“Like many of these choices, it depends on your ownership plan and your value equation,” he says. In other words, if you plan on keeping your car until the wheels fall off, it makes a lot more sense to invest in added protection than if you’re likely to switch cars every few years. Nana-Sinkam says that anyone interested in buying an extended warranty should have a good understanding about what it covers—powertrain, electronics, and in the case of cars with expensive wheels and low-profile tires, wheel and tire coverage—and whether or not the plan has a deductible.
“Cars are increasingly run and managed by computers, and fixing those components when they break can be costly,” he says. “Lots of people don’t realize that run-flat tires cannot be plugged like their old-school counterparts, and they are crazy expensive. So something like a tire and wheel package, which will cover road hazards, might be a good option.”
Credit Karma says that while extended warranties can bring peace of mind regarding potentially expensive problems, there are a number of downsides to consider. First, if coverage is rolled into your auto loan, the cost carries interest. Also, plans often don’t cover everything, so you can avoid unpleasant surprises by knowing what yours does cover and what it does not. Also, check the contract for limitations on where you can and cannot have your vehicle repaired, and for depreciation clauses that can reduce the amount paid for repairs based on vehicle mileage. And know who carries responsibility for claim payouts. If you bought your policy from a dealership or agency that goes out of business, the policy will no longer cover repairs you paid for in advance through premiums.
According to Credit Karma and the Consumer Federation, the best money-saving approach regarding planning for car repairs is making payments to yourself into an emergency fund. That way, says Gillis, if you don't end up needing the money for repairs, you can put it toward your next car purchase. But, as Joyce points out, that doesn’t work for everyone.
“It comes down to who the consumer is,” he says. “If they want peace of mind, and they’re not so organized, maybe getting an extended warranty is a good idea. There are other people who can save money by taking a more hands-on route and setting aside money for anticipated repairs.”
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June 14, 2020 at 05:06PM
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How to Shop for an Extended Car Warranty - ConsumerReports.org
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