Extended Warranties: Is it worth it?

You're in the process of buying or leasing a new or used car. You've negotiated a great deal and now comes the time to consider upgrading your warranty. This has to be the single most popular question when clients are proposed to upgrade their warranty.

I can confidently say that I understand there are a lot of decisions that come into play when purchasing a vehicle. While it may seem like an easy decision, clear cut YES or NO, there are a few things you should consider before you make the investment or choose to forego the extra coverage.

1. What is an extended warranty on a car?

An extended warranty, also known as a service contract, is simply an insurance policy for your vehicle. Different warranty options for different manufacturers and different dealerships cover cover different things, but, after all is said and done, they all protect against potentially surprising vehicle repairs for a specific time period. Whether you are buying a popular import brand or choosing a luxury premium brand - they all consist of million of moving parts that do not last forever. No matter how strong the brand value is or not. They are machines made my machines and covering your asset is something to strongly consider.

All new cars, trucks and SUVs come with a factory warranty that covers your vehicle for the first few years of ownership or the first 60,000km of driving, whichever comes first. During the factory warranty period, the manufacturer will cover costs for labour and repairs of anything covered in the contract. Purchasing an extended warranty makes this kind of coverage last longer.

2. What's included in an extended warranty?

What’s included depends on preferences and budget. Some coverage plans only cover mechanical breakdowns, but don’t include issues caused by regular wear and tear. Irrespective of these variances, here are the most common kinds of extended warranties:

Powertrain: Basic coverage plans come with a powertrain warranty that covers all of the integral and expensive parts of your vehicle: engine, driveshaft and transmission. These types of warranties usually last longer (6 to 10 years) predominately because these systems are the likely to break down.

Bumper to Bumper/Comprehensive: A new vehicle will come with a comprehensive or factory warranty that covers almost everything between its front and back bumper for the first 3 years of its life. Extended warranties can lengthen the bumper-to-bumper coverage for 5 years or more. Tires, brake pads, modified stereo systems, seatbelts and headlights are sometimes excluded from comprehensive plans, however, they again, depend on manufacturer and company coverage plans.

Full Wrap: In some cases,. if the powertrain warranty is still in effect but the bumper-to-bumper coverage has run out, you can purchase a full-wrap policy that covers every other part of your vehicle. Some extended warranty providers will also incentivize you with complimentary add-ons like roadside assistance, rental car coverage or even GAP coverage. However, keep in mind that these perks often come with an added cost.

3. How much do extended car warranties cost?

Costs of extended warranty policies depends on a number of factors:

• Coverage Length/Period
• Coverage Options
• Condition (New/Used)
• Make and Model
• Purchasing Choice (Lease/Finance)

Depending on make, manufacturer and coverage option, plans can start as low as $1000, but more the coverage, more the cost.

Keep in mind, that some extended warranties come with deductibles that can lower the overall cost of the agreement. For example, if a repair bill is $750 and the deductible is $200, you’ll pay the amount of the deductible and the warranty provider will cover the remaining $550. In some case, you can choose the amount of your deductible when negotiating your contract, again depending on make, vehicle and coverage provider, but keep in mind that a lower deductible will mean a more expensive warranty.

Another factor to consider is to find out how the warranty provider pays for repairs. Some are done automatically with manufacturer or service department authorization; where as some require pre-approvals before the vehicle is brought into the store. Vehicle manufacturers usually have the experience to pass warranty repairs rather seamlessly, but policies and procedures to repair must be adhered to. 

4. Different kinds of extended warranties

There are two kinds of extended warranties on the market: those supported by the manufacturer and those offered by third-party companies. Major manufacturers like Toyota, Honda and Nissan will offer extra coverage for their vehicles soon before the factory warranty expires. These are typically only available for new vehicles purchased through the dealership network. Furthermore, parts used in repairs is always brand-specific or original equipment manufacturer (OEM) certified. 

On the other side of the coin, third-party warranties are usually more affordable than manufacturer warranties, of which can be applied to both new and used vehicles. However, do your research to make sure the company is legitimate before you sign the dotted line. If you are looking to purchase a extended warranty as part of your deal through a franchise dealership, usually extended warranty companies are certified and backed with a long history coverage. However, through third-party used car lots, certain extended warranty companies can be sketchy. Whether they are one-off companies or even created in-house which could be cancelled at any time. Nevertheless, look them up online and find out how long they’ve been around and what the reviews say. The last thing you want is to be LITERALLY stuck with a useless contract because the company closed abruptly.

