Roger and Susan Melborne were a typical married couple trying hard to manage their finances. They did their best planning ahead for large purchases such as a new car or when they had to put a new roof on their house. They were careful with their budget and also saved a little extra for their “emergency fund”. This month their car’s warranty was up and they were deciding what they wanted to do. Do you buy a new car, get an extended warranty, or “roll the dice”? They knew they were going to keep the car as a new one was not on their financial schedule. Roger wanted to just let the warranty expire and try to fix things as needed, but Susan wasn’t so sure. She remembered their car has had some issues lately and that they were thankfully covered under the manufacturer’s warranty, but that safety net was going away. Roger agreed about the recent issues and they both thought it certainly would not hurt to at least see how much on an extended car warranty would cost for their car. If they didn’t like the quote they could decide from there.
They got a few quotes and were blown away how reasonable they are. Not more than 3 months later on a family trip to Virginia the transmission went. The new extended warranty covered it in full and just with that one repair the warranty cost paid for itself AND they saved money. They both agreed it was the best financial decision they had made in quite some time. The extended warranty is still good for an additional 5 years and they know more issues will come about. They have piece-of-mind knowing they will be covered and they won’t have surprise repair bills to have to deal with.
Most of us know the feeling. Your car is no longer under factory warranty and you hear or feel something unusual in your car. The first thought that races through your head is your bank account balance going down. The second is finding a reputable repair shop and how long you’ll be without a car.
So you find a repair shop nearby and you take it in. Mixed in with the feeling of relief is the fear of being taken advantage of. “Yeah, your car needed a special hose that is only made in the top of the Himalayas by specially trained yak farmers. So although it looks like your typical $10 hose, it actually costs $500. But because I like you, I’m going to give it to you at cost for just $300.” Yeah, you know what I’m talking about. Another thing you noticed is all the new fancy computers that the mechanic now uses. In fact, the shops don’t look like the auto repair shops you remember. It looks more like a Best Buy Geek Squad counter with lights and displays everywhere.
In either case, the thought that keeps going through your mind is – If only my car was still under warranty.
Repair Costs Are Skyrocketing
Here’s a sobering fact. The average American household spends $3,269 a year on dealership maintenance and body shop repairs. If you purchased your new car on or after the year 1999, you’re in for a surprise to see your repair bills. Cars nowadays are not the simple machines they used to be. Today, new vehicles are loaded with complex technology and electronics. Not only have cost of repairs skyrocketed, so have the cost of just diagnosing the issue. The average cost to repair an air conditioning system for example is $825. Over the next five years repair costs are going to increase about 12% per year. That $825 air conditioner repair today could cost as much as $1,500 to repair five years from now.
Even newer vehicles can experience unexpected mechanical problems, and particularly today. Recent manufacturer recalls are proof of that. According to a recent JD Power study on the dependability of 3 year old vehicles, it was found that, across all brands, more than half of all cars have to have costly repair work done.
The Solution is to Extend Your Car’s Warranty
It’s not too late to get an extended warranty on your car, even if it’s been out of warranty for years. Commonly referred to as a Vehicle Service Contract, an extended auto warranty offered by third parties is the best bet to keep out of control repair costs in check. The manufactures’ factory warranty typically covers a vehicle for an initial period of time or for problems that are least likely to occur. For this reason, third-party service contracts offer protection against mechanical failures that are likely to occur just when the vehicle manufacturers have determined they will.
These vehicle service contracts are packaged in a similar manner to the original warranty offered by the manufacturer. You can purchase a set number of miles or a set number of years like 30,000 miles or 3 years. You are provided with a list of local repair shops that you can go to, and the rest works similarly to how factory warranties work. You won’t need to worry about what things will cost, or if the repair shop is overcharging you because everything is taken care of. In fact, like dealerships, some extended warranties even provide you loaners while your car is being serviced.
After looking at most common scenarios of what an average person will pay in auto repairs after a car is out of factory warranty, it makes sense to extend coverage. But it is important to understand what you’re getting into and especially what is covered and what isn’t. Like any other type of product that will last for years, it pays to spend 5 minutes going over what you get, what is excluded, and what other perks come along with it. Things such as roadside assistance, loaner cars, and trip interruption can be included or offered as options. But an extended auto warranty is something that everyone should at least consider.