Do people really buy extended car warranties?

And most warranties are transferable if you decide to sell. When it comes to the long-term cost of your car, extended warranties are usually “a bad deal,” Gillis says. In a Consumer Reports survey, 55% of people who purchased an extended warranty never touched it. Among those who did use the warranty, most saved less on repairs than they paid for the contract.

Extended warranties are great for people who want to be prepared for possible repairs that may be required once the factory warranty expires. They are usually negotiable, and sometimes you can find online discussion forums where people post how much they paid for a specific guarantee. Unlike regular warranties, extended warranties are sold separately, meaning you have to pay more for them. If you decide to buy an extended warranty, be sure to do your homework, watch out for auto warranty scams, and work with a reputable company.

But while extended assurances may seem like a big safety net if something breaks, are they really worth it? Let's look at what extended warranties are and if you really need them. This means that if a car dealer tries to get you to buy an extended warranty, they'll know exactly which parts of that model tend to break down and how quickly. Once the warranty expires, the cost of all repairs goes out of homeowners' pockets, and nervousness over that possibility has made buying an extended warranty a popular choice. If you want to buy an extended warranty, remember that the price can be negotiated, just like the purchase price of the car.

The main reason people buy an extended service contract is to be protected against major repair bills, such as a new transmission or engine rebuild that can cost thousands of dollars, after the manufacturer's warranty ends. Companies make their salespeople push extended guarantees in the checkout process because it's a great source of money for them. And they will purposely sell you an extended warranty that ends before then, which means that the odds that you will actually be able to use the warranty are quite low. But your extended warranty may not cover your house being struck by lightning and cooling your TV, or you may be so angry with the loss of your favorite sports equipment that you throw your plate of hot wings on the screen.

Most third-party warranties have deductibles, but extended factory warranties usually don't have a deductible for repairs. Nearly half of consumers who buy a new or used vehicle from a franchised dealer opt for an extended warranty, according to the National Association of Automobile Dealers. But like the financing they offer, dealers tend to increase the cost of extended warranties to make a profit.

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