An Extended Car Warranty Is Probably Not Worth The Cost

In December 2016, I purchased a 2015 Range Rover Sport with 10,800 miles. At the time, I had been driving a Honda Fit but sought a larger vehicle as my wife was expecting in early 2017.

During the purchase, the option to acquire an extended car warranty was presented, offering coverage for seven years or up to 100,000 miles, whichever came first. The cost for the extended warranty without a deductible was $4,500, while opting for a $1,000 deductible reduced the cost to $2,500.

I chose not to invest in the extended car warranty as the vehicle had only accrued 10,800 miles and was still under the original manufacturer's warranty, providing coverage for four years or up to 50,000 miles until July 2019. Now that the car will be nine years old in July 2024, let's review the maintenance costs incurred.

The Range Rover Sport serves as a good case study, particularly due to Land Rover's consistently low reliability ratings. Given these ratings, an extended warranty would potentially hold more value in light of the brand's historical reliability challenges.

How Much I Spent Maintaining My Used Range Rover Sport

In late 2019, I incurred a $700 expense to replace my fan, an unfortunate cost that stemmed from a subtle clicking sound I had noticed just before the original warranty expired. It took several months for the clicking to intensify, prompting me to have the car inspected. This was my first out-of-pocket car expense.

In June 2023, I faced another repair, spending $1,200 to replace a leaking water pump. The service also involved a flush of my coolant system. Notably, water pump issues are a prevalent concern for European cars.

A crucial takeaway from this experience is the importance of using the correct type of coolant during replacement. It's essential to choose either the orange or green coolant and avoid mixing the two, as their combination triggers a chemical reaction leading to coolant congealing.

replaced water pump for $1,200
Changed the water pump for $1,200

On January 11, 2024, I had to spend $1,050 to replace my vacuum pump and a PCV valve after my check engine light came on. Initially planning for a routine $212 oil change (was $140 last year!), this unexpected expense was disappointing. But it's essential to include it for a more accurate and balanced representation of recent car maintenance costs.

PCV valve cracked and needed replacing
$150 to replace a cracked PCV valve
$900 to replace vacuum pump when considering an extended warranty
$900 to replace vacuum pump

Total maintenance expenses, excluding oil changes, tires, and brakes: $2,950. $2,950 is after seven years and two months of ownership. The car has about 50,000 miles.

Reasonable Maintenance Expenses

To me $2,950 in maintenance expenses seems quite reasonable after such a period of time and 40,000 miles. After replacing the water pump, vacuum pump, and PCV value, these should hopefully hold up for another 40,000 – 50,000 miles.

There's also a good chance this could be the last of my maintenance expenses for at least two years, bringing the potential 10-year maintenance cost to $2,950. Or, this could be the start of a lot more maintenance expenses to come. Let's hope it's the former.

If I were to include the cost of changing tires, brake pads, brake rotors, and oil since ownership, I need to add another ~$3,800. A set of four new 22” tires cost about $2,000!

Comparing Maintenance Cost To Extended Warranty Cost

$2,950 in maintenance cost is cheaper than a $4,500 warranty cost with $0 deductible.

$2,950 in maintenance cost is also cheaper than the $2,500 warrant cost with a $1,000 deductible.

The crucial point is that both extended warranties would have expired at the seven-year mark, in July 2022. There might have been an opportunity to address the water pump issue, as it occurred in June 2022. However, the replacement of the vacuum pump and PCV valve for $1,050 occurred in January 2024.

In simpler terms, if I had opted for the no-deductible warranty, I would have paid $4,500 plus $1,050, totaling $5,550 in maintenance and warranty costs. Alternatively, with the $1,000 deductible warranty, the expenses would include $2,500, $700 for the fan, $1,000 deductible for the water pump, and $1,050 for the vacuum pump, amounting to a total of $5,250.

Inconvenience Factor Of Fixing The Car At The Dealer

The decision not to opt for the extended warranty also stems from the inconvenience associated with having the car repaired at the Land Rover dealer. The repair shop is not in close proximity to my residence, making it impractical for me. If I were to take the car to the Land Rover dealer, I'd need to rely on Uber for transportation to and from the shop.

I prefer the more convenient option of having my car repaired at a more affordable non-Land Rover dealer that happens to be within walking distance from my home. This is precisely what I did for my last two repairs.

