Do I need an extended warranty?
"Do I need an extended car warranty?" -This is one of the most searched terms when someone's auto warranty expires. The answer is simple; you don't need it until you need it.
Below are some important things to consider when searching for an extended car warranty.
Newer vehicles are becoming too sophisticated to drive without coverage.
With all of the new, high-tech parts integrated throughout a car today, there are more recalls and people using their factory warranties than ever before. We often play the role of guinea pigs for auto manufacturers, testing parts during their first years on the road. Nowadays, mechanics are called technicians, and they're constantly re-trained to keep up with new technology. If your warranty expires and a part fails, then you're the one who has to pay.
Statistically, you're over three times more likely to use a VSC than any other auto insurance.
The average American household spends $3,269 a year on dealership maintenance and car repairs. The average claims & loss ratio for an extended Vehicle Service Contract (VSC) is around 78%, meaning about 78 cents for every dollar spent on a VSC goes towards claims. The average claims & loss ratio for auto insurance is only about 28%. An extended VSC also protects against inflation, since labor rates constantly go up, but the price of your plan never changes from the day you purchase it.
Coverage guarantees you options.
A short monthly payment is always going to be easier than writing a blank check to the shop each time something breaks, but you are never stuck with your extended VSC if something changes down the road. All contracts are fully transferrable to a new owner, which adds resale value when you sell your car. All plans are also pro-rata refundable, so you never pay for what you don't use.
With what shops charge per hour for labor nowadays, a $30 sensor can cost you over $1,000.
You don't have to be on the side of the road with smoke pouring out of the hood to see an expensive repair. Most independent repair shops charge up to $90 per hour, with most dealerships charging up to $130 per hour. We all know nothing gets fixed in an hour. A part may be cheap, but you also pay for labor, diagnostics, fluids, and taxes.
It's always cheapest to protect the vehicle you already own.
Many people think the best course of action when they cannot afford a repair is to trade their car in. However, sales tax and interest on a new vehicle can cover the cost of a VSC. Plus, you may not necessarily be in the position to finance a new vehicle when yours breaks. You can give yourself a short, flexible payment for a VSC or five years of new car payments.
Oil changes and maintenance don't protect the components that see the most repairs.
There is no preventative maintenance you can do for sensors, computers or electronics. We can only cross our fingers and hope they do what they're supposed to. Oil changes typically only protect your engine, but vehicles are becoming more high-tech every year, and electronics go out when they want to. Not to mention brakes, suspention, differential, etc.