The right extended warranty will protect your investment and save you money. Let’s face it, warranty companies wouldn’t be in business unless they did save people money, and it is in the best interest of the warranty company or warranty agent to select the best coverage that meets your particular needs and vehicle.
Choosing the right auto warranty depends on the make, model, age, and mileage of your vehicle, how many miles you drive a year, and how long you want to keep your vehicle.
The first thing you need to do is determine how many miles you drive a year, The average driver will put about 12,000 miles per year on their vehicle. This is the base line for determining the coverage you will need. For example, if you drive 12,000 per year and want to protect your vehicle for five years you will need a minimum of 60,000 miles of coverage. If you are only going to keep your vehicle for three years then you would need a minimum of 36,000 miles of coverage.
If you are leasing a brand new vehicle right off the showroom floor forget about purchasing an extended warranty. The factory warranty will give you enough coverage during the term of the lease and you won’t be saving any money.
If your lease is for longer than the factory bumper to bumper coverage you are responsible for any repairs once the factory coverage expires. For example, your lease is for 4 years and the factory bumper to bumper coverage is for 3 years. In this case, you would want to purchase a plan to carry bumper to bumper coverage through the full term of the lease.
If you are going to purchase the vehicle at the end of the lease, consider a wrap program or a bumper to bumper. You will save money if you buy it before the vehicle reaches 12,000 miles but you should buy it before the factory bumper to bumper coverage expires.
Newer Low Mileage Vehicles - Up to 50,000 or 60,000 Miles
The best value is to purchase a wrap program or bumper to bumper plan before the vehicle reaches 12,000 miles. However, you can purchase a bumper to bumper policy at any time up to around 60,000 miles.
The less mileage a vehicle has, the less expensive the coverage is. For example, a 7 year 100,000 mile bumper to bumper plan on a new Toyota may cost $1,800 . When it reaches 36,000 miles you wouldn’t qualify for a 7 year plan and a 5 year 100,000 mile plan may cost $2,500. At 50,000 miles a 5 year 100,000 mile plan may be $3,000. Remember, the coverage is until you reach 100,000 miles on the your odometer. If you paid $1,800, $2,500 or $3,000 it’s the exact same 100,000 miles on your odometer. It’s always better to buy it sooner than later.
Mid Mileage or Older Vehicles - Between 50,000 to 100,000 Miles
This is where a stated component policy is best suited. You will get an extremely good level of coverage for your major mechanical and electrical systems at a reasonable price. Typically, this includes the engine, transmission and drive axle, radiator and engine cooling system, fuel system, brakes, steering, suspension and air conditioner.
Remember, if your vehicle has 75,000 miles and you drive 15,000 miles a year and you want to keep it for another three years look for at a plan that will cover you up to 120,000 miles.
The more miles you have the more coverage will cost and your choices for length of coverage will be limited. For example, if you have 70,000 miles you will qualify for 5 years of coverage. If you have 90,000 miles you may only qualify for 3 years of stated component coverage. If you are pushing 100,000 miles a powertrain policy may be an inexpensive option.
High Mileage Vehicles – Over 100,000 Miles
With over 100,000 miles you would be looking at a powertrain plan. This is coverage for the big ticket items like your engine, transmission and drive axle and these typically exceed the original factory powertrain coverage from the manufacturer. A powertrain plan will give you more years of driving and more value out of your vehicle
Here is where it mainly depends on how long you want to keep your vehicle. Your choices would run from 3 years or an additional 36,000 miles up to 5 years or 100,000 additional miles. Some powertrain plans will include the air conditioner for a small fee.
Additional Reading: Where to Find the Best Deals