I dropped off my car at the repair shop after driving my son to school, then walked the mile back home. When it was time to retrieve the car, I walked to the repair shop and picked up my son from school. This not only resulted in significant time savings but also allowed me to avoid the additional expense of using Uber.

Get The Extended Warranty Or No?

Based on my 20-year experience owning two used Land Rovers (LRD2 and RRS), I've concluded that purchasing an extended warranty is not the optimal financial decision.

A more effective approach involves conducting a thorough inspection before buying the car, reviewing all the maintenance records, and securing an affordable and reliable mechanic.

While the peace of mind provided by an extended warranty is valuable, especially in major incidents like an engine failure, such occurrences are relatively rare. The majority of issues are typically associated with normal wear and tear, which can be adequately budgeted for.

For individuals, like myself, who prefer to keep their cars for 10 years or more, an extended warranty might seem appealing. However, extended warranties rarely extend beyond 10 years. The finance experts in the extended warranty department have calculated the optimum duration and mileage to cover the car while maximizing profits.

Therefore, I would forego an extended warranty.

The likely worst-case scenario is breaking even and paying out of pocket what the extended warranty would have cost. More likely, you will end up spending less on out-of-pocket maintenance than the cost of the extended warranty. That said, a minority of people will get unlucky and end up paying way more out of pocket than if they got the extended warranty.

Remember, the car dealers are offering extended warranties because they are profitable. If they weren't profitable, they wouldn't offer them or they'd charge a price high enough to make them profitable.

Cost of auto insurance prices and Auto maintenance & repair from 2014 to 2024, 10-yera inflation

When To Sell The Car

As my car approaches its ninth year in July 2024, the idea of purchasing another vehicle within the next three years is becoming increasingly appealing. I'm mainly looking to drive a safe and fun car to transport my family around.

However, now that I've spent another $1,050 on maintenance, these parts should last another 40,000+ miles at least. With my average driving distance of about 6,000 miles a year, my car should last for another five years without any major maintenance expenses. However, as pointed out by my auto mechanic, wear and tear on a car is not solely determined by mileage but is also influenced by time.

Considering these factors, my plan is likely to involve purchasing a new car in 2027, when my current vehicle reaches 12 years old. This decision allows me to make the most of the money spent on repairs in 2023 and 2024 for an additional three years. Moreover, the aim is to sell the car before facing another substantial expense exceeding $1,000.

It's time to start saving up in my car fund! When I buy a new one, I'll surely follow my 1/10th rule to minimize financial stress. I hope you do too.

Reader Questions

Do you think an extended car warranty is worth it? If so, what type of coverage did you get and how much did it cost? Has your extended warranty ever covered anything extremely expensive?

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47 thoughts on “An Extended Car Warranty Is Probably Not Worth The Cost”

  1. I remember considering an extended warranty on my partner’s Ford Fiesta when the original warranty was expiring but we decided against it. Much like in your case the cost of repairs has been less than the cost of the extended warranty. I believe it is much better to simply choose a known reliable brand and model (some models from good brands have been known to have problems) and not worry about it (I was not with my partner when she purchased a Ford!).

    1. I always buy extended warranty for my vehicle. Honda sells it for $1300 and it will add five more years to the original three year warranty from Honda.

  2. I would say it depends on the number of miles you expect to go through during the warranty period. I had a vehicle I knew would far exceed regular mileage and decided to take the extended warranty… it paid off.

  3. Something to consider if you have a longer repair is that the warranty typically has rental car coverage in it and sometimes that’s a huge factor when you have repairs. I’ve had a couple 20 day repairs, not uncommon with part challenges these days, and having the warranty pay for the rental also adds up.

      1. The touch screen went out and the part chain was behind, ended up being a while until they could get the one in stock given the current environment.

          1. Always fun, they have to because they are liable, if it’s your own insurance you only have the policy stated amount. Generally 30 days, but dependent on policy. Personal rental these days is expensive and can add up quick. I work in the insurance industry and we’re starting to see rental companies not honor insurance rates when people don’t carry rental coverages and I’m assuming that transcends to warranties as well

  4. Sam, I think a dimension I didn’t see in your analysis is how little you drive per year – far less than the typical 12k miles per year. In your case, the extended warranty would have run out due to elapsed time and not mileage. Had you driven the car 12k miles per year, you’d be closer to 100k miles by now, and undoubtedly would have incurred far more issues to really test whether the extended warranty makes sense or not. Another dimension to look at is if you’re financing, then the total extended warranty cost should also include the interest. I did get an extended warranty on two lightly used vehicles just more to have some peace of mind. Probably not the best financial decision, but we do put a ton of miles on our cars and so I’d rather not have to incur a massive expense beyond the $100 deductible should problems arise.

