The Car Warranty Mistakes That Could Cost You More Than Repairs
You need an auto warranty, but not just any warranty.
When buying a new car, an extended car warranty can feel like an extra layer of protection against unexpected repairs. But depending on the vehicle, the contract and even how you use it, that extra protection can become one of the most expensive decisions you make as a car owner.
Auto experts explain three car warranty mistakes that could cost you more than repairs.
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Buying an Extended Warranty That You’re Unlikely To Use
Many drivers assume extended warranties are a safety net, but they’re often priced to benefit the seller far more than the buyer.
Ryan Salata, marketing director of Specialty Auto Parts USA, Inc., said the biggest mistake “is buying extended warranties on reliable vehicles that are unlikely to need expensive major repairs in the first place.”
There’s little need to spend $3,000 on an extended warranty for a Toyota or Honda, for example.
“You're basically wagering against the reliability of those brands,” he said. Many modern cars simply don’t rack up major repair costs early on, “yet dealers will sell them extended warranties that cover just those very expensive repairs.”
“Extended warranties are really just gambling,” according to Michael A. Klitzke, Esq., CEO at Auto Law Firm, PC.
Not Reading the Fine Print (and Assuming You’re Fully Covered)
The next biggest mistake buyers make, according to Ryan Hartman, founder and CMO of Chaiz.com, a comparison site for extended car warranties, is not reading the contract. Most buyers assume coverage means full protection, he said, which isn’t always the case.
“That gap between expectation and reality is where frustration and unnecessary costs arise,” he said.
Key details in the fine print, like exclusions, deductibles and claims processes, can change the outcome entirely.
“If the structure is overly complex, it often leads to complications during claims,” he said. Worse, “[i]f you have more than one separate problem, some warranties will make you pay a deductible for each separate problem.”
Paying for Coverage You Already Have
Another costly misstep is buying coverage you already have (but might not realize). Michael M. Ouziel, Esq., founder of automotive defect law firm, MMO Law, APC, said that for most new vehicles, “an extended warranty is often redundant because the manufacturer’s warranty already provides a built-in protection.”
On top of that, how you pay matters. Rolling the cost into your loan increases what you actually spend over time. Klitzke said that consumers often pay a 200% to 400% markup.
“The true cost is even higher when you consider these warranties are included in the car loan,” he said.
Instead, Hartman suggested setting aside $100 to $150 per month in a dedicated repair fund which “allows you to maintain full control of your money and avoid claim limitations or denials.”
An extended warranty isn’t always a bad idea, but it’s rarely a default one. Be sure you know when you’re buying real protection and when you’re just paying for the illusion of it.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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