, the price of the extended warranty is ultimately going to depend on the type of car you're buying and the level of coverage that you're getting. Now it can be hard to gauge exactly how much an extended warranty plan is going to cost, especially when dealerships usually don't post this information on their websites, but generally speaking, if you're looking for an extra 2-3 years of coverage, you should probably go with the standard warranty guarantee.
No good quality warranty, so you should play with safety and safety while buying. But if for a typical mainstream car such as a Honda or Toyota a comprehensive warranty can cost anywhere from $1,200 to $1,500. If you're looking for a higher-end luxury car like a Mercedes or a BMW the same type of warranty could cost a lot more money upwards of $2,500 to $3,500 depending on the level of coverage. The reason why an extended warranty plan can cost a lot less for a brand like say Toyota when compared to BMW is because Toyotas are known for being a lot more reliable and having a far lower cost of repair. So if they're not going to cost the company as much money to repair they can justify giving you an extended warranty for a much lower price. If you had any doubts as to whether high-end European brands such as Volkswagen, BMW or Mercedes could be unreliable and expensive to repair just look at the cost of their extended warranty plans. It's no coincidence that their extended warranties cost a lot more money when compared to ones from say Toyota or Honda. Now it's very important to remember that just like the purchase price of the car itself extended warranties just like a lot of other products are negotiable and there are ways to save money on them. In fact extended warranties typically have very large profit margins for the dealer which is why they typically try to push them on you at the last few moments of the sale. When compared to the price of the car itself which typically has a profit margin for the dealer of around seven to eight percent extended warranties can have a much larger profit margin upwards of 30 percent to even 50 or 60 percent depending on the type of car. That being said it's usually pretty easy to negotiate a discount on the extended warranty with the dealer and it's not unreasonable to ask for at least a 15 to 20 percent discount. For example let's say the dealer is offering you a comprehensive extended warranty for an extra two years of coverage and they're asking $1,500. Well that means you can probably negotiate the price down to around $1,200 which is going to give you a really good deal but also keep the dealership happy as well. Now let's go back a little bit to my earlier point about the two different types of warranties that exist which include OEM extended warranties and aftermarket extended warranties because it's very important to know the distinction between the two and which one you're getting. Now before I get into that if you're getting value out of this video make sure to like and subscribe. I create regular informational videos like this on a regular basis all designed to help you with your car purchase. All right so let's talk about the difference between an OEM warranty and an aftermarket warranty. So an OEM warranty again is an original manufacturer warranty that's offered by the car company.
So if you're buying say a brand new Honda, then you're getting a Honda branded extended warranty but an aftermarket warranty is something completely different. This is a warranty that's coming from a third-party company and has nothing to do with Honda or any other car company. There are many different third-party warranty companies that are out there and it's important to know exactly which one you're considering because some of them have okay reputations and some of them have absolutely terrible reputations and you don't want to be buying something that's completely useless and a waste of money. So if some third-party warranties can be bad and useless then why would a dealership be selling them? Well it ultimately comes down to profit. Surprise surprise some dealerships are ultimately just not looking out for the best interests of their customers and would rather sell you something that's junk and gives them a high profit margin than a high quality warranty product that has a smaller profit margin.
Some dealers won't even tell you that they're selling you a third-party warranty and will instead let you assume that you're getting an original equipment manufacturer warranty which is a huge mistake. So if you're buying a car from a dealer that's not a third-party manufacturer, make sure to find out whether it's an original manufacturer warranty or if it's an aftermarket third-party warranty and if it is a third-party warranty you need to do your research on the company and find out whether it's a reputable warranty company or not. If you're buying a used car from a used car dealership then more than likely you are going to have to go with an aftermarket third-party warranty if you want an extended warranty plan and that's okay you just have to do some research to find out whether you're buying a reputable warranty company and offer you value down the road. If the dealership is offering you an extended warranty plan from a third-party company you're going to want to do a few things including getting the name of the extended warranty company, learning about the level of coverage that they include, learn about what's not included in the warranty coverage, and finding out how easy or difficult it is to file a warranty claim. The best warranty companies are those that have a really good reputation online that have been around for a very long time upwards of say 10, 20, or even 30 years and they have a positive feedback from people who purchase them who say that they don't give you a huge hassle when you need to file a warranty claim and it's easy to get compensated with money if you need a repair done at either a repair shop or a dealership. You also want to make sure that you're getting good value for money and good coverage for what you're paying for. For example if the warranty has a very high deductible on every claim and a very small claim limit then you're probably not getting very good value. If your car has a blown engine and say needs a full engine replacement that costs you seven or eight thousand dollars but the warranty is only willing to pay up to two thousand dollars as a maximum claim limit well then that still leaves you on the hook for another five or six thousand dollars. So what value did you really get out of that warranty? Now I'm not saying not to consider a third-party warranty all I'm saying is that you need to do your homework to make sure that you're getting a quality product and good value for money. So again the things you're going to want to watch out for if you're buying a third-party warranty is that you want to make sure that you're buying from a reputable company.
A company that has a good reputation of honoring warranty claims not giving its customers a hard time and it's been around for a very long time with a good reputation. You also want to make sure that you have a warranty that has a high claim limit and a low deductible so you're not paying a lot of money out of pocket for repairs. And finally you want to find out exactly what's covered on the warranty and what's not covered so that there are no surprises down the road. If the extended warranty you're considering checks out in all of these areas then it can be a good buy because third-party warranties can be upwards of 30 to 40 percent cheaper than OEM warranties so it can be a great way to save money if you're buying a quality product. Whatever you do just make sure that you don't let the dealership pressure you into making a decision about an extended warranty too fast. Instead collect all of the information about the warranty from the dealer go home take time to read it and think about it so that you can make an informed decision. Extended warranty plans are definitely not something for every type of buyer but if you've decided that it's something that you're going to get value of whether it's because you're buying a car that has high repair costs you do a lot of driving or you just want to have the peace of mind then make sure that you do your homework and follow some of these steps to make sure that you're getting good value for money.