To know whether you'll benefit from the warranty, or end up having paid for something you'll never use requires a bit of detective work.

All new cars - and in fact, many certified pre-owned cars - come with warranties designed to protect buyers from major and minor defects during those first few years (or kilometres) of ownership. Some companies have even started throwing free maintenance into the deal for Canadian car shoppers, further sweetening the problem-free driving experience.

But what about extended warranties? These add-ons can be found lurking at the bottom of purchase contracts and options sheets at dealerships across the country, and they promise to provide even more peace of mind for buyers who aren't convinced that the factory guarantee is going to be enough.

It's not easy to make blanket statements about these kind of 'extra' warranties, mostly because they aren't standardized and can come in many forms, and at many price points. Sometimes extended warranties are offered directly from manufacturers, while others are provided by third-party companies or the dealerships themselves. One type of extended warranty might extend the original warranty's coverage past the initial period of factory protection, but another could just fill in the gaps on the OEM warranty and then end at the very same time.

Sometimes extended warranties are offered directly from manufacturers, while others are provided by third-party companies or the dealerships themselves.

Extra warranty protection is a gamble that the car you are buying is going to be problematic to the point where the amount of money you pay for the coverage will end up being less than the repairs you would have been responsible for out-of-pocket. According to Consumer Reports, 55-percent of extended warranty buyers never ended up using it, as most modern cars are built to a very high standard - and those who did use it, covered less than $1,000 in repair costs over their course of ownership.

To know whether you'll benefit from the warranty, or end up having paid for something you'll never use requires a bit of detective work on your part. The four most important questions are:

  • Is the vehicle you have chosen to buy known in the industry for having higher-than-average repair costs or problems?
  • Does the warranty itself actually cover the areas of the automobile that typically break down?
  • Is the warranty long enough to cover the period when you're most likely to need repairs (6 to 8 years after purchase on most vehicles)?
  • Is there a lifetime limit in terms of dollars for the repairs associated with the warranty?

Answering these questions is challenging, as some extended warranties very specifically exclude some types of components and vehicle systems. This is where reading the fine print - after already having had to deal with the purchase contract itself - really pays dividends. If the warranty coverage is affordable, but leaves you high and dry when something breaks down the road, it's not much use to you at all.

To know whether you'll benefit from the warranty, or end up having paid for something you'll never use requires a bit of detective work on your part.

It's also a good idea to select a factory extended warranty over a third-party. Dealing with the company that built your car is typically easier when trying to get your coverage honoured, as they have a vested interest in keeping you around as a potential repeat customer. It's also usually easier to find a dealer willing to do the repair than one of the 'network' shops used by other warranty companies. Don't trust the sales person's recommendation either, when it comes to a third-party warranty, because most of the time these are simply more profitable for the dealership. Understandably, the dealer trying to make the most cash off of your new car transaction as possible including a commission for selling third party warranties. 

Follow these guidelines, ask the right questions, and research just how reliable the vehicle you are buying is, and you'll be able to make the right choice when it comes to an extended warranty.

Photo: Benjamin Hunting

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