An extended car warranty helps to cover you in case of costly auto repairs, but you may be paying more than is necessary for your policy.
Did you know that you can negotiate the terms? We can show you how to negotiate the best price for an extended warranty so you can be confident getting the best deal.
This guide discusses the fundamentals of extended car warranty, time saving tips and if an extended car warranty is worth the price, while answering a few questions we commonly hear.
What Is an Extended Car Warranty?
An extended warranty pays a portion or all of the repair costs included in the plan, which becomes effective after the factory warranty expires.
Depending on the provider you choose, the extended warranty may also include towing, roadside assistance, fuel delivery, key replacement, and more.
You can customize the terms and conditions of your warranty plan, whether you want full bumper-to-bumper coverage or just powertrain coverage.
Can You Negotiate an Extended Warranty?
If you buy an extended warranty through a dealer, they should always be willing to negotiate. That said, the dealer will not always give you the best priced extended warranty most times due to the markup involved with the bios.
For this reason, shopping for extended warranty protection on your own is often the best way to get the best rate.
How to Negotiate the Best Price for an Extended Warranty?
To get the lowest extended warranty rate, get a quote from multiple providers. Research, analyze for hidden fees and request itemized costs.
Overall, pay upfront, get timing right, don’t jump in right away and don’t succumb to any pressure from the salesperson. Let’s go through this so you can get the best rate.
#1. Multiple Quotes.
What do you do before you make a big purchase? Get quotes from multiple providers. Ideally, you’ll want three quotes from three providers.
One may be the dealership, but the dealership’s quote is unlikely to be competitive with third-party plans due to the costs associated with the dealership’s markup.
In addition to getting quotes from multiple providers you will want to consider the needed plan. The only way to review the quote is to make sure they are quotes from the same coverage.
You’ll want to make sure that the term lengths and term conditions are the same so that you will be comparing apples to apples.
#2. Do Your Research In Advance.
Before spending a lot of money on a warranty, you’ll want to know a little about the company you plan to work with. Check some online reviews about the provider from other customers and their satisfaction.
Also, it wouldn’t hurt to research the company with the Better Business Bureau (BBB) since that’s where they deal with major complaints.
As you do your research, identify the type of plan you want. Are you looking for bumper-to-bumper protection similar to a factory warranty, or do you only need powertrain coverage? These are things you need to know ahead of time.
#3. Look For Hidden Fees.
When you look over the prices in your quotes, the total may not be everything it seems to be. You also want to determine if there are any hidden fees to be added at the end.
You will also want to look at the deductible you must pay. A car warranty deductible works the same way an auto insurance deductible does, it is an out of pocket expense for a covered repair.
Choosing a higher deductible will keep the warranty price lower, however, you must be able to come up with that money when a repair happens.
#4. Get Itemized Cost.
Would you consent to an auto repair without obtaining a cost breakdown? You should always know what you are spending to protect your interests. You want to know how much you are paying for parts and labor. The same is true regarding a car warranty.
Ask the provider for a breakdown, so you can see if the “deal” is worth it. You should see a solid number for the coverage plus line items for the extra fees.
#5. Try to Pay Up Front.
Some warranty companies let you pay the premium in installments, which is useful if you don’t have cash for a lump sum. However, you could also be paying interest on a payment plan, the company sees it as a risk to insure you for less money while they get a better return.
Instead of giving the warranty company more money, just pay for the plan in cash and keep the money in your own account instead. If you know when your factory warranty is expiring, you can start saving in advance and there will be no lapse in coverage.
#6. Don’t Get the Extended Warranty Right Away.
Some think it’s best to buy the extended warranty when buying the car. This may not be necessary since you may be covered for a couple of years with the factory warranty.
However, you should consider waiting to buy the extended warranty until you have a chance to shop for a better deal. Before the factory warranty runs out, you will be prepared to buy from a reputable company at a definite price.
#7. Time Your Purchase.
At certain periods of the year, you may be able to charter a deal through the dealership. At the end of a quarter, or sales year, the dealership may have to meet a particular quota. To achieve these quotas there will be incentives on purchases like warranties.
