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Saturday, April 14, 2012
Whether to Buy an Extended Car Warranty
Deciding on whether or not to buy an extended auto warranty can be a tough call. The auto manufacturer’s base warranty on a new vehicle is usually good for only the first three years of ownership, which means it will expire right when you’ve put some serious kilometers on the car and it’s more likely to need repairs.
For a new vehicle, the extended warranty must usually be bought within the first year. For a used vehicle, the extended warranty has to be bought when you purchase the vehicle.
It’s better to buy an automaker’s extended warranty, when available, than one sold by a third-party vendor. That’s because the coverage is likely to be more comprehensive, and manufacturers tend to honour claims more readily and with fewer restrictions.
Here are some factors to consider.
Extended warranties are pricey.Few manufacturer-backed plans covering five- or six-year terms cost less than $2,000. For high-end cars or SUVs, you’ll probably have to spend at least $3,000 for a warranty that covers more than just the basic power-train components.Nevertheless, the price of an out-of-pocket repair job on your car could easily exceed that of an extended warranty.
No extended warranty is likely to equal your new vehicle's base warranty for comprehensive coverage. The devil is in the fine print.Interior and exterior trim items are the most predictable exclusions.Also, there are likely to be deductibles that range from $50 to $250 per repair visit (though zero-deductible options are available at higher cost).
You also have to take into account that most extended warranty plans have limits. Most plans are based on an outmoded 20,000 kilometers per year. So a five-year plan would carry a 100,000 kilometer limit, which many drivers would reach in less than four years.
Then, too, the clock starts ticking on a five-year plan the moment you drive your new car off the dealer’s lot. So, in reality, a five-year plan expires two years after the base warranty ends.
If you can't get by without a vehicle while yours is under repair, the extended warranty plans are helpful because they usually provide rental car allowances for warranty repairs.
If your car has features such as air conditioning and power windows that are likely to need repair after five or six years, an extended warranty that covers them makes sense. And if you intend to keep your new car well beyond the basic warranty’s expiry date, then buying an extended plan may be a wise move.It all comes down to your risk tolerance and how good a deal you can find.
If a reputable vendor offers adequate coverage at a reasonable price, then an extended warranty can be good insurance against unanticipated big repair bills. The cost is fixed, which means you can factor it into the car purchase price upfront. And if you decide later to sell the vehicle, an extended warranty that’s transferable to the new owner will add to the car’s resale value.◄
For information about PRUDENT VALUE CARS, visit our web site: www.prudentvaluecars.com