Is An Extended Car Warranty Worth It?


I know what you’re thinking: we’re hardly an objective source here at Protect My Car.

But today, I’m going to be completely objective. Together we’ll peel away all the secrets behind extended warranties and figure out if one is worth it for you.

Before we go any further, I’ll tell you in advance that there’s no one size fits all answer to this question. An extended warranty can be worth it for some, but not for others. We’ll figure out which of those camps you belong in, while also dispelling the notion that extended car warranty sellers are snake oil salesmen who are living large on your hard-earned cash.

Buckle up folks, we’re about to go deep.


What is an extended warranty?

Non-descriptive face thinking

An extended warranty is essentially mechanical breakdown insurance for your car’s most important parts.

So, let’s say you’re driving on the highway, and your transmission decides to fall out of your car. If you have an extended warranty, instead of worrying about the $2,000 it’s going to cost to repair, your extended warranty will step in and pay the repair shop, minus any deductible. You pay a monthly premium, and any covered repairs are paid for.

Sounds simple enough, right?

Most extended warranties cover just the basics. Your engine, transmission, and other drive train systems like the transfer case and possibly your exhaust. These are the most expensive parts of your car and having one of them quit on you can result in a hefty repair bill. A more premium policy will offer more coverage. Our supreme policy for instance not only covers expensive mechanical breakdowns, but also covers Hi-Tech electrical components such as EVP sensors, oil pressure sensors, and keyless entry locks.

There are two types of warranties, your manufacturers warranty, which comes with your car when you buy it, and an extended warranty.

Most manufacturer warranties expire at around 5 years / 60,000 miles. There are a few exceptions which we’ll talk about in a minute.

Extended warranties are meant to cover your vehicle after your manufacturer warranty expires, so you won’t be on the hook if your transmission decides to fall out.

You can get an extended warranty through your manufacturer at a relatively high mark up, or you can get one through a third-party company.


But Extended Warranties Are Scams, Right?


Text Sign saying Scam

Raise your hand if you’ve heard extended warranties called a scam.

I think we’ve all been there once. I used to get the letters all the time telling me that my car warranty was about to expire, and I always used to wonder where the hell my address got out. Hey, at least the notices made great kindling for the campfire. To this day no one has told me how in the heck the companies sending me mail knew my vehicle mileage.

I blame big brother. Someone really is always watching. But I digress.

There are two types of warranty companies: the legitimate ones, and then there’s everyone else.

This stereotype is so prevalent in our industry, we wrote an entire article about it. Luckily, most extended car warranty companies are completely legitimate enterprises that won’t steal your money like that Nigerian prince who keeps emailing you. If you’re worried, we always advise reading the reviews. Using consumer sites like BBB and Consumer Affairs should give you a good picture into who’s here to help you out.

After all, we’ve paid for over $16 million in repairs this year, and we’re hoping that number climbs even higher.


So, what’s the catch?


Man trying to catch butterflies with a net

The devil is in the details.

With extended warranties, the details are what you need to be looking at. Specifically, it’s what’s covered versus what’s not. A lot of warranties come up short in terms of what’s expected. Unfortunately, some people learn the hard way that not all extended warranty companies cover what they promise.

Ironically enough, the clutch pack, which is mentioned in this case, is not considered a covered repair – so in this case, the warranty company did fulfill its end of the bargain. As I’ll talk about in a minute, reading your policy will save you from this type of letdown.

For example, almost all extended warranties do not cover what we call “wear and tear” items. Wear and tear items are things like the brake pads, select sensors, and some wiring components that naturally wear out over time. The good news is these components are usually inexpensive.

We always recommend reading the policy you’re being offered from cover to cover! That way you’ll be able to see exactly what’s covered and what’s not prior to making your choice.

When determining if a policy is worth it, you should always start with what’s not covered. While you don’t need to get too in-depth with it, as I’ll show you in little bit, understanding what’s not covered is more important than understanding what’s covered. Each contract should have an exclusions section, where you’ll be able to see the complete list of what’s not covered.

Some companies are tricky. Contracts are deliberately structured to be difficult to read, with large information heavy paragraphs that’ll give even the most determined of us a headache.

That’s why I recommend taking the time to read the contract in full. Don’t feel pressured to sign right away. Only sign once you are sure you know what you’re buying! Don’t be afraid to ask questions either!

Now we’re getting somewhere.


Arguments for and against buying an extended warranty


Non descriptive cartoon people holding a conversation with one another.

Before we get into the meat of this analysis, I wanted to present the two sides to this debate.

I’ll start with one of my heroes, Dave Ramsey. If you don’t know him, Dave Ramsey is a financial guru who has helped thousands (including myself) pay off mountains of debt. Regardless of how you feel about us, Dave Ramsey’s worth checking out.

When it comes to extended warranties, Dave Ramsey is not a fan. To quote the man himself: “Extended warranties are a really horrible set of mathematics […] On average, you’ll pay about $1,500 on an extended warranty, and the average repair is $180. I don’t recommend buying extended warranties, ever. If you can’t afford a $200 repair on a car, then you can’t afford the car”

Dave does make a good argument. If a $200-dollar repair is something you can’t afford, you probably shouldn’t have a car. However, as we’ll see in a little bit, Dave Ramsey’s numbers aren’t entirely accurate.

On the other hand, we have Pat Goss, the master technician for MotorWeek and Goss’ Garage who is publicly in favor of extended warranties – calling them a great way to protect your car investment. Goss is a supporter of one of our competitors – but his statement still stands!

Objectively speaking though, even our policies are not right for everyone.


How we’re going to evaluate the numbers


Time to evaluate clock

Now, to give some context to these two arguments, we’re going to need to do the math.

Luckily, unlike Algebra 1 and 2, we’ll make this math a little bit more fun. Instead of factoring denominators, we’ll be saving money.

The first then we’ll need to do is evaluate the policy cost. To do that, I’m going to pretend that I want to get coverage for my 2013 Toyota Camry, one of the most driven cars in the entire world. Toyota Camrys are also very reliable, so this will be a great test of the value of an extended warranty.

We’ll also assume our Camry only has 50,000 miles on it and has been well maintained.

We’ve also previously established that the average car, according to a 2016 AAA study costs around $1,200 dollars a year to maintain – so in order to be worth it, we’ll need a policy that costs less at the minimum.

In order to figure out if an extended warranty is worth it, we’ll need to compare some of the biggest names in the industry. To do so, we’ve taken Protect My Car, and 3 of our competitors, who also offer fantastic warranty packages.

After spending nearly an hour getting quotes, here are the results for the most appropriate coverage for our Toyota Camry.


  Protect My Car Endurance Auto Warranty Carchex Car Shield
Cost Per Month $70.56/ month $89/month at promotional price



$122.00/ month otherwise

$198.56/ month $129.99/ month
Deductible $100 dollars $100 dollars $100 dollars $100 dollars
Additional Charges None $200-dollar admin fee, 5% due at signing (promotional), or 10% None None
Policy Term 4 Years / 60,000 Miles 5 years / 60,000 miles 6 years / 125,000 miles Month to month
Coverage Engine, Transmission, Drive Axle, Transfer Case, Brake Components, Steering, Electrical Components, Air Conditioning, Front and Rear Suspension, Fuel System, Cooling System Engine, Transmission, Drive Axle, Transfer Case, Brake Components, Steering, Electrical Components, Air Conditioning, Front and Rear Suspension, Fuel System, Cooling System Engine, Transmission, Drive Axle, Transfer Case, Brake Components, Steering, Electrical Components, Air Conditioning, Front and Rear Suspension, Fuel System, Cooling System Engine, Transmission, Axle Steering, AC Components, Steering, Electrical Components, Air Conditioning, Front and Rear Suspension, Fuel System, Cooling System
Major Exclusions Wear and tear items* Wear and tear items* Wear and tear items* Wear and tear items*


*wear and tear items: Brake pads, spark plugs, shocks, hoses, drive belts, seatbelts and airbags, brake rotors and drums


So why the difference in prices?