You should also consider asking for a trial period onto your warranty. This is typically offered through most third-party companies.
While you will still have to pay for the premium up front, if you are not satisfied you can request your money back. Just be sure to read the restrictions that the company has so that you know what you are getting yourself into.
#8. Don’t Give In to Pressure.
Finance managers are trained to be easy to be persuasive and get the sales. When you sit down and go through the extended warranty coverages, it may feel a bit much to consider but don’t let the high-pressure sales tactics dictate what you decide to do.
Take your time, if you feel uncomfortable or pressured, just get up, walk away, and tell them you need to think about it or you want to look at other options. Don’t ever let them “pressure” you to make a decision. This is when you make mistakes or spend way more than what is necessary.
#9. Ask the Right Questions.
Before you sign off on anything, you should have some important questions answered. Some are to ask yourself and the others are for the provider.
Questions for Yourself
- Do I need this extended warranty?
- What must I have covered for this to be important for me?
- If I had to pay for the repairs out of my own pocket, would I be able to afford them?
Questions for the Provider
- What is covered by the policy?
- Is the warranty transferable if I sell the car?
- Am I receiving any other benefit, such as roadside assistance or fuel delivery?
- Can I extend the coverage at any time?
When you ask the right questions, more information is revealed. From the ting you see, you may learn more about the company you want to work with. The answers may even provide other ways to save.
Is an Extended Warranty Worth the Cost?
It truly depends on your situation. Suppose you are not in a position to afford an unexpected repair bill; in that case, you may be better off extending your warranty and protection against serious problems or needed repairs.
One thing I do want to mention is that you would still have to take a matching deductible into consideration, which most warranties have.
That said, there are plenty of folks out there that do not need the warranty protection at all. If you are going to sell the vehicle before the factory warranty ends, there is no point in paying for an extended warranty term.
You should also consider your vehicle’s reliability. J.D. Power can help with average rankings, etc. If you have a reliable vehicle and you are taking care of it, you will most likely never use the warranty and thus there is no benefit and your money was wasted.
In that case, it would also make more sense just to put that warranty money into a savings account.
You could always just add the extra percentage in when you do not spend all of your paycheck. If something arose as expected, you have the extra money laying around: if not, at least you have a good deposit saved up for a future used car.
FAQs.
How much should I pay for an extended warranty?
The price of extended warranty coverage is usually in the $1,000 to $5,000 range, but it does vary.
Pricing is based on the make/model of your car type, current mileage on the car, your company, and plan for coverage. Getting some specific quotes should give you some idea of the cost you might expect.
What is the markup on extended car warranty?
The time of year and whether the dealership has incentives probably has the most to do with the markup. At certain times of the year, a car dealership may even get half the markup.
For example, a $2,000 car warranty through the dealership would go to the dealership and produce $1,000 to their bottom line.
How can I maximize an extended car warranty?
Auto warranties go unused and warranties ultimately benefit the provider. Knowing what’s covered in your warranty and making a claim when warranted is a good starting point in maximizing your warranty.
Using the claimed protections will help ensure the value of your car is up to the standard you will expect if you want to sell it in, for example, two years.
What is the downside of extended warranties?
If you went with the guide that had negative reviews, unpaid claims could develop. This would mean you are paying twice to fix your vehicle; first the warranty, and second the repairs.
You could also miss out on all warranty protections and warranties do take money from you with no use whatsoever.
How to calculate extended warranty cost?
The best way to find out about cost is to get quotes. Many companies that provide this service make it very easy to get a free quote online.
You can select the terms and the coverage options to see how that impacts the cost. But please always take this quote and compare it with other reputable warranty companies before deciding on which warranty you prefer.
As professional mechanics, you see first-hand what happens when someone needs a repair and doesn’t have any money to make the repair. This is a horrible situation to be in, which is one of the reasons extended warranties can be beneficial.
However, you don’t want to always pay more than you have to to get this coverage. But if you are willing to put a little time into comparing the quotes to find the best deal and get some decent coverage, this is actually useful.
Shopping around should not take long at all and you might even end up with some leftover cash at the end, along with the peace of mind that you will not have to deplete your life savings on a car repair.