Is an Extended Warranty Worth the Price?


A Consumer Reports survey cautions that despite the hype dealers give extended warranties, the added benefits probably aren’t worth the costs. According to the report, consumers paid out an average of $1,000 and saved only $700 in repairs.

The trick is that as vehicles have become more reliable, the likelihood that they will need extensive repairs for a "nightmare" scenario has decreased. Therefore, an extended warranty is insurance for a situation that will probably never occur, or — as Consumer Reports put it — it’s like betting against the house. The game is always rigged so the house reaps the reward because consumers tend to overestimate how much of a safety net they need.

Does this mean all extended warranties are bogus and trying to stay on the safe side is foolish? Of course not. In fact, there are probably plenty of car buyers out there who've had their behinds saved by an extended warranty. However, there are other options for emergency automotive repairs, such as putting the money you would have spent on the warranty into a mutual fund.

Let us know what your experiences have been with extended warranties. Will you buy one with your next car?

Extended Warranties: A High-Priced Gamble (Consumer Reports via The Consumerist) 

By Stephen Markley | March 26, 2008 | Comments (43)


I bought extended warranties on two vehicles and never had to use either one. One was a Toyota and the other was a Honda. What was I thinking? I guess it was $1400 for peace of mind.


I got one with my previous vehicle and it worked out great. But this was only because I was purchasing a used car 4-5 years old and I didn't include it my monthly car payment. I found out I would pay more for the warranty in intrest if it gets financed thereby truly negating the value of it. Plus if you finance a vehicle like this for 48-60 months, you will probably experience some problem(s) that may exceed the cost of the warranty regardless of whether its the Japs or Detroit's finest.


The issue is just an advanced microeconomics problem. All insurance companies charge more in premiums than they pay out in claims. If you divide the premiums and claims by the number of participants, the ratio of premium to claim remains the same. It is how they stay in business and make a profit. Using this article's reasoning on whether it is worth it or not to purchase the insurance, why would I want to purchase health insurance? Why not put the money in a mutual fund in case I get sick? Extended warranties are an insurance product in a competitive market. If there were excess profits being made on the warranties, more companies would enter the market (and maybe they are), which would drive down the price of the contract so that the insurance company would make a normal profit.

There are equations you can use to decide whether to purchase insurance at a given price. The inputs involve the probability of something bad happening and the incremental cost of insurance. It would be neat if someone made a form with some easy inputs to compute whether I should by a warranty or not., get on it.


Maybe there aren't excessive profits - and its a bad deal - it may just be an inefficient concept. Administering the insurance and the claims may be so costly that its both a bad deal for consumers as well as not excessively profitable. That's what I suspect.

with that said - I have a chrysler minivan with all the bells and whistles, motorized doors, NAV(already replaced once - under the normal warranty), heated seats, rear seat DVD player, etc...

I plan to keep this thing well past the 3/36 original warranty - so we just extended out 4 more years - it cost a lot - but I don't think that reliability has gotten so good that I won't get a few door motors, power windows, and another NAV unit by the time this is done.

Engine/Transmission - maybe those are far more reliable than they used to be - but my Ford Mustang has power window problems, my Cadillac DTS has regular power window failures and my Chrylser Minivan is due for a long nightmare of gadget breakdowns.

I love my cars and all their gadgets - but they are expensive - that's life.


A good friend of mine has 4 years old BMW M3 and 6 years old Audi S4. He bought extended insurance for both cars and audi ones paid off more than twice he told me. As for BMW he had so many malfunctions, some of them were serious, that he bought insurance as soon as his warranty expired. In general if you have German cars buying extra insurance helps. My previous car was Corolla and worked as a dream with minimum maintenance. I have never tought of buying extendid insurance. My current car is G35 and after two years the car is solid as a rock with no issues. I have another friend with S4 and he has so many problems with his car.

I also heard that Corvette Z06 is more relailable than Porsche.

"The game is always rigged so the house reaps the reward because consumers tend to overestimate how much of a safety net they need."

This doesn't seem right to me. I always thought consumers usually underestimate how much of a safety net they need. If they are overestimating in this case, its probably just due to outdated notions of vehicle quality. But in situations such as car insurance, health case, etc, I thought most people would skimp on total amount of coverage where possible. I dunno, maybe I'm wrong.

