Should You Buy an Extended Warranty on a Used Car?

Whether you should buy an extended warranty on a used car depends on the car, how long you'll keep it, and whether you could absorb a surprise repair bill. For many buyers it's optional, not necessary. It's most useful when a repair would strain your budget, and least useful on a car that already has strong coverage left. Here's how to decide.

What is an extended warranty on a used car?

An extended warranty is usually a vehicle service contract: a paid plan that covers certain repairs after the factory coverage ends or when a used car has little of it left. Strictly speaking it's not a warranty, because a warranty comes included with the car. A service contract is sold separately, and it can come from the automaker or from a third-party company.

Coverage differs a lot from plan to plan. Some cover only the engine and transmission. Others cover far more components. The name on the brochure tells you very little, so the contract itself is what counts.

When is an extended warranty worth it?

A service contract tends to make sense when:

• A single large repair would be hard for you to pay for without borrowing.
• You plan to keep the car for many years, well past any remaining factory coverage.
• The model has complex electronics or systems that are expensive to fix.
• You value a predictable monthly cost over the chance of a lump-sum bill.

When should you skip it?

You can often skip the contract when:

• The car still has factory powertrain or bumper-to-bumper coverage. Ask for the exact remaining terms.
• It's a certified pre-owned car that already includes extended coverage.
• You have savings set aside for repairs and would rather keep that money.
• You plan to sell or trade the car in a year or two.

Reliability and history matter here too. A car with a clean record and good maintenance paperwork is less likely to need big repairs, which is why it helps to check a used car's history and get a pre-purchase inspection before deciding on coverage.

What should you check in the contract before you sign?

Ask for the full contract and read it before agreeing. Look for:

• What's covered. A list of covered parts is better than a vague promise. Check what's excluded.
• The deductible. Find out whether it applies per visit or per repair.
• Who pays the shop. Some plans pay the repair shop directly; others reimburse you after you pay.
• Where you can get service. Some plans limit you to certain shops.
• Maintenance requirements. Missed oil changes can void a claim.
• Cancellation and refund terms. Ask what you get back if you sell the car or cancel early.
• Who backs the plan. Know the company that actually pays claims, and whether it's the automaker or a third party.

How does the price fit into your loan?

A service contract is often offered at the finance desk, and the cost can be rolled into your loan. That raises your balance and the interest you pay on it. If you're considering one, ask for the price on its own, and look at how it changes your total, not just your payment. This is the same habit that helps with the out-the-door price: ask for every number in writing. The price of these contracts is also usually negotiable, so don't treat the first quote as final.

Can you buy a warranty later?

In many cases you can buy a service contract after the sale, so you aren't obligated to decide at the finance desk. Coverage options and prices can change as the car ages or racks up miles, so compare offers rather than rushing. Get any offer in writing and take time to read it.

Ready to shop?

Browse the used cars available on Keysy, and ask about remaining factory coverage on any car you like before you decide whether you need more.

Frequently asked questions

Is an extended warranty the same as a service contract?

Mostly, yes. Most products sold as extended warranties are service contracts, which are sold separately from the car and can be backed by the automaker or a third party.

Do I have to buy one when I buy a used car?

No. It's an optional add-on. You can decline it and still buy the car.

Can I negotiate the price of an extended warranty?

Often, yes. Ask for the price on its own and compare it with other quotes.

Does a certified pre-owned car need one?

Often not right away, since certified programs usually include extra coverage. Check how long it lasts and what it covers.

Can I cancel an extended warranty?

Many contracts allow cancellation, sometimes with a partial refund. Read the cancellation terms before you sign.