I love audience questions. Here’s a good one:
What are your thoughts on the value of a lifetime powertrain warranty on a truck? The dealership offers a powertrain warranty for however long I own the truck.
It’s a great question with a super easy answer:
Now let’s figure out why.
Self Insure Automobile Repairs to Save Money
Like many other posts I’ve written about insurance, you want to self-insure whenever possible. When it comes to an automobile extended warranty, self-insurance means that:
if you have enough money to cover any unexpected repair bills yourself, you should cover them yourself
You will save money by not paying for the warranty. You will play the odds (that are in your favor) for covering any costs yourself. Because the average cost of all repairs covered by the warranty will be less than it costs to buy the extended warranty for your car or truck.
Third Party Extended Warranties May Leave You Hanging
But, if you do not have sufficient savings (up to six months of living expenses saved in cash) to cover the costs yourself, then you should purchase a manufacturer warranty.
Again, do not purchase a non-manufacturer warranty (i.e. an extended warranty from a dealer or anyone else). Consumer expert Clark Howard often shares on his radio show that third-party warranties aren’t worth the paper they’re written on. This is because the warranty’s issuer can simply choose not to honor the warranty. This could be, in part, because of the multitude of loopholes embedded into a typical warranty contract, including:
• No clear distinction between “wear and tear” (which is not covered under the extended warranty contact) and “mechanical breakdown or failure” (which is covered under the extended warranty contact).
• Requirement for repairs to be authorized by an “administrator,” which is appointed by the dealership themselves!
But, contact stipulations aside, allow me to share a personal story to drive this point home:
My first new car was a Nissan Sentra. And knowing absolutely nothing about money at the time, I shelled out well over a thousand dollars ($1,000) for an extended warranty sold by the dealer. When I had an issue with the car, the repair wasn’t covered by the warranty. That’s $1,500 down the drain. Flush!
If you’re still not sure if an extended warranty for your car is right for you, check out this chart below: