But what do you do when that long warranty is coming to an end? Your 48,000 mile warranty may have seemed generous when you bought the car, but now your vehicle's odometer shows 47,500 miles and is counting down fast. Do you simply roll the dice and hope for the best? Do you trade in your now warranty-less car for a brand new one and resign yourself to five more years of car payments? Or do you choose the third option and buy an extended warranty for your current car?
Buying an extended vehicle warranty for your car is always somewhat of a gamble, and there are a lot of things to consider. One of the most important considerations has nothing to do with your car and everything to do with your personal finances. If you have a robust emergency fund, it may be more cost-effective to pay any needed repairs out of your pocket and avoid the high cost of an extended warranty. If you do not know how you would come up with the money to fix your car, investing in an extended warranty might make sense.
Of course there are some vehicle-specific considerations as well. One of the smartest things to do when thinking about an extended warranty is to check the year-by-year reliability ratings of the vehicle you are driving. If the vehicle has been consistently reliable even with over 100,000 miles on the odometer, chances are an extended warranty is not worth the money. If problems seem to crop up in the out years, buying an extended warranty might be a smart move.
If you do decide to purchase an extended warranty for your vehicle, you will need to shop around carefully and make sure your preferred mechanic accepts the coverage. Not all independent mechanics participate in these kinds of programs, and you do not want to get an unpleasant surprise when you have to fix your car.
You will also want to review the paperwork carefully and make sure you understand exactly what is - and is not - included in the extended warranty. Some extended vehicle warranties offer true bumper-to-bumper coverage, with reimbursement for even the smallest repairs. Others cover only major systems - like the engine and transmission. Knowing what is covered will make it easier to assess the value of each policy and make a smart decision.
Driving an older car can be a little scary sometimes, especially if your vehicle has high mileage and things have already started to go wrong. Even so, driving an 8, 9 or even 10-year old vehicle can be an excellent way to save money and get control of your finances. With no car payment to worry about, you can free up extra money for retirement, education and other essentials. When used properly, an extended vehicle warranty can bridge the gap between the manufacturer's warranty and your own out-of-pocket costs. As with any financial decision, you will need to weigh the pros and cons of the warranty carefully and make sure it is the right choice in your case.