Is an Extended Warranty Worth It For Your Car?

In a world filled with up-sells, it can be difficult to determine whether an extended warranty is worth it for your current car- particularly when someone is incentivised to sell you one.

If you’re tossing up whether or not an extended warranty is a worthwhile investment - we’ve done the homework and we’ll be unpacking it all.

What is an Extended Car Warranty and What Does it Cover?

Put simply, an extended warranty is a product designed to give your vehicle additional coverage outside of the manufacturer's warranty terms.

This can be offered by the original manufacturer, though more commonly in the context of automotive extended warranties, they are a paid product often offered by a third party.

Typically, the extended warranty is offered as an agreement to cover the costs associated with repairing or replacing parts in the event of a defect.

Depending on the provider, an extended warranty may cover costs associated with mechanical and electrical failures that would have been covered by the original manufacturer’s warranty before it expired.

What is Not Covered by an Extended Warranty?

An extended warranty isn’t necessarily a ticket to care-free car ownership, which means it’s important to read the product disclosure statement of any extended warranty that you’re tossing up.

While we can’t say exactly what is not covered by an extended warranty, as each policy is different, some of the most common issues that you’re not protected for include the following:

• Deterioration associated with general wear and tear

• Damage from an impact or accident

• Non-OEM parts fitted to the vehicle

• Damage to the engine block from overheating

• Leaks, O-rings, seals and timing belts

• Voided coverage from not meeting servicing obligations

• Damage to the engine from inappropriate lubricants, fluids & contaminated fuel

• Damage to vehicle from unauthorised servicing

• Corrosion and rust, UV damage

• Wheels and tyres

• Exhaust system

• Submersion in water

Does Australian Consumer Law Cover a Car Out of Warranty?

Aussies will be pleased to know that Australian Consumer Law (ACL) protections exist for the vehicle you’ve purchased - even if the factory warranty has expired.

Your protections will vary, of course, though the general guidelines for whether or not you have recourse centre on the product, in this case, the vehicle meets minimum standards for durability and consumer protections for 'faulty' goods.

If, for example, your vehicle is 12 months out of its warranty period but there is a catastrophic failure deemed the result of a lack of durability or failure from a manufacturer’s faulty part, you may well be covered.

Dealer vs Manufacturer Warranty

The main difference between a manufacturer’s warranty that you receive upon purchase of a vehicle and a dealer warranty is that the former is backed by the factory itself.

This is in contrast to a dealer warranty which is sold by the dealership and typically operated by a range of third-party agencies which generally come into action when the manufacturer’s factory warranty coverage has expired.

Manufacturer warranties are by far the most comprehensive packages that will provide more coverage for your back pocket in the event of a mechanical breakdown.

Three Things to Consider About an Extended Warranty

1. Is there coverage for general wear and tear?

2. Is the provider reputable with solid customer reviews?

3. Compare the cost of the extended warranty against general maintenance

Is an Extended Warranty Worth it For Your Car?

In many cases, keeping up with your vehicle’s logbook servicing requirements, rather than buying an extended warranty, is a more cost-effective means of gaining long-term peace of mind from your vehicle.

This is simply because of the number of caveats and conditions included with each extended warranty that may leave you high and dry if something were to go wrong, even if it’s a straightforward issue.

Having said that, many extended warranties cover you for different mechanical issues, so it’s impossible to say flat-out that they’re a bad idea, though generally, investing in maintenance is a better option.

FAQ: What are the Downsides of Purchasing an Extended Warranty?

One of the biggest potential downsides of purchasing an extended warranty is paying for a product that does not cover expenses related to the general wear and tear of engine components.

Engines have hundreds of moving parts and, over time, these will require some maintenance and replacements.

If routine fixes and upgrades aren’t made, the engine can suffer from a range of problems and, often, an extended warranty will feature a number of clauses that allow the provider to reject your claim on the basis of general wear and tear.

FAQ: How Much Does an Extended Warranty Cost?

While the exact price of an extended warranty varies with factors like the make, model and age of the vehicle, typically the cost ranges from $2,500 to $3,500 for a three-year/200,000-kilometre extended warranty.

FAQ: Can You Buy an Extended Warranty Later?

Extended warranties are products designed to be purchased after the manufacturer’s factory warranty has expired. They are often marketed as a peace of mind product to be purchased later in the lifespan of your vehicle.

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