Extended Auto Warranties - Are They Worth It?

Posted by: Dan on 16/11/2016

Category: General


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Buying a car is a lot like taking a holiday: once you arrive at your destination, all is well, but a lot of work, planning, and stress goes into getting there. Making your experience as stress-free as possible is always ideal, and this can mean passing over extra steps when you can.


As Australians buy more cars than ever before – with over half a million new vehicles sold in Australia within the first half of 2016 – greater attention is now on the buying process, and in particular, whether extended auto warranties are worthwhile. Here’s an in-depth look at these warranties to help you decide if buying one is right for you.


Why are extended auto warranties controversial?

Oftentimes, an extended warranty can just be an extra cost dressed up in a lot of fancy language.

It’s an easy mistake for many car buyers to make – you are there in a shiny showroom, excited to get the keys to your new car (and perhaps desperate to trade in your old bomb that’s not working so well). In such a situation, buying some extra coverage to speed up the process of getting on the road can seem fine.


The downside to this is that while other extras – like an enhanced stereo system or greater safety features – can be worthwhile buys, an extended warranty that offers nothing new (but just costs you more money) is sometimes barely worth the paper it’s printed on.


How to spot a good one


It’s easy to quickly find out whether the warranty you are being offered is real value for money.  The first step is to just ask the question, “Other than extra time, what makes this extended warranty better than the one that already comes with the car?” A quality provider will be able to give you a number of reasons why the extras they offer are really worthwhile.


Second, ask if they will price-match a competitor. Any good business knows that competition in the marketplace means providing good value for money is essential – so if they are unwilling to offer you a competitive price on a warranty, chances are good that the product they are offering is not all that valuable in the first place.


You are also protected under Australian law


Whether you’ve decided you want a extended warranty or not, it's important to be aware that there are other protections in place for you under state, territory, and Australian law. While the law can vary a little depending upon what state or territory you live in, on a national level, any goods you purchase in Australia, like a vehicle, must meet certain expectations surrounding quality and performance.


It's true that the more time that passes, the more difficult it can be to prove that the manufacturer or the dealer was at fault when they sold you a lemon, but it does mean you are protected beyond your initial warranty period nonetheless.


This is particularly important as a car under Victorian law (with similar rules applying in other Australian states and territories) must “have spare parts and repairs available for a reasonable amount of time after purchase unless otherwise stated.” So, if any dealer tells you an extended warranty is essential to ensuring the long-term use of your car, tell him he’s dreaming.


The long-term need

Just like a variety of other factors that help you decide what to do when buying or selling a vehicle, considering the long-term need for an extended warranty is essential. If you have just bought your new dream car and envision keeping it for at least a decade? That extended warranty will give you some extra peace of mind while Sunday driving.


If you’re currently a university student, intending to move to a new city soon, or you’re a young mom or dad just in need of a ‘placeholder’ car that’ll get you through school pickup for the next couple of years? Then paying extra on a warranty for a vehicle that you may soon replace anyway is likely not needed.

Read the fine print: warranties do not cover everything

Whether you are all but assured an extended warranty is for you, or you’re just about set to buy a car without it, reading the fine print on any offer is crucial. This is particularly true as different providers will often vary in what is covered and the services they’ll provide in case you encounter car trouble.


Reading the fine print can mean the difference between someone who originally wanted an extended warranty deciding against it, or someone who was opposed to it but was drawn in by certain incentives and features deciding to buy one. Whatever you decide is right for you, reading the details of any extended warranty you are offered is a must.


In general, the value of having an extended warranty is subjective and entirely depends on the individual and their needs and comfort level. If you are a driver who takes pride in ensuring every “i” is dotted and every “t” is crossed when it comes to your car’s care, then getting an extended warranty is likely an essential.


If, on the other hand, you come more from the school of “A car is used to get from Point A to Point B,” then an extended warranty may well feel like an option that you really don’t need right now.


Either way, if you’re unsure of whether you need a warranty right now, just make it a point to monitor your regular driving over the next couple of months. If you find your car is often beset with little irritations and problems, then a warranty may be worthwhile. If you’re one of those lucky few drivers who never encounter any car problems, however? Saving that money for a road trip may be your best bet.


What has your experience with extended auto warranties been like? Let us know in the comments below.


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