Are Used Car Extended Warranties Worth It?

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

, - August 16, 2018

An extended warranty – also known as a service contract – is an optional form of protection that covers certain vehicle repair costs. Not everyone chooses to purchase an extended warranty, but if something were to happen down the road, it can really help you out, especially if you plan on buying a used car.

Determining if You Need an Extended Warranty

If you buy new, purchasing an extended warranty may not be worth the extra cash if you plan on selling or trading in your car once the manufacturer’s warranty is up.

If you buy a used car, the type of vehicle you plan on financing can influence whether or not you’ll want to purchase an extended warranty. Purchasing an extended warranty could save you thousands of dollars in major repairs if the car you want has a spotty history or is notorious for breaking down.

Before you jump the gun and purchase an extended warranty, make sure you do these three things:

  1. Research the vehicle you want to buy – Check the car’s reliability ratings online and note the problems other owners have had.
  2. Check the VIN number – Have the vehicle identification number (VIN) checked on a site like to gather the car’s complete history.
  3. Have the vehicle inspected by a mechanic – A pre-purchase inspection from your mechanic can give you a lot of information about the car. Just because it looks good on the surface doesn’t mean there isn’t potential for issues underneath.

Because it costs a good chunk of money for the extra coverage, it’s important you understand your used vehicle’s overall track record, and what could potentially happen to it.

Just how much an extended warranty costs varies. But according to Consumer Reports’ 2014 survey on extended warranties, the median price paid for coverage was over $1,200, and 55 percent of owners who purchased an extended warranty never used it for repairs. Extended warranties are a gamble. You may or may not use it over the life of your car. And, if you do end up using it, you may still find you owe on certain repairs.

What’s Covered Under an Extended Warranty?

Extended warranties don’t cover every service and repair. There may also be more money involved than just the purchase price. Some plans require deductibles or may only reimburse you once you’ve paid for the needed repair.

If the warranty doesn’t come from the manufacturer, note that many third-party extended warranties come in tiers that have different price points and offer different levels of coverage. What one warranty may cover, another may not. So, make sure you read the fine print and ask questions before signing.

Pros and Cons of Extended Warranties

Extended warranties come with equal pros and cons:


  • Cover expensive repairs – The biggest pro of an extended warranty is its ability to cover extensive, big repairs.
  • Security – Purchasing an extended warranty gives you a sense of security and assurance if any major repair needs to be done.
  • Coverage choices – There’s more than one type of extended warranty coverage, and most dealers and third-party providers have various options for you to choose from.


  • Not all repairs are covered – Each extended warranty contract has a list of exclusions which can include certain parts and repairs that won’t be covered.
  • You may never use it – You may never need an extended warranty over the car’s life, which means you could be shelling out thousands of dollars for nothing.
  • May be limited to certain repair shops – If the dealer has a third-party warranty you may only be able to go to the repair shops listed with the warranty provider. This can be a challenge if you end up moving, or if your provider doesn’t have any repair shops available in your area.

The Bottom Line

At the end of the day, whether or not you choose to purchase an extended warranty is your decision. Just how much you’re willing to pay to be covered, the type of vehicle you plan on purchasing, and how long you plan on keeping a car can all affect your decision.

When you’re ready to finance your next vehicle, CarsDirect wants to help. We work with a network of special finance dealers that have lending resources available to help people facing difficult credit situations. Just fill out our online auto loan request form to get started today.


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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

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