Sexy Driver

I have extended warranties on both my bmw and on my Range Rover. I didnt buy them at the dealership because their prices were too high, so I began searching the net for more info. I found Aftermarket Auto Warranties and bought the same contract, coverage as the dealer had offered me for $1000 less. I've filed claims and have gotten repairs paid. Overall, It's economical choice to buy a service contract and insure yourself against unexpected, costly repairs. Try checking with them before you buy


A 07 Civic, and the way I baby her. Do I really need the extended warranty?

I like this method.


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I was looking for a warranty for my BMW and I could not find what I needed until I found Warranties-For-Less. Interesting to learn I could become a free distributorship for extended warranties, so I registered, then started to finish my due diligence on getting a warranty for my BMW.

Once I compared all the available warranties on the market, it became even more interesting to look at the opportunity side of distributorship for more reasons than just wanting to save over a thousand dollars on my own warranty. Yes, you can sell to yourself, and if you do, you will soon learn that this warranty actually pays me to enjoy the benefits and the peace of mind knowing I am covered. An engine or transmission for a BMW is $3,000. to $5,000. cost and I already had over 100,000 miles on mine, trouble free, so I wanted to keep it that way.

Long story short, this is a no lose situation, first, I got my $2,000.00 Cash Gift Card, then I got a commission check or rebate of $500.00 on my own purchase, and then to my surprise, I am currently getting just over $130.00 per week in commissions because of this unique and powerful compensation plan. Bottom line, I can see myself pulling in six figures a year with only passive effort, so if you can find a warranty that pays you to enjoy the peace of mind, it won't offer as much as offers.

Peace of mind, plus financial freedom, all I can say is WOW!


Extended warranties are always a good deal for the seller (not so for the buyer) as they often produce obscene profits. Worse, costs are usually set by what the traffic will bear rather then a formula calculated by losses such as a home insurer might use.

Here’s an example, before moving into our new home we had to purchase appliances for the kitchen. Rather then argue with the sales person I agreed to purchase an extended warranty on all 4 pieces. Individually the cost didn’t seem to bad but when I got home and calculated the total price ($750) it became very obvious why they push so hard to sell the warranty.

The warranty order was canceled shortly thereafter. Long story short, 5 years later not one product failure. Even if I’d had a problem the $750 saved would have easily covered the replacement of any one piece with the exception of the refrigerator.

OK so cars are more expensive items but so are the extended warranties for same. It’s a proven fact that most defects occur before the standard warranty expires. Certified used cars may be worth the extra cost if the vehicles standard warranty has expired but that is dependent on the premium the dealer is asking.

Let the buyer beware, it always pays to do your homework before making a major purchase.


Absolute necessity for German cars and Suzuki XL-7s. The repair bills on these vehicles are incredibly expensive and come more often than you like. For example, the XL-7 air conditioning compressor is a real weak point. Early failures are common. And the repair cost ranges from $1600 to over $2000. My German cars (3) were fun to drive but not fun to fix.

Not required on Hyundais, Toyotas or Hondas. Statistically speaking, there's no need. One rarely gets a lemon from these folks.

Detroit iron: You take your life in your hands. Good luck, comrade.

I Fully believe in extended warranties no matter what Consumer Reports says. I bought one on a 92 Honda Civic and used it 3 times because the distributors are bad in Hondas and go out at about every 40,000 miles at $560 for a replacement new plus towing and rental car it paid for itself!

Second car I bought was a 2002 Audi A4 that the oil system sludged up and lost oil pressure and froze up. Vehicle Life Warranty replaced the engine for about a $4300 claim!
They are a Real Deal and not some MLM cover!

To me an extended is no different than health insurance for me! Who doesnt want health insurance? Why not have it for my vehicles?

Just makes sound sense if you are living on a budget to buy one and finance it with your car purchase. The article says save the money every month in an account - sounds great but what happens if the car breaks down in a few months and you only have a few hundred or less saved?

Shop around and buy a good warranty from a reputable dealer!

If you've left the dealership and need an extended warranty, consider the after-market warranties available from ACA Auto Warranty. AAA rated insurance backing!


I just bought a new 2010 Ford Fusion hybrid. Hard car to find right now as they are just trickling into dealerships. I knew that negotiating room was essentially zero (there was another party breathing down my back as I was test driving the lone hybrid on the lot and kicking the tires!)

I was presented with the extended warranty sales pitch plus all of the other "protection package" packs. I said I'd take a look at the literature at home and the pitchman dropped the price instantly (still too much though..) from $1936 to $1250 (because I had bought the car there) to $1075 (for us folks becuase we looked like nice people..)

