When I was fresh out of college, I spent a ridiculous amount of money on an extended warranty for a digital camera. I was broke at the time and trying to protect what I saw as an investment in my fledgling journalism career.
It was a total waste of money. We used the camera for 6 years without a problem and I ended up abandoning it for newer technology.
Ever since then, I have sworn off extended warranties for most things.
But I still buy them for my vehicles. I’m sure some of you scoff at this – after all – most extended vehicle warranties run anywhere from $700 to $2,000 and the policies don’t cover as much as they should.
Paying for an extended warranty is a bit of a gamble. You may shell out the money and never take advantage of the warranty. Or, if you’re lucky (?), your vehicle will need a repair and it will be under warranty.
The first car we owned with an extended warranty on it was a Chevy Lumina. Just 15,000 miles shy of the end of the warranty period, the transmission went out. It was a $2,600 repair. Because we had purchased the extended warranty a few years earlier (at a cost of $1,300), we only had to pay a deductible of $100 to get our vehicle back on the road. By having the extended warranty, we saved $1,200.
When we bought our 2006 Chrysler Town & Country Minivan, we decided to extend the warranty, too. And it almost paid off for us again. Unfortunately, the air conditioner evaporator went out – a depressing 6 weeks after our extended warranty expired.
We learned that the repair would cost between $700 to $1,000. We also learned that it was possible to extend the extended warranty as long as it was done within 45 days of the previous contract ending. We had to make a decision. Make the repair and pay out of pocket and hope that nothing else on our aging minivan would break before we replace it. Or, pay another $700 to $1,200 to extend the warranty coverage out further. And we had exactly two days to decide.
So we took another gamble. We extended the warranty another 2 years at a cost of $900. The extended warranty covers everything from the engine and transmission to the air conditioner. Our repair ended up costing $739, which is less than what we paid for the extension. So, yes, I realize that we could have saved money by not extending the warranty. But I also know that it is a Chrysler. A 2006 Chrysler with 74,000 miles on it. I believe that our purchase of the extended warranty is a gamble that will most likely (unfortunately) pay off. All it takes is a fuel pump or a water pump to go out and I will have saved money.
Sometimes paying a little bit more can be worth the peace of mind. It was for us in this case.
Do you buy extended warranties for your vehicles? Why or why not?