Extended Car Warranties: Are They Worth It?

Vehicle service contracts, also known as extended car warranties, can bring peace of mind to buyers. But as is the case with any purchasing decision, it’s important to do your homework before opening your wallet.

Most warranties cover what is already covered under the manufacturer’s warranty. Some might also cover the repair costs up to the market value of the car at the time depending on its depreciation. Commonly covered items under vehicle service contracts include selected parts of the engine, transmission or differential up to a certain figure. However, there is no official set of standards defining what’s covered under an extended warranty. For this reason, it is wise to read the product disclosure statement as well as the terms and conditions.

Bargain basement policies generally cost about a hundred dollars, while more comprehensive policies can range in the thousands. Some even offer ‘bumper to bumper’ warranties. These cover virtually everything that makes up the car but could be even more expensive. Normal wear and tear usually isn’t included. Most new cars come with at least a three-year, 60,000km bumper-to-bumper warranty. For other brands, the warranty is even longer.

Here's a tip: If you decided to keep or lease your car for less than the length of your factory coverage, you do not need an extended car warranty. But if you plan on keeping your car until the wheels fall off, you might want to consider an extended warranty to cover the inevitable repairs in the car’s later years.

Some cars come with a powertrain warranty that kicks in after the bumper-to-bumper warranty expires. If anything goes wrong with the car’s powertrain (the parts that move the car down the road), it’s covered. But say, for example, if the door handle breaks, the window won’t go up or the side view mirror becomes detached, you’ll have to fork out extra yourself.

The following are the advantages of extended car warranties:

1. You can drive your car for longer.
2. It puts your money back in your pocket when it comes to repairs.
3. You can choose the coverage you need.

How to say no

If you don’t want an extended car warranty, that is your prerogative as a consumer. But as most of us know, some salespeople don’t take no for an answer. They can pile on the pressure and make it very difficult for you to refuse. When dealing with these pushy types, try using the line: “I usually trade-in my cars every three years.” This will hush them up. And if you’re reading this after already purchasing an extended car warranty, you can cancel at any time and get a prorated refund.

Know your rights

Australian Consumer Law guarantees that the car you buy will do what it’s reasonably expected to do.

Car manufacturers are also obliged to continue to support the vehicle for a ‘reasonable’ period beyond the manufacturer’s warranty. This means that if you’ve done everything by the book and looked after your vehicle and your warranty is for five years but your engine blows up on the sixth year, the onus will likely remain with the manufacturer.

Given that the laws in Australia are quite supportive of the car buyer and manufacturer warranties can be quite generous, an extended warranty might not provide any bonafide value over what’s already etched into law or provided out of the box. Our advice is to be wary of any dealership trying to pressure you into purchasing an extended warranty or telling you what you can or can’t do.

If you are looking for a reliable dealer with your best interests at heart, check out Motor Matcher. At Motor Matcher, everything we do is modelled around providing customers with the right tools and empowering them with rich information, helping them make sound decisions when buying and selling cars. We offer a faster, simpler way to compare new and used cars online, creating an ideal and safe marketplace for all car buyers and sellers.

Visit our website today at www.motormatcher.com.au.