Should I Buy An Extended Warranty On Used Car?

Should I Buy An Extended Warranty?

Extended warranties are essentially service contracts that cover the cost of specific repairs to your car after your vehicle’s manufacturer warranty expires. These plans are offered by third-party providers, are typically not cheap, and may add $1000 to $3000 to the overall price of your vehicle.

Tips When You Buy One

1. Review your extended warranty thoroughly.

You should understand what is covered and what is not before you sign the dotted line. Check if labor costs are covered and other limitations.

2. Whether the warranty is transferable.

You may want to gift your car to a relative a few years down the road and find out that your warranty does not transfer; ultimately losing money.

3. Check the J.D. Power database to find out your car’s reliability record.

If you car is rated as a reliable one, you probably should avoid a warranty and save some money.

4. Check the reputation of the third-party extended warranty providers.

Some warranty companies have strong reputations and nationwide presence. Do a bit of research before you choose any of them.

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About Dale Williams

Dale Q. Williams, MBA, is a well-respected financial executive whose experience spans from insurance to investment banking. Dale has first hand underwriting experience through working for one of the largest U.S. based insurance carriers, and advisory experience from working for several bulge-bracket and middle-market investment banks. Dale also received his MBA from University of Chicago Booth School of Business, with concentrations in finance and accounting.