A car is one of the most significant purchases anyone can make in their lifetime. With such an important role in daily living, many car owners pay extra for extended warranty coverage to protect their car for years to come.
But what happens when you decide to sell your car? Will the coverage continue after your car is purchased by someone else? Will having coverage affect the resale value of your car?
This blog delves into extended car warranty coverage and how it can affect your car’s resale value. Specifically, we answer the following questions:
- What is an extended warranty?
- How does an extended warranty work?
- What are the pros and cons of an extended warranty?
- How does an extended warranty affect my car’s resale value?
What is an Extended Car Warranty?
When purchasing a new vehicle, auto dealerships and manufacturers typically offer protection against potential problems that require repairs or replacement parts for a certain period as part of the overall purchase cost. This is what is known as a warranty.
An extended warranty, meanwhile, is an optional service contract typically offered by dealerships, manufacturers, and third-party service providers at an additional charge to provide protection for problems not typically covered by the manufacturer’s warranty. These can include benefits such as towing services, rental car coverage, and travel insurance.
How Does Extended Car Warranty Work?
Car owners are all too familiar with the common problems their vehicles can encounter while on the road. Although some of these problems are already covered by the manufacturer’s warranty, many of these aren’t and require the car owner to pay out of pocket. For this reason, an extended warranty can come in handy.
Extended warranties are designed to offer coverage outside what is covered by the manufacturer’s warranty. These generally cover problems encountered by a vehicle’s electrical or mechanical parts, including its engine and transmission. However, these do not include costs for routine maintenance, such as tire replacements and oil changes.
The typical contract length for extended warranties can vary, from one to eight years, or up to 12,000 to 125,000 miles, depending on your choice. But even within those timeframes, there are limits to the amount covered by the warranty. For instance, contract restrictions may limit your towing expenses, putting you on the hook for the rest.
What are the Pros and Cons of an Extended Car Warranty?
Pros
The following are advantages of extended warranties:
- Financial Security: Purchasing an extended warranty saves you out-of-pocket expenses for emergency repairs later. This eliminates the stress of worrying about paying for any unexpected repairs.
- Extended Protection: With service contracts typically lasting beyond the manufacturer’s warranty period, any expenses you encounter even after its expiration can still be covered by an extended warranty, which may include some costs covered by the original manufacturer’s warranty.
- Purchase Flexibility: As an optional service, you can choose to purchase an extended warranty at any time, allowing you more time to make an informed decision.
Cons
The following are the disadvantages of getting an extended car warranty:
- Additional Expenses: The costs associated with payments for an extended car warranty can quickly add up to a considerable amount. These payments can be quite expensive, considering the cost of insurance and car payments.
- Redundant Coverage: In some cases, the expenses on repairs needed on your car may already be covered by the manufacturer’s warranty, making additional coverage redundant.
- No Tangible Benefit: Ultimately, you will only benefit from extended coverage when or if you need repairs. If no repairs are needed, you won’t be getting any tangible benefits from your service contract, which is then money down the drain.
How Does Extended Warranty Affect My Car Resale Value?
Regardless of the extent of coverage offered, some benefits can still be derived from an extended car warranty. Your current needs will determine whether these benefits are worth it. Now, for the question “will extended warranty affect my car resale value?” the answer is a resounding yes, as it can increase your car’s value and make it viable for resale.
Any amount of money you invest in extended warranties will not go to waste should you decide to sell your car. Comprehensive coverage remains even after the transfer of ownership to someone else. In many cases, sellers can use extended warranty coverage to incentivize a sale and increase the car’s resale value.
In typical transactions involving used cars, there is always a cloud of doubt surrounding prospective buyers’ minds regarding the condition of the vehicle in question. Buyers may be afraid because of some problems that are being concealed, but extended warranty coverage can put their minds at ease.
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