You know how it goes, you agreed to a sale price and you are in the finance manager’s office. He is trying to sell you everything under the sun. This includes an extended warranty. Before you instinctively say no to this option, you really need to think things through in order to make the best decision for you. In this post, I will help you decide if buying the extended warranty on a new car is worth the price or not.

Steps In Deciding To Buy The Extended Warranty

Step #1: Assess Your Usage

The first step you have to take is two-fold: how long is the warranty the car comes with and how long are you keeping the car. You have to be able to answer both of these questions before you can move onto making a decision.

If you tend to keep cars for 5 years or so and the car comes with a 10 year, 100,000 mile warranty, then buying the extended warranty probably makes little to no sense for you. On the other hand, if you tend to keep your cars until the wheels fall off, it could be something to consider.

Of course, you also have to consider when you sell the car. Even if you keep the car for 5 years, you can most likely get a higher asking price when selling it privately if the car has an extended warranty. But, don’t just buy it for this reason as you might not recoup the entire cost. Also, if you trade your cars in, the dealer won’t give you much more (if anything) for the warranty.

Step #2: Assess The Car

If you find that you keep cars for a long time, the next step in the process is to evaluate the car. Does it have a history of breaking down? Is it a luxury car that will cost a lot to repair? These too are things to think about.

When I bought a Volkswagen a couple of years ago, I was on the fence about the extended warranty. VW’s have been known to have electronic gremlins that suddenly cause the power windows to stop working or the radio to not work one day and then work the next. I ended up passing on the extended warranty thinking that Volkswagen has improved their workmanship. So far, so good.

Step #3: Assess The Cost

The best deal you are going to get for the extended warranty is if you can negotiate for it with the price of the car. When you agree to a price for the car and then negotiate for the warranty separately, you are going to pay more.

Also note that you don’t have to buy the warranty on the spot. Many car manufacturers will allow you to buy a warranty up to 30 days after buying the car. Some even allow you to buy before the standard warranty runs out, which could be a couple of years down the road.

In this case, shop around. When I was debating buying the extended warranty for my car, I found a dealership in my area that was on one of the car forums selling extended warranties. You didn’t have to buy the car from them, just the warranty. And they were selling the warranty for about $500 less than the dealership where I bought the car!

Step #4: Decide

Once you have all of this information, you can now make a decision as to whether or not the extended warranty makes sense for you. In some cases it will, while in other cases it won’t. The key is to make the best decision for you and not allow a salesperson talk you into buying something you have no need for.

One final note, be wary of offers in the mail for extended warranties from third parties. In these cases, many of the costly repairs are not covered and you are just throwing money into a hole. Only take the extended warranty from the manufacturer as this is the one that will cover the most repairs.