Is an Extended Warranty Worth It on New Cars? 2024 Guide (2024)

An extended warranty is worth it on a new car when you plan to keep the vehicle for longer than the duration of its factory warranty, when the factory warranty is too short for your needs, or when you purchase a car that may need expensive repairs further down the line.

Though the best new car warranties provide comprehensive coverage for 5 years/60,000 miles, most warranties only cover 3 years/36,000 miles. Extended warranties lengthen your warranty period to upwards of 10 or more years and hundreds of thousands of miles — but when is an extended warranty worth it on new cars?

We at USA TODAY Homefront surveyed 1,500 extended warranty owners in December 2023, and 62% of respondents said they purchased coverage around the time they bought their vehicles. Another 24% purchased coverage when their factory warranty was still in force.

Let’s look at how extended warranties work, when coverage begins and what’s included in your plan. We’ll also discuss how much these products cost and if an extended warranty is worth it on a new car.

What is an extended car warranty?

An extended car warranty is an optional vehicle service contract that begins when your factory warranty expires. Extended auto warranties are similar to your car’s factory warranty in that they cover mechanical breakdowns and other repairs outlined in your agreement.

This means that when your car needs a covered repair, you’re only responsible for paying a deductible if your plan requires one. Your extended warranty provider pays the remainder of the repair cost.

Extended car warranties are sold by vehicle manufacturers as well as third-party administrators and brokers. Dealerships typically sell policies on behalf of automakers, whereas aftermarket warranties are sold through a variety of methods, including dealerships, by mail, on the phone or online.

Endurance is our top choice in our ranking of the best extended car warranty companies based on its market standing, coverage options and trustworthiness.

When purchasing an extended warranty policy, 46% of our survey respondents said they bought coverage from a manufacturer or authorized dealer. Another 35% said they purchased a plan from a third-party extended warranty provider, with 16% buying coverage from a used car dealership.

When does extended warranty coverage start?

Extended warranty coverage starts when your factory warranty expires. For example, the Ford warranty has a 3-year/36,000-mile bumper-to-bumper warranty. If you purchased an aftermarket warranty, coverage would begin three years after your car’s in-service date or after its odometer hits 36,000 miles, whichever comes first.

That doesn’t mean you need to wait for your factory warranty to expire before you buy coverage. If you buy a plan while your factory warranty is in force, your coverage may overlap. In that case, you would still rely on your factory warranty for warranty repairs during its duration.

An extended warranty may be purchased after your factory warranty expires, too. In this case, coverage may begin immediately or after a brief waiting period — typically 30 days or 1,000 miles, though waiting periods may differ between providers so make sure you read through your contract’s fine print.

What are the differences between extended car warranties and factory warranties?

An extended warranty is optional coverage that you may buy during or after your car purchase. On the flip side, factory warranties come with new (and some used or certified pre-owned) vehicles, with the cost essentially baked into the purchase price.

Factory warranties expire at the end of their term and may only be extended by purchasing an extended warranty from a manufacturer or aftermarket provider.

The best car warranties provide 5 years/60,000 miles of bumper-to-bumper coverage and 10 years/100,000 miles of powertrain coverage. They also typically include a corrosion warranty and other benefits, such as rental car reimbursem*nt, towing assistance and even some limited maintenance coverage for certain services, such as brake pad replacement or oil changes.

You generally aren’t responsible for paying for warranty repairs under a factory warranty, though you may have to pay a deductible or disappearing deductible before services are performed. Automakers typically require you to visit an authorized dealership for repairs made under your factory warranty.

With extended warranties, you have more freedom to choose your mechanic. However, some third-party providers stipulate that whatever car repair shop you choose must be ASE-certified.

Factory warranties typically require that only genuine original equipment manufacturer (OEM) parts be used for any warranty repairs. In contrast, third-party warranties often allow for a wider range of parts, including aftermarket parts that are equal to or better in quality than their OEM counterparts.

This may cut down on the time your car is in the shop for repairs, according to Kathleen Long, chief revenue officer of RepairPal. “Most shops are not parts-loyal,” Long said, which means they can search for the highest-quality parts with the best parts warranties, limiting the possibility you need to return for the same repair due to an issue with a newly installed part.

