Are extended warranties (Service Contracts) worthwhile on a used car? At All Tune and Lube Total Car Care in Tempe we have to admit that we like it when a customer has a service contract on their vehicle. It makes getting the repair done right an easy decision for the customer. But from the customers’ perspective there are a few things to consider.
I guess the first thing to think about is that the company selling the extended warranty is there to make money and they’ve done their homework. If they’re selling a warranty to you for $2400 you know they’ve looked at the model of your car with the mileage it has and determined that it’s a good bet that it will need substantially less than $2400 worth of repairs over the life of your contract. What I mean by that is that if they’re selling a warranty to you for $2400 they don’t expect to have to pay that much out. That being said there have been a number of situations here at our shop where a major repair was required and the customer was very thankful for having purchased a warranty. The best thing you can do is set aside the money you would have spent on the service contract in the event you have a major break down, but if you can’t leave that much in an account, the peace of mind provided by the warranty might be worth it to you.
Your next consideration should be in regard to what the warranty covers. If you can get a good deal on a service contract the covers the really catastrophic failures, like an engine or transmission, but leaves many of the less expensive items uncovered, maybe that’s worth exploring. For example, a wheel bearing or a water pump might set you back $300-$500 but an engine could be $5000. If you can swing a $500 repair out of pocket but an engine would be out of the question maybe that kind of contract would be worth it to you. Keep in mind though that engines and transmission seldom fail on modern vehicles, water pumps and bearings are more common. Service contracts that cover the vehicle “Bumper to Bumper” are available but they’re more expensive. Once again, peace of mind.
If you decide to buy a service contract make sure it’s one that can be used anywhere rather than just at the dealership where you bought the car. You don’t want to be broke down in Odessa Texas with a warranty that’s only good in Tempe.
Also, while I don’t know this for a fact, it seems to me as though you want to buy the contract directly from the company that issues it. If they’re making money on the deal so is the dealership. At least that makes sense to me.
Lastly, research the warranty company you’re intending to buy the contract from. My experience in dealing with these companies has all been positive but horror stories abound.
Hope this helps!
From your Local Mechanic, All Tune & Lube Total Car Care Tempe. Complete Auto Repair and Maintenance.