3. Do you know what's covered?
An extended warranty isn't all-encompassing. Many wear-and-tear parts — items that will eventually break or wear out — are not covered by most vehicle extended warranties.
To complicate things more, many extended warranties come in coverage tiers — silver, gold and platinum, for example — each with its own price and level of coverage. Take the time to read the fine print to determine what is and isn't covered.
You must also determine who will front the cost for the repair bill. Are the repairs fully covered? Do you have to pay a small deductible? Or do you have to pay out of pocket for the repairs and get reimbursed later?
Finally, can you take the vehicle to any repair shop? Some third-party car warranty providers limit the repairs to only the dealership or repair shop specified in the contract.
4. What's your history with repair costs?
Have other cars you've owned had the kinds of problems that would have been covered by a warranty? If you are considering a road-hazard tire warranty, for example, think about how many times you've had a flat tire. If there is a lot of debris on the roads in your area or if you've had several flat tires in a short span of time, a road-hazard warranty may be worth looking into. But if you can't remember the last time you had a flat, you might not need the coverage.
You also can add up how much you have spent on out-of-warranty repairs in the past and compare the total to the warranty's price. For example, if you've paid $500 for repairs that occurred out of warranty, weigh that against the cost of the extended warranty.
You're never going to have the same repair history in any two vehicles, of course. But if you are buying a vehicle from the same carmaker, it can give you a rough idea of what to expect.
5. Do you really need this warranty?
Some F&I managers can make you feel that saying no to the extended warranty is like playing Russian roulette with your vehicle. You never know when that costly repair bullet might strike. But new cars are more reliable than ever. And the data seems to indicate that most people might not need an extended warranty.
According to the most recent J.D. Power study, overall vehicle dependability is on the upswing, improving in 2018 for the first time since 2013.
If you still want an extra measure of security, you can self-insure. Financial guru Dave Ramsey suggests setting aside half of what you would pay for a warranty and using that money to handle any car repairs that might come up.
No matter what advice comes their way, some people simply aren't willing to take chances or prefer the convenience of an extended warranty. They're more comfortable knowing that any major repairs will be taken care of. There's nothing wrong with that. If you're a belt-and-suspenders person, just make sure you ask the right questions before you buy an extended warranty.