Shops are aware of common issues with most makes and models, so they know which parts are reliable and which aren’t. Long said that, sometimes, “there'll be something that comes from a manufacturer that just fails over and over and over again, and the shop is better off giving you an aftermarket part that's more reliable,” which they’re not always able to do when your car is under its original manufacturer’s warranty.

What do extended car warranties cover?

There are three primary types of extended car warranty coverage options:

• Exclusionary: An exclusionary warranty, or bumper-to-bumper warranty, provides comprehensive protection for most of your car’s parts and systems, other than a list of excluded components and situations.
• Midlevel: A midlevel extended warranty covers your powertrain and some other components, which may include your electrical and fuel systems, air conditioning, steering and suspension.
• Powertrain: A powertrain warranty is a stated-components policy that covers your car’s engine, transmission and drive systems, though some powertrain plus policies also cover a few other components.

“If you're going to go with one of these policies, I would get the best or highest level of coverage that you can,” Long said. “I think the limited ones are of limited value, and then you're kind of gambling on what's going to go wrong with the car and whether that's going to be covered.”

If you're going to go with one of these policies, I would get the best or highest level of coverage that you can. I think the limited ones are of limited value, and then you're kind of gambling on what's going to go wrong with the car and whether that's going to be covered.

Kathleen Long

Though Long recommended getting a comprehensive, high-quality exclusionary policy, she also mentioned that “there are some inclusionary policies as well that are written such that they cover just a very broad range of components. So it's not as important whether it's inclusionary or exclusionary; the question is what's included or excluded.”

In other words, look at the specific terms of each plan offered by an extended warranty provider. You want to make sure it covers the most components and conditions while fitting within your budget. For example, if you can’t afford powertrain coverage, a policy that covers your car’s drivetrain could still help you save money on potential car repairs.

Though extended warranty coverage doesn’t typically overlap with your vehicle’s factory warranty, there’s a caveat: Some extended warranties offer coverage or benefits that may not be included in your factory warranty (or that have relatively short terms).

For example, an extended warranty may offer roadside assistance or maintenance benefits that your car warranty doesn’t. In this case, you may be able to use these benefits while your original factory warranty is still in place, though you should read your extended warranty contract for policy specifics.

Common exclusions

All vehicle warranties specify a list of exclusions that aren’t covered by your warranty or that void your warranty coverage. These may include the following:

• Acts of God or acts of nature, such as weather, fire or environmental conditions
• Accidents and collisions
• Damage from abuse, misuse, neglect or participating in activities not described in your owner’s manual (such as racing or competitive driving)
• Vehicles with inoperable or altered odometers
• Damage caused by aftermarket parts
• Cosmetic damages, including chipped or scratched paint
• Routine maintenance
• Normal wear and tear
• Salvage and total-loss vehicles
• Expenses from losing the use of your car (including lost wages and other expenses)

Preexisting conditions are generally excluded from coverage. This means buying an extended warranty on a new car gives you greater overall protection than on a used vehicle, when your vehicle may have developed ongoing issues or concerns that wouldn’t be covered by an aftermarket provider.

How much does an extended warranty cost on a new car?

The cost of an extended car warranty depends on the following:

• Age, make and model of the car
• Mileage
• Extended auto warranty provider
• Type of extended warranty
• Term length of the extended warranty
• Policy deductible
• Optional add ons or additional surcharges (for example, for using your vehicle for commercial purposes)

Generally, extended auto warranties cost the least for new cars.

Our research found that the average extended auto warranty costs about $2,845 in total (or $108 per month), but that figure is inclusive of a wide range of cars — not just new vehicles. To get a better idea of the cost of coverage for a new car, I requested a quote from Endurance for a 2024 Toyota Camry with 100 miles. You can see the coverage and pricing options I was given in the image below.

The total cost for bumper-to-bumper coverage from Endurance for a new Toyota Camry would be about $2,463, or $382 less the average cost for all vehicles across multiple providers.

