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The Complete Guide To An Extended Warranty’s Pros and Cons


At the end of the day, we’re keeping our cars for longer than ever. The average car on the road is over 11 years old, and many have well over 100,000 miles. It’s become clear that reliability and dependability is critical when it comes to choosing a new car.

But, as cars age, they break down, and maintaining them can be expensive.

Enter the extended car warranty.

But if you ask someone what they think about extended car warranties and your liable to get answers that range from “They’re a scam!” to “I can’t live without mine”.

An extended warranty, also known as a vehicle service contract (VSC for short) is like insurance for breakdowns. Much like insurance, you pay a monthly premium, and if something goes wrong with your car, the warranty company steps in to assist in paying for repairs.

The way it works is similar to insurance. You pay a deductible at the repair shop, and then the extended warranty company steps in to pay for the rest. The standard deductible for the industry is $100 dollars, although there are policies, we’ve seen that have deductibles as high as 75% of the cost.

There are two main types of extended warranties. You have warranties from the manufacturer, and 3rd party warranty companies, including us!

When you buy a car new off the lot, it comes with a manufacturer warranty. This can either be a bumper to bumper warranty, that covers just about everything, or a more basic powertrain warranty that covers your engine, transmission, and transfer case. Most manufacturer bumper to bumper warranties last 3 years / 30,000 miles, while the manufacturer powertrain lasts on average of 5 years / 60,000 miles.

We won’t be talking abut those today, because we’ll be looking at the other type of warranty: a 3rd party warranty.

A 3rd party warranty you can purchase after your manufacturer warranty expires. The length of the warranty and what it covers can be adjusted to your needs, so as I’ll show you in a moment, they can be very flexible.

In theory it sounds simple enough, but in practice 3rd party extended warranties can be tricky.

As with any extra option, there are some very definite pros and cons.

Pros of an extended car warranty:



1: No Catastrophic Repair Bills

 All 3rd party extended warranties cover the most expensive to repair parts of your car. For example, if your car needs a new transmission and you have an extended warranty, you’ll only pay the deductible instead of paying the over $2,000 dollars it costs to repair normally. If you have a tight monthly budget and can’t handle an unexpected expense, having warranty coverage can be a lifesaver.

2: Makes budgeting easier:

With an extended warranty, you’ll only need to worry about making the monthly payment, which isn’t going to change. You can set it and forget it. Instead of having to plan for a repair happening, you can rest assured that you’re covered.

3: Flexibility:

Thanks to all of the different providers out there, you can find coverage for just about any car, no matter the age or mileage.

You also have the choice of what you want to cover. Coverage can range from just the basics (powertrain coverage) to a more comprehensive bumper to bumper policy. You can tailor the warranty to what your car specifically needs.

4: Extended warranties are not as expensive as you think:

One of the most common questions we get asked about extended warranties is how much they cost.

While the exact cost will vary depending on your car, your mileage, your policy, and your policy length, our average policy cost is less than the nationwide average cost of a dinner date for two, at least according to Yahoo Finance.

While the average cost of a date is about $102, the average cost of a Protect My Car extended warranty is only $79 dollars a month. We even have policy holders paying as little as $27.99 a month – for full bumper to bumper coverage.

5: You can negotiate your policy cost:

My boss probably doesn’t want me to tell you that, but it’s true. You can negotiate everything including your monthly payment, down payment, and coverage term.

6: There are often deals to save you money:

Many warranty companies will run specials for military, disability, and social security. Don’t be afraid to ask if there are any discounts available.

You might be surprised what you qualify for. These discounts can often be fairly substantial, from 10-20% off the cost of the entire policy.

7: Extended warranties come with extra benefits:

Besides just covering your vehicle, most extended warranties come with other benefits as well. While you’ll need to check your policy for the specifics, common benefits include:

8: 24/7 roadside assistance.

This includes towing to a repair shop, flat tire repair, and other similar services.

  • Rental car reimbursement: Most policies come with some form of reimbursement for rental car expenses if your repair takes longer than an allotted amount of time. For our policies, we offer reimbursement if the repair takes longer than 4 hours.
  • Repair financing:
  • Maintenance perks, like free oil changes and tire rotations: Most policies will offer you 2-3 OEM oil changes per year, along with 1-2 free tire rotations.
  • Partnered rewards: Approved repairs can generate cash back at thousands of retail destinations.
  • Key fob replacement
  • Repair financing: The bigger players in the industry will even offer financing for repairs that might not be covered, which can then be broken down into affordable monthly payments even if you have low credit.

9: You don’t have to handle the repair details:

Extended warranty companies employ teams of claims adjustors. When you submit a repair claim, these claims adjustors work directly with the repair shop to handle your repairs.

Many of our claims adjustors are former ASE certified mechanics, so you won’t have to worry about the paperwork, as the claims adjustors handle the specifics of the repair, along with the paperwork.