The protection package included fabric protection (I got leather seats...) rustproofing (I work in the metals industry..where do you think all of that two side galvanized coated coil goes?), paint sealant (why?) and the old undercoating/sound shield ruse This pack is DOA at $485 dropped to $385.

I did the "piece of mind" thing with a 98 Pontiac Grand Prix that I bought used in 1999. Never needed it, car is still in the family, warranty of course is expired but car still does not require any attention along previously covered warranty lines.

Had a GEO Storm bought used for a teenager, got a good price on an extended warranty because I personally knew the sales guy. It was an independent warranty. The engine blew and after a ton of hassle with a voice on the phone and a repair shop intervention, they finally paid up 60% of the cost of a rebuilt engine.


I bought a Honda insight hybrid in 2003 with a warranty that expired last February. I am shopping for an extended warranty at the moment and found all of your comments very useful. I thank you for that. My Honda electric battery charging system had an issue in 2004, the part and the procedure to replace costs around $3k retail. Luckily the car was under warranty and the dealer fixed it for free after a some resistance. It seems to me that the more technologically advanced is the product the more sense it makes to get a warranty for it.


Would you by life insurance planning to use it very soon? that's how extended warranties work, they are there just in case you need them. I was advised by a friend not to get the warranty and when I need it to replace the transmission I had to write the check, not my friend.

Again, I have to re-iterate what you said. Read the fine print, all of it, black and white, front and back.
I used to work at a company that sold extended service contracts for cars, and when they had a repair, that we denied, and they come back with the “well the dealer told us it was bumper to bumper”, i always referred them back to their service contract, and pointed out exactly why they weren’t covered. They threatened to sue us, but the contract is a signed document, and generally they would not win.
I don’t work there anymore, hated it the whole time I was there, but the one thing I did learn was to read the fine print…

As I discussed here,, the extended warranty is maybe worth it for cars that you plan to keep for a long time. However for appliances, it is a total waste of money.


I wouldn't buy United Auto Care warranty again!

I bought their top-of-the-line extended warranty a year ago.

They fixed a couple of small things that came up, but I just paid $250 because they denied the claim on fixing my HEATER! It was a fan resistor that failed, and they don't cover that part.

Note the two ways they got me:

1. Although this was marketed to me as an "extended warranty," it's actually a promise to fix a very specific list of parts that might fail. So if your heating and a/c fails, it might or might not be because of a covered part, so they might or might not fix it.

I thought that "of course they'll cover a broken heater" but they referred back to the contract, pointed out that the "climate control fan resistor" is not listed in the contract, and denied my claim. So I have no legal recourse. But I can say that I feel misled, that it was my local BWM dealer that sold me this warranty, that I won't buy this warranty again, and finally that I'll reconsider my planned purchase of two new BMWs this year.

2. I called the customer service number and spoke to a live rep in a reasonable period of time. He referred to the contract and said that my claim was denied. When I told him I was not satisfied, he would not refer me to someone (e.g. manager) who could work with me and would not provide a direct dial number. So they did not provide a way for me to appeal or resolve my issue.

Bottom line, my experience has been THUMBS-DOWN!


Thanks everyone for contributing, these are interesting posts. I bought a Subaru Outback today and passed on extended warrantee. I think if they *really* don't want to let you leave without it, you shouldn't buy it. And it's not like health insurance -- no health insurance could bankrupt you or cause you to be denied treatment, no car repair insurance means you might lose your car. Big difference.

I wish I had kept my extended warranty.
Back in 2007 I bought used Audi A6 with 50K on it. I paid 17K and took 5 year warranty for about $3500. The was great, really great and after about 20K miles I desided to cancel the warranty.
Not even three months after I canceled I started getting trouble. First the catalytic converter went bad, took it to the dealer and they just reset the code as it was under 80K, It came back on at 85K so it was not covered by dealer. Than real trouble started: misfiring on ignition coils, Maf sensors, engine mounts, transmission stared shaking when shifting and orther issues.
worse part was the car would just turn of when slowing down to turn or on a light. I put another 4K in repairs and that just fixed to top surface. I finally just got rid of it "as is" for 7K and bought a pontiac grand prix instead. For the price of changing catalytic converter and MAF now I can get whole new engine for the Pontiac. And yes, I have extended warranty on it, and even though I still did not need I will keep it.
As with anything else, you never know for sure what you get and little peace of mind is good.
As mentioned my Audi was so expensive to repair that warranty would have made sense, than again my dad has old Buick and never touched anything on it just fills gas and changes oil. Good Luck.

