How to Get the Best Price on an Extended Car Warranty

The sales pitch for an extended warranty on a car is often a compelling one. "You plan on keeping the car for a while, right?" the finance and insurance manager asks you. "Why not lock in the price of parts and service now rather than pay more later?"

It's something to consider before heading out to the dealership to finalize a car purchase. But how do you get the best price on an extended warranty? If you choose to buy an extended warranty, can you only buy it when you're buying the car? Here's what you need to know when you want an extended factory warranty but don't want to pay too much.

Negotiating an Extended Warranty

Dealers mark extended warranties up from the wholesale cost as they do with many products they sell. But this actually leaves you room for negotiation.

Begin by getting quotes from at least two sources. Call local dealerships, speak with the finance and insurance managers, and ask what they charge for the extended warranty that you're interested in buying. Dealers quote different prices, but once you have a few answers, you'll know roughly what the going rate is.

At this point, you can either take the lowest offer or venture into more advanced negotiations. If you decide to go the latter route, said Oren Weintraub, president of L.A. car concierge company Authority Auto, the most effective negotiating method is to get a realistic estimate of the dealer's cost of the warranty and then offer to pay $100-$200 over that. Weintraub negotiates warranties on behalf of his clients.

He describes how he does this in our article on the secrets of negotiating an extended warranty. The dealer will likely make a counteroffer. "A fair profit margin for dealers is between $200 and $500 over their cost," Weintraub said.

Here's another tip: When they're selling extended warranties with new cars, dealers often talk about the overall monthly payment for the deal, not the cost of the warranty itself. To know exactly what you'd be paying, ask for an itemized cost of everything involved in the vehicle purchase, including the specific cost of the extended warranty.

Advantages of a Factory Warranty

Extended vehicle warranties fall into two classes: manufacturer warranties (also known as factory warranties) and third-party warranties. Even though manufacturer warranties are generally more expensive, Edmunds recommends them over third-party warranties for several reasons:

• You get factory-trained technicians who use manufacturer-authorized parts to repair your car.
• You don't have to wait for repairs to start while the service department gets an authorization.
• You don't have to pay the money up front or file claims for reimbursement. Some third-party warranties don't require upfront payments either, but some do.
• If you sell the vehicle, factory extended warranties are often transferable to another owner.

To learn specifics about factory extended warranty coverage, go to the manufacturer's extended warranty site. Most of the major automakers are linked here. For those that aren't, contact a franchised dealership:

Acura
Audi
BMW
Buick/Cadillac/Chevrolet/GMC
Alfa Romeo/Chrysler/Dodge/Fiat/Jeep/Ram
Ford/Lincoln
Honda
Hyundai
Infiniti
Lexus
Mazda
Mercedes-Benz
Mini
Mitsubishi The Diamond Care Protection Plan is sold through Mitsubishi dealers and is administered by different companies based on the state in which you live.
Nissan
Smart There's minimal information on the Smart warranty website. Contact a Smart dealer for details.
Subaru
Tesla You can get extended warranties for the Tesla Model S and the Tesla Model X, but there's currently no extended warranty for the Model 3.
Toyota
Volkswagen
Volvo

Dealers can sell both factory and third-party warranties and will sometimes promote the third-party provider over their own brand's product. If the dealership says it doesn't offer the manufacturer's warranty, you can inquire at another dealership that sells the same brand. Most people buy plans through a dealership, but some carmakers also sell their extended warranties online.

Timing Your Purchase

Buying an extended warranty when you purchase your vehicle lets you include the cost of the warranty in the vehicle's financing. It takes away the sting of paying up front and allows you to roll it into your monthly car payment. A drawback is that you will pay interest over the course of the loan, so the warranty ends up being more expensive than if you'd paid for it all at once. Of course, if you can qualify for low-interest financing — or can get zero percent interest financing — you could have the best of both worlds.

You don't have to purchase an extended warranty when you are buying your new car. You can get an extended warranty any time before the standard factory warranty runs out, which gives you the extra time to save up and shop for the best price. Some dealerships might offer you what they characterize as zero percent financing on warranty alone, but there's typically a fee attached to the deal. So it's not quite free money.

But don't wait too long to buy the extended warranty. If you let the original warranty expire, the vehicle might not qualify for a factory extended warranty or your coverage might be limited. You still might be able to add the coverage even after the standard factory coverage expires, though this avenue can be far more expensive.

If you are purchasing a used vehicle that is out of warranty, however, you usually will need to buy the extended warranty on the day you purchase the car.

Picking Coverage and Deductibles

As with car insurance, you can choose extended warranty plans with different deductibles and levels of coverage. Extended warranties typically offer coverage tiers, and three or four are common. Generally, the first level pertains to the powertrain, while the next adds coverage for more components. The highest-level warranty provides comprehensive coverage, which includes electrical and infotainment systems that can be expensive to fix.

When you're comparing the levels of coverage, pay particular attention to what each one excludes. We recommend the higher level of coverage if you can afford it. This way you're less likely to be caught off guard by a repair that wasn't covered. 

Warranty deductibles can range from zero to about $250. When you're shopping, do the math to see whether a more expensive plan with a lower deductible might make more sense for you. It comes down to how much you want to pay up front and how many claims you might have during the warranty period, Weintraub said.

Let's say you opt for a warranty that's priced at $1,500 and charges a $250 deductible per claim. If you make six claims during the warranty period, you'll pay $1,500 in deductibles. That's $3,000 in overall warranty costs.

Or you could choose a higher upfront warranty cost of $1,850 and a lower $100 deductible per claim. If you make six claims, you'll pay $600 in deductibles. That's $2,450 in overall warranty costs.

Finally, if you are considering a third-party warranty company, be aware that some require owners to pay the repairs out of pocket and get reimbursement later.