Extended car warranties: the costs and benefits

Cars on motorway

Vehicle repair costs are rising steadily and if your car is over three years old you are probably not covered by its original warranty if anything goes wrong. However, an extended warranty could give you peace of mind and save you thousands if your car breaks down. But these warranties come at a price. We look at their pros and cons.

For most people, buying a new car is one of the bigger investments they make in their lives and they want the peace of mind that their investment is protected. Thankfully, all car manufacturers offer warranties that are enough for most people.

A typical manufacturer’s warranty includes a three-year mechanical warranty, or up to 60,000 miles, whichever comes first; a three-year paintwork and surface rust warranty; and a 12-year anti-corrosion warranty. There may also be other benefits. For example, Toyota offers free RAC membership for one year to new car buyers.

For most motorists this warranty is perfectly adequate, although extended warranties are available for new cars that will give some extra benefits, such as free car hire while your own car is being repaired. These also cover you if you exceed the 60,000 mile limit in the first three years. However, with prices ranging from about £300 to £700 per year, depending on engine size, this is probably not worth it.

It is when your three-year warranty expires that you should really start considering an extended warranty. As your car gets older the chances of mechanical failure will increase and it is good to know that repair costs will be covered if anything goes wrong.

Almost all car manufacturers offer their own extended warranties, though these can be relatively expensive and may impose certain restrictions, such as having your car serviced at a certified garage at least once a year.

There are also many private operators on the market and products offer roughly the same benefits. A typical extended warranty will cover you for repairs up to £5,000 or the value of the car, whichever is lower; all labour costs; car recovery; car hire; emergency travel; and overnight accommodation.

Prices will depend on the age and mileage of your car, how much mileage you do annually, the engine size, and how long the warranty is for. For a small, three-year old car with low mileage you can expect to pay at least £200 for a year. However, this can rise to about the £1,000 per year mark for larger, more expensive cars, which is quite an outlay.

While the benefits are significant, especially if your car experiences mechanical problems, you should shop around and try to ascertain if it is really worth it. In truth, a four-year old car that has been fully serviced and well looked after should not experience any significant mechanical problems, but you can never be sure. One significant benefit of having an extended warranty is that you will not have to pay for a separate roadside assistance package, such as RAC or AA membership, which will offset some of the cost.

If you think an extended warranty will benefit you, be sure to read all terms and conditions carefully and watch out for exclusions. For example, some policies will not cover damage caused by wear and tear or damage caused by non-insured parts. Also, cover may be limited if your car has high mileage.

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