I Fully believe in extended warranties no matter what Consumer Reports says. I bought one on a 92 Honda Accord and used it 3 times because the distributors are bad in Hondas and go out at about every 40,000 miles at $560 for a replacement new plus towing and rental car it paid for itself!

I can always appreciate comments that are sincere in their desire to help protect consumers. But many times these comments are based on an isolated personal experience.I worked in the auto industry for over 20 years and I never worked for a successful dealer that didn't have a thriving repair business.Do I think a warranty is a worthwhile investment? The answer is, yes,with the technology on cars today, one repair and the warranty will pay for itself.I have car insurance, but I don't call it a bad investment when I don't use it. However, just like any insurance, know what your policy covers, get the best coverage available, and like anything else make sure you get a fair price.


HAHAHHAHAH AAA rated insurance company, sadly no longer in business and domain is up for sale. ahahhahah

ACA Auto Warranty
Oct 13, 2008 7:02:39 PM
If you've left the dealership and need an extended warranty, consider the after-market warranties available from ACA Auto Warranty. AAA rated insurance backing!

Hal Smith

I got the extended warranty on my 2005 and it has paid off. Main reason I got it is, that the day's of replacing a starter for $25.00 are long gone. Just to have that "chip" reset is a ripoff. I have 100,00, bumper to pumper, "if it's mechanical, it's covered". Fore extended warranty I've ever gotten, mainly because of the exhorbetan prices being charged for minor repairs.


Insurance is just like gambling, and as in all gambling the house will win. The only legitimate reason to get an extended warranty is because you do not have the discipline to put aside the money to pay for a major repair, or because your finances cannot survive a major unexpected expense. The extended warranty companies have done a careful analysis of the typical expenses of repairing your car and they charge more than enough to cover those repairs. If you take that same money and put it into a muni bond, or some other interest bearing investment, you will generally be better off than buying the extended warranty.

The exception to all this is if you win the gamble and your particular car happens to require much more repair than is normal for that make and model. As an example, my wife bought a new Lexus RX-300 in 2000. She did get a Lexus factory extended warranty and had 2 transmissions fail during the warranty period (100,000 miles). The warranty was about $1,500 and each tranny was probably over $5,000 installed. On my 2001 Audi I have paid a total of perhaps $2000 in repairs and service in the 6 years since the factory warranty expired. I seriously doubt that I could have gotten a policy that would have been a better deal than simply investing the money and paying for the repairs as they ocured.


Car dealers have a book that tells the number of hours to charge for each different kind of repair. You don't pay by clock hours, but rather by this "flat rate" book. Warranty repairs (and those covered by a manufacturer's extended warranty) use a different flat rate book--with substantially lower hours for each type of repair. The manufacturer also dictates the labor rate for those hours. Having the manufacturer's extended warranty (versus paying out of your pocket) saves a third or more on labor costs. So even if the covered repairs exceed the cost of the extended warranty, the manufacturer may still make a profit on the warranty because of the discounted rate and reduced number of labor hours.

Ziggy raised an interesting point. In the end, it was okay for him to have spent money because it gave him peace of mind. I guess the issue here is if you're willing to shell out your hard-earned pay to protect you and your car. But, you know, Stephen, you already gave an excellent suggestion. Others may just set aside the money that was supposed to be for warranties and treat it as an emergency fund. That way, the money can spent on any unforeseen cost.

Anupam Bandyopadhyay

I just bought a Honda Accord 2012 LX. Is it worth it to buy extended warranty for $2000 7 year/100k? I am from Florida, so I can't buy discounted warranty from 3rd party. Fla legislation regulated discounted warranty. So my warranty has to be purchased from a dealer at a much higher price. Is it worth it? Please advise.

Edward S.

As with any product or service it has to be profitable for the seller and I used to think an extended warranty on a car was a waste of money. I've changed my mind and purchased them for my last two vehicles--and both paid off for me monetarily and mentally. Since I use my minivan for business and personal, it has to be reliable. I used to trade in at around 60-70,000 miles for fear of running into major expense. I purchased the 100,000 mile warranty this time. I'm now at 65,000 miles and feel confident keeping my '07 minivan for an additional 35,000 miles because I know it won't cost me an arm and a leg for repairs. So I save a lot on depreciation as well as on repairs.

Due to oil consumption I just had a ring job done. I've also had the alternator replaced, both sliding doors repaired, and the air conditioner evaporator. All expensive and all replaced under warranty.

I will purchase only the factory warranty for trust reasons. What most people don't know is that you can price shop extended warranties from any dealer and they are valid anywhere.


Talk about Honda Lemons. I bought a used 2003 Honda Accord in 2007. I didn't know any better because it was my first car and I had no knowledge of what extended warranty was.

It's 2012 and I've already spent thousands of dollars in repairing things like starter, oxygen sensor, AC (which still doesn't work), brakes.

It still has the engine check light on because of "some" problem with the oil/engine, AC doesn't work, driver side auto lock doesn't work, radio doesn't work.

I went in for a trade in and they said because of all the problems with the car they won't ay me a dime above 3,500. i wish I had an extended warranty. I would get all these things fixed and I would have saved on repairs.


These posts confirm my experience with an extended service contract through National Auto Care Corp. I bought them through Audi back in 2003 for a used 2000 Audi TT with 30,000 miles. I got my TT covered to 100,000 miles. I spent $2000 for the extended service contract and had $6000 in repairs so the contract was well worth it. Question: Can anyone recommend any specific service contract providers? I need specific names and how much you paid. Thanks,


I have a 2007 BMW 328i coupe that I purchased a warranty for through a company called easycare. I think I paid around $3,500 but I opted for their top of the line "total care" package. So far it has covered: ball joint, tail light sensor, replaced runflat tire due to nail in tread, faulty ipod cable (dealer installed option). They pay by mastercard at the time service is complete, and there is a $100 deductible per visit. They cover all of the diagnostic fees too, assuming it results in a covered repair. So far they refused to pay for a tow hook cover (which I found was only $47), and they also denied a bent rim. They said if the rim were cracked or bent to the point of not holding air, that they would replace it. Overall, I am very satisfied with this company, I estimate they have paid out nearly $2,500 in repairs and I still have 2 years/30,000 miles remaining. I'm sure I can find at least another thousand for them to fix in the next two years to at least have the warranty pay for itself. They are very honest and open about what they don't cover-all I need to do is ask and they'll tell me, there are no 'yes it's covered but...' answers from their reps. Definitely recommended!

Best Regards,


Daisy Salter

Extended warranty on my 2007 4Runner covered new AC rather than just repair--$3000. I had never needed the warranty for 30 yrs but was very glad I had it today.


Seems to me that the choice is dependent on the type of car and accessories. Powertrain failures today are rare, Yet, today's autos come with a wide variety of expensive electrical accessories, and their failures are more common. If you buy a baseline Civic, decline the extended warranty. If you buy a fully loaded BMW or Lexus (or Toyota), one repair past the factory warranty will justify the platinum level extended warranty cost.

For the most part all comments have validity. Nobody thinks an extended protection plan is worth it until something goes wrong after the factory warranty expires. Many of our guests choose to have the coverage, and we sell the coverage nationwide for a fair price. A dealership can make money on these plans, however, if you can get the coverage at a fair price, it makes much more sense. You will still have people say they never used it and just as many people say it was totally worth it. Unfortunately not everybody has the experience. Please call us if you would like the coverage at a fair price.

Debra V

Bought the manufacturer's extended warranty with my new 2006 Honda Pilot LX. Glad I did. I had a defective radiator which had to be replaced. The 2nd radiator was also flawed, causing engine damage just after the regular warranty expired. The engine had to be rebuilt and I was in a paid-for rental for a week. Even the best manufacturers have quality problems.


Kind of like sitting across the desk from this fairly keen sales person in an office after the initial vehicle sell and being told that if you don't spend $2,000 at a casino you might not win. I'm pondering vehicle EC right now with a brand new Toyota and having a difficult time convincing myself it is worth the money. At the moment I'm seeing it as prepaying for repairs that might not occur. Putting the money aside for repairs feels like a sure thing in that it would be like having unconditional repair coverage up to the amount the insurance would have cost, and any unused amount would be fully refundable, plus no time or mileage restrictions. Or looked at another way by setting the money aside I would have to rack up more than the $2,000 in repair costs before actually paying out of pocket. If I am prone to worry I may imagine scenarios where the repair isn't covered so it's not a given I will purchase peace of mind :) Perhaps my logic has flaws? Thanks to everyone for the very good posts which added excellent ideas for consideration before purchasing extended care with a new car purchase.

mrs lundy

why sure I buy three year warranty on a 2008 outback Subaru ?

mrs lundy

Can any one help me


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