Extended Warranties: Worth The Money?

I’m generally of the opinion that extended warranties are not worth the cost, unless your name is Doug and you deal in used Range Rovers or Astons. When I buy a TV or an appliance (or seemingly any damn thing these days) I reflexively refuse the extended warranty/protection plan, and that’s worked out pretty good for me so far. I also usually do not buy them for my cars, but a few years ago, I made an exception.

Image Credit: Doug DeMuro
Image Credit: Doug DeMuro

I was buying a used BMW with some existing factory warranty remaining, but not much, and this particular BMW came with an ///M badge — much like Josh’s new ride — which might as well stand for muy costosa reparación. To add fuel to the fire, I’d caught a bad AC evaporator soon after I bought it and had it fixed under warranty, a job that involved removing the entire dash and would have cost me a few grand. So, I took to the task of finding a warranty to cover my ass for the next few years.

Any research done on extended warranties results in many, many stories of denied claims and frustrated customers, but there are a few of these companies that actually seem to be trustworthy. In the end, I narrowed it down to a couple options, Fidelity and EasyCare, and ended up choosing EasyCare. (Just a note here: if you have access to USAA’s warranties because of your own, or a relative’s, military service, they seem to be some of the best in the business.) For EasyCare TotalCare — their top of the line coverage — on my car, for 3 years and up to 85k total miles with a high $500 deductible, I spent around $2500. I was really just looking for catastrophic coverage, and liked the idea of a $500 bill if something went really wrong compared to a $5000 bill. Just for reference, a replacement engine from the factory for my car is rumored to be around twenty grand before labor, and that was not a bill I wanted to ever see.

Image Credit: rioyellows2k
Image Credit: rioyellows2k

At the beginning, I was happy with my purchase, and was confident that I’d made the right choice. The warranty definitely made me sleep better at night, but as time went on, I wondered more and more if it had been a good decision. After all, I could have just put that cash into an emergency fund for repairs instead. I did end up having a couple of small claims, both related to tire damage, and both quickly covered, to EasyCare’s credit. The only other issue I had with the car over the past 3 years was a sensor that went bad, which just cost me a couple hundred dollars out of pocket.

With my warranty’s expiration coming up in a just a few days, I took my car to the dealer one last time for a thorough inspection, to make sure there was no issue that hadn’t yet presented itself to me. I got the car back with a clean bill of health, knowing then that I’d spent around $2000 on nothing more than peace of mind.

Now you can say that that’s just $50 dollars per month for protection against a much bigger bill, but that’s also two grand that I didn’t spend on track days or performance modifications instead. In hindsight, would I have spent the money? Of course not. If I buy a similarly complex car in the future, will I buy another extended warranty? I might be less likely to, but I wouldn’t be that surprised if I do anyway. Peace of mind is a valuable thing, after all.

Image Credit: David Lange
Image Credit: David Lange