Over the last several years, used car sales volume has steadily increased. Perhaps more significantly, used car prices have gone up as well, reaching an all-time high in 2016. Since people are investing more in their used cars, many are looking to protect their investment as well. That often means a used car warranty, but there are some very important things to consider.
Do You Need One?
Many people buy extended warranties with their new cars. Furthermore, to bolster sales, many manufacturers offer long basic warranties on their new cars. Moreover, some manufacturers offer two year or 12,000 mile warranties to the first used car purchaser and some used car dealers offer coverage as well. As a result, the used car you buy may have several years or tens of thousands of miles remaining on an existing warranty.
These warranties are usually, but not always, transferable. If there is no such language in the warranty documents, the law will probably not protect you. Due to a legal term called privity of contract, only the person who actually bought the car from the manufacturer may be able to benefit from a warranty.
Type of Company
Used car dealers, in particular, had a very good year in 2016. Their newer vehicles and higher prices help explain the record-breaking sales figures. Most people know that not all car dealerships are created equal, and the same thing goes for warranty companies.
Purchasing a used car warranty from a vehicle manufacturer has some advantages. Most repairs are covered, and the provider mechanics are usually manufacturer-certified. The major downside, and it is a very big downside, is that such warranties are often prohibitively expensive.
That leaves aftermarket, third-party warranties. Pay close attention to the types of used vehicle warranty companies that sell these policies. Some are financially solid and have been around for years, but others are little more than fly-by-night operations.
Also, pay close attention to the policy terms. Many have very high deductibles or only cover certain kinds of repairs.
Do You Really Need One?
Only you can really answer this question, but it’s important to understand all aspects of this issue.
Financial experts say that you are much better off if you take what an extended warranty would cost and put the money in a savings account. Statistically, this point is pretty much unassailable.
But extended warranties have a substantial non-economic value. Many people do not like dealing with unexpected expenses. That’s especially true with regard to expensive car repairs. An air conditioner or other repair could break a monthly budget. The peace of mind that comes with knowing these repairs are covered may be worth a few hundred dollars a year. The car’s age and reliability come into play here as well.
Basically, a used car extended warranty is a bet. Usually, the company comes out ahead, but in some cases, the customer wins financially. Moreover, the customer almost always wins from a non-financial perspective. Many times, that security is worth the price.