    1. Yes, I assumed my extended warranty would run out in terms of time before I hit the mileage.

      I don’t need peace of mind for my car because no matter the expense, I can likely afford it from cash flow. It also helps that I have a trustworthy mechanic.

  5. Bill Bourlet

    Number one cost of a vehicle is deprecation. Maintenance cost for an older vehicle are minor in comparison to the depreciation. To get the best value out of a vehicle buy a new one with warranty on it and keep it for 10 years minimum or longer so long as it keeps running. Till a maintenance issue comes up that makes it prohibitive to repair. Like a new engine or transmission. After 10 years it has become worthless and all repairs are worthwhile. Till you get to a major one. I rented, for the day ,an old Honda Civic that had 290,000 kilometres on it. It ran fine. I laughed at the rental guy when I returned it as asking how many kms do you keep the car till. He said 300,000. Then I give them away or sell them dirt cheap. Car ran fine and got me there and back. It was comfortable and worked fine.

  6. It’s just an insurance policy and you’ll never know at the time of purchase if it’s a good purchase or not. Generally I only purchase insurance as a means to prevent financial disaster and make deductibles as high as possible to reduce premium. You kinda had a similar post in regards to home insurance. I really don’t consider anything vehicle related that would cause me financial disaster. Replacing an engine for $10k or whatever would certainly sting, but not destroy my future. Add that to notoriously bad extended warranty companies, deductibles, having to fix at certain dealerships, totally not worth it. Just invest the money you would be otherwise spending on the warranty in the S&P 500.

  7. Range Rovers are a great status symbol, but they really aren’t that great of a car .Your not going to do any real off roading with a $100k SUV. Repairs on Range Rovers are also notoriously frequent and expensive. They are alluring, but so happy I didn’t end up buying a Range Rover… to each their own. They sure do look nice though!

    1. I don’t think about a RR as a status symbol at all. I just think they look good and drive great for an SUV.

      I do go up to Lake Tahoe during snowy winters. So a 4X4 is very important, otherwise, I need chains.

      What did you end up buying?

      1. 4×4 are the way to go no doubt. I ended up getting a Lexus GX 460 a few years ago. Tried and true built off Toyota Land Cruiser Prado. There is an entirely new GX model coming out this year.. looks pretty nice if you like a boxy SUV style.. Check it. New models will be twin turbo V6 though, so the everlasting V8 will be phased out..

  8. Back in Oct 2023 I traded in my ’16 Jeep Grand Cherokee v8. After 7 years of ownership and 97k miles I can wholeheartedly say that was the best car I ever owned (and probably should’ve kept it). I only had one problem with it three weeks after I bought it – a leak in the air suspension line which cause the rear end to bottom out. After a week in the shop it was fixed under warranty and never happened again.

    After that, all I had to do to the car was replace the tires once and regular oil changes. After 97,000 miles I never had to do ONE brake job. Front or rear! Hemi v8 is a total workhorse engine too. When I took it in for a diagnostic before a long road trip to Coeur D’Alene, the mechanics couldn’t find a single thing to replace or repair. I asked if this is common and they said only with the v8’s.

    As I don’t like to keep cars past 100k miles, I stayed American and ended up with a new 2023 Cadillac Escalade. Hoping for the same results. So far the car has been phenomenal. Great ride, super comfortable, robust cabin features, 420hp engine. I test drove a RR, Cayenne S, and Tahoe RST. At the time, RR was charging $60k over sticker for the new body style. Cayenne was too small (but fun!), Tahoe RST was nice but the interior of the Escalade was just much nicer.

    I ended up paying off the Escalade two weeks ago and will likely keep it 10yrs or 100k miles, whichever comes first. Unless it becomes an electrical nightmare. I’ve got my sights set on a 911 GTS after I make a home purchase. BTW, don’t forget to factor in insurance. The Escalade is $290/mo and I’m 50. Ridiculous

    1. RR was selling for $60K over sticker? That’s nuts! Maybe the salesman who said they are “only charging $10K over sticker” right now really was providing a good deal lol.

      Enjoy the Escalade!