All you have to do is drive it in to the repair shop and then drive it off when the repair is done.

10: Having an extended warranty is a great selling point:

If you plan on selling your car in the future, an extended warranty is the ultimate insurance for a used car buyer. Having an extended warranty tells your buyer than in case of repairs, they’ll be covered, so there’s no risk.

Cons of an extended car warranty:

1: Some extended warranty companies are expensive:

An extended warranty can be expensive. We’ve seen competitor quotes for over $200 dollars a month – which is a lot to pay, no matter what your income is. One way you can avoid paying a ton of money for a contract is to shop around.

We always recommend getting at least 3 quotes in order to compare and then get the best price. Once you have multiple quotes, if one company isn’t giving you the price you want, you’ll have fallback options.

2: It can be cheaper to just save money:

An extended warranty is like a bet on the blackjack table. You’re betting that you’ll pay more in repair costs than the contract value. Sometimes you’ll end up getting the better deal, and other times the warranty company will end up making money off you.

The truth is, if you can be disciplined enough to save $100-$200 dollars every month, you may not need an extended warranty. Simply put the money aside and if you never need it, you get the keep the money. On the other hand, repairs are unpredictable. It might take you 6 months to save $2,000, but your engine might crap out in 3 months.

If you know you have repairs upcoming, getting an extended warranty is a great choice. However, if your car is in good working order and you don’t anticipate any major repairs, you may be better off just putting the money aside.

The most expensive repair you’ll likely have to deal with is either an engine or transmission failure, which costs around $4,000 dollars at most. If you can save $200 dollars a month, you’ll have enough to cover the repair in 20 months – which is less time than the shortest extended warranty contract – which is around 3 years.

3: Extended warranties don’t cover every repair:


WSB-TV Atlanta ran a story back in August about a man named Joseph Weatherspoon who got the runaround on a repair for his 2016 Chevy Impala. Weatherspoon, who had a 3rd party extended warranty found out he needed a new transmission when his car would no longer go in reverse.

Unfortunately, the cause of the failure (a clutch pack) wasn’t something covered in the extended warranty he purchased. This caused his claim to be denied by the company he purchased his policy with. Although the company in question ended up paying for the repair after the news coverage, Joseph Weatherspoon’s dilemma isn’t as uncommon as it should be.

The problem is, even bumper to bumper extended warranties don’t cover everything. For one, extended warranties only cover mechanical damage. That means any body panel repair won’t be covered.

Secondly, most wear and tear items aren’t covered. Wear and tear items are things like the brake pads, sensors, spark plugs, tires, and wiring. The good news is most wear and tear repairs are inexpensive (<$300).

4: The contract language can be deliberately confusing:

Raise your hand if your head hurts when you have to read the fine print. Unfortunately, with extended car warranties, there is often a lot of fine print.

For example:

  • Repairs can be denied if you don’t authorize them first
  • Repairs can be denied if you don’t do your repairs
  • Repairs can be denied if you’re in Mexico or Canada

5: Some of the bigger repairs come with conditions:

When Joseph Weatherspoon’s transmission failed because of the clutch pack, his repair wasn’t initially covered. On the surface, this might seem confusing, but when you dig a bit deeper into the contract, it’s not surprising.

Hidden away in Weatherspoon’s policy under Section E, Exclusions: “Due to gradual loss of performance resulting from normal operation and use (due to VEHICLE mileage / age) such as, but not limited to, valve guides, piston rings, transmission clutch pack discs and bands, etc, or if worn parts are within manufacturer tolerances.”

What this means is that Weatherspoon’s company can decide it’s not obligated to pay for the repair if it’s caused by a wear and tear part. These types of clauses are very common, and you should be on the lookout for them.

6: Some extended warranty providers don’t give you many choices for repair shops:

Some extended warranties don’t give you access to every repair facility. Most extended warranties require you to have your car serviced at either a dealership or an ASE certified mechanic.

7: Extended warranties have a waiting period:

Much like insurance has a waiting period before benefits start, extended warranties usually take 30 days and 1,000 miles driven before you can make a claim. Claims made before the waiting period aren’t covered.

8: Some types of vehicles aren’t covered:

If you drive a commercial vehicle, some policies won’t cover you. This can include rideshare and fleet vehicles. Make sure you check the policy for vehicle exclusions before you sign.

9: Pre-existing conditions aren’t covered:

If you know your water pump is about to go out, and you sign an extended warranty contract, your water pump won’t be covered. Same story if you have a check engine light. With most extended warranty contracts, you’ll have to confirm your car has no preexisting conditions and the check engine light isn’t in.

10: Acts of nature aren’t covered:

Extended warranties only cover mechanical breakdowns. If you’re in North Carolina and a hurricane decides to come through, a tree branch through the engine won’t be covered.

