Should I Buy an Extended Warranty?

Should you buy an extended warranty — sometimes called a “service contract?” The answer is “No” according to Real Simple Magazine. The median price of an extended warranty in 2013 was $1,214, according to Consumer Reports. The Consumer’s Friend commonly sees dealerships selling these contracts at over $2,000! Dealer cost is only a few hundred, so this means hundreds or thousands in pure profit for the Dealership! In fact, dealers make far more on extended warranty sales then they do selling the actual car. Besides giving your money away, there are other downsides to buying these products: some require onerous deductibles per job or even per part, many require work to be done only at select places or with prior authorization, some allow used parts, many are basically duplicative of the manufacturer’s coverage, many are non-transferable and will never be used because we don’t keep cars as long as we used to. Pros? In California, used cars may not be sold “As-Is” if an extended warranty is sold with them. Lauren Fix, the “Car Coach,” says you are better off sticking the sale price in a savings account and using it for eventual repairs. The Consumer’s Friend agrees, but knows many buyers don’t have the cash to do that. The Consumer’s Friend has seen these products cover major repairs, but more often has seen “the run around” or outright denials of coverage. One thing is clear: NEVER BUY ONE FROM A DEALER. If you are considering purchase, shop around looking for customer reviews and demanding to READ THE FINE PRINT.