      1. Yup. Ventura Land Rover. I test drove thinking I was gonna negotiate off sticker and the salesguy says, “oh no that’s the wrong sticker. Here is the correct price”. I just laughed and I’m sure you can imagine how the conversation went after that.

  9. Buy a new Toyota Grand Hylander hybrid and you are set for a minimum of five years. Follow The Car Care Nut on YouTube and he has a video on the vehicle as well. He is a Toyota Master Trained Technician and has his own shop in the Chicago area. GLTU!

  10. Peter Campbell

    Hi Sam. Looks like you have a V6 Range Rover Sport. I would be prepared for more coolant related repairs. The Coolant Transfer Pipes and Rear Manifold are commonly replaced. Also, Air Suspension & suspension components wear out too. I would consider you lucky to spend only this amount with this mileage. I recommend an additional $3000 a year set aside for vehicle related expenses. This cash in addition to your fuel & insurance costs. Assuming you drive 15,000 a year.

  11. You use 2 data points from the same car and your own personal experience to make a general conclusion about warranties? I’m not a fan of warranties either for the basic reason that they must work in favor of the seller or they wouldn’t sell them! However, trying to base it off analytics on 2 data points on the same vehicle type is not really a scientific approach at all.

    I would simplify it to this: “since sellers only sell these to make a profit, it must be true that in aggregate, the expected value to the buyer of the warranty is negative”. This is the case for all insurances and warranties. On an EV basis they must not be a good value, but for a cashflow basis they could be, if you would struggle to incur a major expense then they essentially cap your total out of pocket.

    1. Yep, two datapoints over a 20 year period with the most unreliable brand. I’ve owned 7 used cars before these two cars as well and I just fixed the problems myself. I can include those as well.

      Feel free to share your experience fixing used cars and extended warranties.

      1. Ya man your data points here are pretty irrelevant when compared to the average male driver at 15k miles a year. In my opinion, there is no need for you to even read reliability ratings let alone buy extended warranties! Consider yourself blessed on this one and buy any car you want, forget the math and relax :). For the rest of us, rerun your analysis on your RR with 15k miles per year of stop-and-go LA traffic…it would be an interesting study. As for me, I’ve never bought an extended warranty for anything.. technology moves too fast and the good brands usually hold up to their rep.

        1. Sounds good. I didn’t realize I was that different from the average male driver as a male driver who drives every day.

          Feel free to share your experience. All experiences are relevant and welcome here. It’s a great way to learn!

          What care do you have and how much did you pay? What are the maintenance expenses so far?

  12. Wish you published this a few weeks earlier. I just purchased a 2024 RR LWB. My first Range Rover and given RR’s low reliability ratings got sucked in to purchasing the $4500 extended warranty up to 7 years or 100k miles on top of the new car warranty that lasts for 4 years or 70k miles. I expect to drive no more than 10k miles. But given its brand new car and after reading your article I think I wouldn’t need the extended warranty particularly as I also take good care of my car. Will check with dealer if I can cancel and get money back – it’s just been 5 weeks.

    Another question that keeps perplexing me is the need to have a PPF or ceramic coating on a car – is something like that worth it for a big car such as RR?

    1. Let me know how the newly redesigned RR is! It’s the most beautiful SUV on the road. Sounds like you got the $155,000+ version?

      4 year / 70K manufacture warranty ain’t bad. The 4 years will run out before you hit 70K for sure.

      No idea about the coating. You buy or lease?

      I can’t get myself to spend more than $80,000 on a car nowadays. I just can’t partly because I no longer view driving as a fun luxury. It’s more of a necessity and sometimes a pain in the butt because of maintenance issues. I just want a safe car to protect my family. Also, I’m finding that I just don’t want any attention. So I’m also looking at the new Honda CRV.

      1. I have been very thrifty in cars. Been driving a civic for last 10 years and purchased a model 3 6 years back (use to commute 80 miles a day only charge at office for free). After we had our first kid a couple years back needed a safe car. Was looking for something cheap but when I test drove the new RR Lwb it was unlike any other car that I had driven (have driven urus and bentayga). At $197k its expensive but its a surreal experience: 40+ speakers in the cabin, extremely quite inside the cabin even at 80+ miles, adaptive shock absorbers makes it feel you’re driving on cloud and so much room.

        I am very big in stealth so dint take it everywhere. Most of my friends/family will likely not know I have an RR.

        1. Wow, $197,000+! Nice. I guess driving the Civic helps balance it out.

          My fear is getting a nice car dented or dinged up as I drive around the city. Now that my car is in its 9th year, I don’t care and it’s great! It’s a free feeling.