Of course, with some factory warranties, including the Toyota warranty, this means you would pay off your extended warranty plan before its coverage begins. However, that’s not an issue if you initially planned to keep your car for longer than the length of its factory warranty.

“If you know you're going to put a lot of miles on your car, and you know the factory warranty is going to run out fast, it can be sometimes cheaper to cover your car before you need to,” Long said.

“If you've got a 3-year/36,000-mile factory warranty, you're buying a new car today, [and] you know that you're going to be through that 36,000 miles because you drive a lot in the first 12 to 18 months, that first 12 to 18 months is when to buy the policy,” she continued.

Long said that though you may pay for some overlapping coverage, “at the end of the day, you're saving a lot of money on that policy because you didn't wait until it was out of factory to buy it.”

Long warned against waiting too long, too. Buying an extended auto warranty is “kind of like getting life insurance when you're young and just keeping the policy,” she said.

“If you try to do it when you're already older, it's going to cost you more money. It's the same concept with the car. The older and more broken down the car is, the more miles it has on it, the higher the actuarial tables are around how much it's going to cost the provider to give you that policy, so it's not as economical then.”

Though the cost of an extended warranty may seem significant, the majority of respondents to our survey — 76% — were satisfied or very satisfied with the cost of their plans:

That said, there are certain other costs of coverage, too. Policies requiring a deductible before warranty repairs increase your out-of-pocket expenses. In other cases, your provider may only cover a portion of an unexpected repair or labor cost, which means you may have to cover the rest of an expensive repair yourself.

The older and more broken down the car is, the more miles it has on it, the higher the actuarial tables are around how much it's going to cost the provider to give you that policy, so it's not as economical then.

Kathleen Long

How do you buy an extended warranty for a new car?

Some dealers or lenders offer extended warranty coverage — either a manufacturer’s extended warranty or aftermarket policy — during the car-buying process. In these situations, you may be able to pay the total cost upfront, roll the cost into your car loan (which would increase your total interest paid) or pay for the policy on a monthly basis.

Third-party extended warranties are typically paid for upfront or over time for the duration of the plan’s term. Some companies, such as CarShield, offer unlimited terms, which means you maintain coverage for as long as you pay a monthly fee similar to a subscription service.

Most aftermarket warranty providers allow you to request quotes through online tools, though some only sell policies through dealerships. Some companies, such as Endurance, immediately present you with a quote before prompting you to move further through the process by adding the plan to a cart, reviewing your choices and paying for coverage.

Other providers require that you get in contact via phone for a personalized quote. Generally, we found that most representatives we contacted by phone were friendly, helpful and open to haggling to secure discounts or a lower price, with only a few agents acting pushy.

Can you transfer an extended warranty?

When you buy an extended warranty for a new or used car, there’s a chance you may not keep your car for the duration of your coverage. For example, you may want to sell your sports car if you need a vehicle with more space to accommodate a growing family.

Fortunately, most extended warranties are transferable to private buyers. Consult your warranty or a sample contract for the specific terms, which may require you to pay a transfer fee or contact customer service to acknowledge the transfer to a new car owner.

As an added bonus, an extended warranty may increase the sales value of your car, especially if it’s out of its factory warranty period. Though the new buyer would have to take over paying for the extended warranty if it’s not already paid off, they would also have the peace of mind that they’re protected against defects and breakdowns.

What you should know about extended warranties for new cars

Extended auto warranties are valuable tools for reducing your out-of-pocket car repair expenses, but they’re not always worth it for new cars. Before you purchase coverage, keep the following considerations in mind.

Final take: Extended car warranties are worth it if you plan to keep your new car long-term

If you intend to drive your vehicle for years beyond its factory warranty, buying an extended warranty for your new car is generally the most affordable option for long-term protection. Because the cost of coverage is based partly on your car’s age and mileage, you’ll secure the best rate before you start adding to the odometer.

On the flip side, if you expect to trade in your car before or shortly after its factory warranty expires — or the vehicle is one of the most reliable makes and models available — it makes sense to avoid purchasing aftermarket coverage.

Fortunately, you can always shop around to compare quotes from our top providers to learn what extended warranty coverage costs for a new or used car.