5. Should you get an extended car warranty?

This is probably the most common question and the most difficult to answer. While it all comes down to personal preference, extended warranties is only about coverage, but also about the length of time you plan on driving your vehicle for. For car owners looking to drive the same vehicle for 10+ years, I suggest to consider getting the extended warranty before your new car warranty expires. With augmented technology and more parts used in vehicles, it's better to have the issue fixed and paid by the coverage provider versus an out of pocket expense.

To help make an informed decision, here is a list of the advantages and disadvantages:

Advantages:

• Costly repairs are covered: Owning a vehicle is an expensive responsibility and with increased technology and moving parts, there are a lot of things that can go wrong. Most people don’t have liquid cash or capital to fix a broken transmission or a seized engine. Having an extended warranty coverage plan means major repairs can be covered if and when they arise.
• Customizable Contract: You don’t have to choose everything or nothing at all. Most warranty providers (third party of manufacturer) have different coverage tiers that allow you to customize the contract to fit your budget and needs. Naturally, you have to keep money set aside for regular manufacturer/dealership maintenance and service, but you shouldn't have to worry about paying for an expensive repair like a broken axle. A strong powertrain warranty may be all you need.
• Peace of Mind: This is a huge one if you have a tendency to worry about what if's. An extended warranty will give you peace of mind; regardless of what happens down the road, you’ll be able to fix your vehicle stress-free. This is something that’s particularly important if you plan on driving it for a long time.

Disadvantages:

• Never Utilized: Purchasing an extended warranty is a financial gamble because you never know if you’ll actually use it. I hear from many people: "why do I need to buy an extended warranty. It's a Honda/Toyota/Nissan/Lexus etc.. - they last forever". While you’ll be protected should expensive breakdown occurs, the flip side is that you might end up paying thousands of dollars for coverage you never need.
• All Repairs are NOT Covered: Even top-tier warranties don’t cover absolutely everything. This means you still have to pay of items such as oil changes, regular routine maintenance and service aside from extended warranty coverages. With some coverage plans, the contract could be voided if you fail to keep up with a routine maintenance schedule. 
• Limited Mechanic Options: Manufacturers often require you to bring your vehicle to the dealership for warranty coverage. Non-certified, third-party service companies or repair shops cannot fulfill warranty work. While this can be a major inconvenience if your vehicle breaks down in a place where there is no dealership, it's something definitely to consider. However, keep in mind, if this was to happen, manufacturers will make exceptions considering the situation.

Last but not least, it's very important to take your time and get all the information before deciding whether or not to buy an extended warranty. If you are purchasing a vehicle through a dealership, Financial Service Advisors will educate you and provide you all the info you need to make a proper decision. However, if you are getting a vehicle from a third-party used car lot, it's here where you should know what you are getting into. If you’re stressed about the decision, ask the dealership or warranty provider if you can sign up for an extended warranty later. Which in most cases, is possible prior to the manufacturer warranty expiring.

5. Honda Plus Coverage at Okotoks Honda

Okotoks Honda, renowned for sophisticated cars also has established a name synonymous with reliability. Building on that reputation, we offer Honda Plus Extended Owner Comfort coverage plans; plans that you can customize to minimize the aggravation and expense of unpleasant driving experiences. It guarantees that, no matter what happens and no matter where you drive in Canada and continental USA, your vehicle will be backed by Honda approved technicians using Honda parts. That’s something to think about when you drive your Honda and when you’re looking for solid resale value further down the road.

Honda Plus Protection: Choose only the plan that suits your needs. Just as we have different vehicles to suit your personal style, we offer several plans to fit your driving needs, thereby providing you with flexibility in choosing your protection.

Engine Stress Shouldn’t Add to Yours: With Honda Plus, you can prolong your worry-free pleasure on specified parts and components even further. Just choose from our flexible selection of coverage options for the type of protection you need. Then enjoy your vehicle – knowing that Honda Plus Extended Owner Comfort is designed, administered and backed by Honda Canada Inc. So you can count on us being there.

How do I Benefit & Buy: As a current Honda owner who hasn’t taken advantage of this program, you still can redeem a Honda Plus on your vehicle if you are still within Honda Warranty parameters. Speak to our Finance Services Department for more details.

At Okotoks Honda, we make auto financing easy. Our entire process is designed to be hassle-free and quick, ensuring you spend no more than two minutes filling out our application form. Within no time, we’ll have you driving a vehicle that fits both your lifestyle and budget. Visit Okotoks Honda at 100 Northgate Boulevard, just 10 minutes South of Calgary.