          But if I were to drive a $200K car to the grocery store, I think I’d be stressed unless I found an end cap parking spot.

          But good to know the RR drives amazing!

          Can you share your income and/or occupation? I’m always curious to know what type of folks drive such nice cars. Thanks

    2. I believe you can get a refund on your service contract. Read the fine print. Or call the phone number on the contract for customer service.

  13. Matthew Drybred

    Yes, most extended warranties are a poor investment. I sold millions of dollars in vehicle services and rarely had customers with repair costs that exceeded the cost of the contract. Not to mention there are a lot of really bad extended warranty companies that use labor rates far below market and even fight to use used parts. So only buy a contract from the manufacturer, Fidelity, or Zurich.

    However, the markup on contracts is quite high and both sales and F&I get commissions on contracts, so the price of a contract is open to bargaining.

    I purchased an 8/150k Honda backed warranty on my 2020 Insight for $1500 because I was flush with cash at the time. Although, it does appear that Honda will win the bet as the vehicle now has 104k miles without issue, but with putting on less miles I have more time to allow entropy to do its thing.

    It sounds like you have found a trustworthy indy and that is really a great benefit. Dealerships have such high operating expenses and service often carries the brunt of absorption, so labor rates have been climbing.

    Side note: Doug DeMuro had his major breakout mainly due to his series covering his experience with buying a CarMax warranty for his Range Rover.

    Also, a “breaks” instead of “brakes” snuck in. ;-)

  14. I try to avoid buying extended warranties but have been buying them on my dishwashers. We use them heavily and they tend to wear quickly. They have paid off several times.

  15. Can confirm. Extended warranties are profitable for dealers AND the companies that back them. You can bet they know the likelihood of claims on every vehicle, so you are playing with about 25-30% odds.

    You’re better off spending some effort finding an honest, competent mechanic. They’re worth their weight in gold. Also, learn a little about your car so you understand when a recommended repair is actually necessary.

  16. To me maintenance costs and warranty packages are not comparable – apples to oranges. Warranties don’t typically cover maintenance costs like now brakes, tires, oil changes. YOu can typically buy a “mantainance package” to cover alot of that stuff that is part of regular checkups.

    With a warranty you are looking to cover the big ticket one-time items like transmission, significant electrical malfunction, maybe power steering issues, chassis issues. Those run 5-10k for repair each.

    Those items are rare but you aren’t buying a warranty due to cost analysis with maintenance. You are buying it for peace of mind. It is like insurance – you likely will never need it and the issuer is always making money overall, but can provide peace mind if I’m the 1 out of 1,000 houses that has a fire during my lifetime,

    1. You buy a maintenance package for brakes, tires, and oil changes? If so, how much does that cost you?

      Those things are pretty easy to calculate how much they cost and afford.

      I’m not sure what type of warranty you’re looking at, but the extended warranty I could’ve bought would’ve covered these issues like a fan, we can vacuum pump, water pump, etc.

  17. I admire being able to put 6k miles per year on a vehicle as I’m around 30k mark. Gotta love this Atlanta commute.

    1. That’s a lot of driving! Yeah, 7 years, 40,000 miles… so closer to 5,714/year. I dislike driving.. I really do. If I had to drive more than 12,000 miles a year I would get much grumpier.

      I’m thrilled my son’s school is moving about 10-12 minutes closer each way this year.

  18. You made the right call. I never buy extended warranty’s on anything and never regretted it. The only cars I was told by a friend who sell cars to buy a warranty is on high performance vehicles like a Porsche. Repairs are incredibly expensive, and are much more common than traditional cars and trucks. However if you can afford a 911 you should easily be able to afford the maintenance.

    1. Thanks. That is the irony. If you can afford X luxury car, you can afford Y maintenance. Which is also means you can afford the expensive extended warranty as well.

      Range Rovers definitely are more expensive to fix than Hondas. I had a Fit for three years. But I’m used to the RR costs as I bought w/in my 1/10th rule and can afford the expenses based on my cash flow so far.

      Nice that it’s a business expense too.

  19. Fascinating insights on the math comparison of both warranties and what you actually ended up spending out of pocket. I’ve never had an extended warranty on a car and also never opt to buy insurance protection on appliances and such. So far things have worked out ok for me and I’ve been able to invest the money I would have spent on extra coverage instead.

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