Looking for an easy way to save hundreds on your next new car and simplify the buying process at the same time? Skip the extended warranty, says Consumer Reports.
The dealer will probably try hard to sell you one, telling horror stories about the thousands of dollars it can cost to replace an engine or transmission. But the odds are you’ll never need the coverage, and even if you do, the money you’ll save in repairs won’t come close to what you paid for the added warranty.
A recent Consumer Reports survey found that 55 percent of owners who purchased an extended warranty hadn’t used it for repairs during the lifetime of the policy, even though the median price paid for the coverage was just over $1,200. And, on average, those who did use it spent hundreds more for the coverage than they saved in repair costs.
Among survey participants who used their policy, the median out-of-pocket savings on repairs covered by extended warranties for all brands was $837. Based on a $1,214 average initial cost, that works out to a net loss of more than $375. Factoring those who didn’t use their policy, the median savings was zero. And that may have something to do with why satisfaction with automobile extended warranties is among the lower Rated of all products and services surveyed by Consumer Reports, and why only about a quarter of respondents said they would definitely get it again.
Conducted by the Consumer Reports National Research Center in late 2013, the survey included responses from more than 12,000 Consumer Reports subscribers who purchased an extended warranty. The survey covers vehicles built during model years 2006 to 2010. Consumer Reports targeted those years to focus on vehicles that are typically no longer covered by a traditional three-year new-car factory warranty.