11: You might never use your extended warranty:

The biggest con is also the most obvious: you might never suffer a breakdown. Getting an extended warranty is a bet that your car will have more money spent on repairs then the value of the contract. With increasingly reliable cars, it’s entirely possible you’ll never suffer a breakdown. If you don’t have any issues, you’ll have paid several thousand dollars for nothing.

So, is an extended car warranty worth it? 

An extended warranty can be worth it for you depending on your personal tolerance for risk. If you don’t have the money to absorb an expensive repair, then having the right extended warranty is the ultimate peace of mind. However, if you’re able to save $100-$200 every month, you may be better off just setting aside the money.

Beyond that, if you’re still considering an extended warranty you have a few more considerations to make.

1: How much longer do you plan to drive your car?

Car maintenance costs increase as your vehicle ages. If you’re interested in keeping your car around for the long haul, having an extended warranty is a great option. It’s also well worth it if you plan on selling the car in a private party sale as insurance for your buyer. However, if you’re not going to keep the car for at least a year, it might not be worth it.

2: Some cars break down more than others

If you have an older BMW, you know how painful this can be. Ultimately, some cars break more than others. According to Priceonomics, BMWs cost an average of $17,800 to maintain over 10 years.

The same analysis also found that Mercury models were most likely to suffer a breakdown. On the other hand, Toyotas very rarely break down.

The moral of the story: if your car isn’t known for reliability, having an extended warranty can be extremely valuable.

For a better idea, take a look at this Consumer Reports study on most and least reliable cars in every class:

Subcompact Cars Toyota Prius C Ford Fiesta
Compact Cars Toyota Prius 1 Ford Focus
Midsized Cars Kia Optima 1 Chrysler 200 1
Large Cars Hyundai Azera 1 Dodge Charger
Luxury Compact Cars Lexus CT 200h 1 Acura TLX
Luxury Midsized/Large Cars Infiniti Q70 1 Mercedes-Benz S-Class 1
Sporty Cars Lexus RC 1 Ford Mustang
Minivans Toyota Sienna Dodge Grand Caravan
Small SUVs Toyota RAV4 Jeep Cherokee
Midsized SUVs Toyota 4Runner Jeep Grand Cherokee
Large SUVs Ford Expedition 1 Chevrolet Suburban/GMC Yukon XL
Luxury Compact SUVs Mercedes-Benz GLC 1 Lincoln MKC
Luxury Midsized/Large SUVs Lexus GX Cadillac Escalade
Pickup Trucks Toyota Tundra Ram 2500
  1. Based on one model year of data instead of the usual three years.

If your car is on the least reliable side, you might be better off with an extended warranty.

3: How is your financial situation?

If you can afford to set aside money for repairs, you should do so. Otherwise, if money is tight, an extended warranty is worth it.

4: Have you looked at other options?

If you’re considering an extended warranty because your car is getting older, you might be better off just getting a new car. The monthly cost of an extended warranty could be a car payment on a new car.

Ultimately, there’s no right answer

Don’t feel pressured to decide right away. Take the time to look at multiple providers and do your financial math.

If you do decide to get a quote, read the sample policy! Look at what’s covered and what’s not before you decide to buy.

Just like with insurance, there’s no one sized fits all solution, so it’s important to work with someone you trust. We can help you.

Protect My Car’s policies are designed to protect your car from some of the most expensive auto repairs you’ll face. Since we’re also aware of many of the downsides of extended warranties, we’ve worked hard to make sure we limit them.

For example:

  1. Our policies aren’t expensive. The average monthly payment costs less than a dinner date for two.
  2. Our policies are comprehensive. Worried if we’ll cover you? Don’t be. You’ll never wonder if a repair is covered when you have a Protect My Car policy because:
  3. Our policies are written in plain English. We know our extended warranty plans are the best in the industry, and we don’t need to confuse you in order to make the sale. That’s why our contracts are written in plain, easy to understand English so you know what’s covered, and what your responsibility is. We also make our contract short, on purpose. 15 pages? No thanks. Our contracts are 8 pages.
  4. Decide you don’t need your warranty? Let us know within 30 days and we’ll give you back every cent. If you’re not satisfied, we’re not satisfied.

Let us show you why we believe we believe our extended warranties are the class of the industry, and get a free quote from us and never pay full price for car repairs again.


About Protect My Car

Protect My Car is a vehicle service contract provider, also referred to as extended car warranty provider, with multiple coverage plans for new and used vehicles with low to higher mileage to help meet your needs and budget. Protect My Car customers work directly with the company for customer service, claims administration and contract financing. No middleman or the need for third-party approval. All Protect My Car Plans include best-in-class claims and customer support, 24/7 roadside assistance, free oil changes and tire rotations and the exclusive PMC Rewards Plan, providing daily deals, giveaways, coupons, and thousands of ways to save money every day. Protect My Car has a 30-day money-back guarantee.

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