Non descriptive people in a line with one looking out

The short answer isn’t so obvious, but only Endurance and Protect My Car directly administrate your contract. What that means is if you have a claim, we’re the ones paying you.

Most extended warranty companies actually sell a policy belonging to another organization, usually a 3rd party finance company. This arrangement is less than ideal for many reasons. Before I can explain that though, we need to cover a few boring legal terms.

The first is an Obligor. In simple terms, an Obligor is the company responsible for creating a warranty program and then paying the repairs as set forth under the legal standards of the department of insurance.

The other is the contract administrator. The contract administrator is a company that’s licensed to administer insurance and pay out claims.

Simple enough, right?

The difference in cost is directly attributable to these two terms.

Take Car Shield for example, which isn’t the obligor for their own contracts. Now, they don’t want you to know this. But if you look at a sample policy of theirs, they never define who the Obligor is in their policy. Now that might not seem like a big deal at first, but it makes all the difference in terms of whether or not an extended warranty is worth it.

When someone buys a policy with Car Shield or any company in a similar situation, enough financial gymnastics occur that Simone Biles would be jealous.

The way it works, is Carshield pays a number of administrative fees to an extended warranty financing company (like Mepco), who then becomes the obligor for your contract.

In other words, if you ever make a claim on your policy, you’ll no longer be dealing with Car Shield or a similar company. You’ll be dealing with the financing company who is on taking the risk on the contract.

The Obligor in this case has no connection to you as a person, and because they are only getting a portion of what you’re paying for your policy, they can be far less lenient when it comes time to pay claims. This is were the knit-picking comes in to avoid paying out those claims.

You’ll also potentially have to deal with being transferred between the company selling you the policy, and the actual obligor who’ll be paying for your repairs.

You want to see where this could leave you? This can leave you with headaches and unnecessary spending.

Now that doesn’t mean the company is inherently bad – as Car Shield does have a track record of good reviews, as does every company listed here. The downside is because both Car Shield and the Obligor company both need to be paid, the cost increase is passed on to you.

Because Endurance and Protect My Car are both the obligor and contract administrator, the rates you’re going to get will be much cheaper than companies that aren’t the obligor, and the quotes I received bare this out.


Company 1st Year Contract Cost
Protect My Car $846.72
Endurance Auto Warranty $1068 with promotion, $1464 without, plus $200-dollar administrative fee due at signing.
Car Shield $1559.88
Carchex $2382.72


As you see, because we act as both the obligor and administrator to our own contracts, we can pass the savings on to you.

If you do decide that an extended warranty is right for you, make sure you read the sample contracts. You want to look for an extended warranty company that acts as the obligor and the administrator for its own contracts.

You’ll want to look in the definitions section of the contract and see that the obligor is clearly defined as the company offering the warranty.

Here’s an example of what to look for:


From Endurance’s Sample Contract:

“Administrator/Obligor: Endurance Dealer Services, LLC, 400 Skokie Blvd, Suite 105, Northbrook, IL 60062 – (877) 414- 0134. This is a Contract between You and the Administrator/Obligor. The Administrator/Obligor’s performance under this Contract is insured by Wesco Insurance Comp”


From Protect My Car’s Sample Contract:

“WE, US, OUR and SERVICE PROVIDER, OBLIGOR: means PROTECT MY CAR LLC, who is the party responsible to YOU for the benefits under this vehicle service CONTRACT.”


Dave Ramsey’s Argument Revisited

Going back to Dave Ramsey’s original math, we see that his numbers are quite accurate for the extended car warranty companies I reviewed.

Like I said, Dave Ramsey is a smart guy – and he’s right. Extended warranty companies who don’t act as their own Obligor and Administrator are not cost effective.

Fortunately, at Protect My Car, we aren’t in the same situation.

For our new Camry, our 1st year of coverage only costs around $850, which is around half of the number Dave is talking about.

Now I’ll let you be the judge of whether that proves or disproves what Dave is saying, but at least for our part, we think this compares nicely.


Is an extended warranty worth it on a new car?

Objectively speaking here, buying a 3rd party warranty on a new car isn’t worth it, with a caveat.

Your manufacturer’s warranty will be far cheaper than any 3rd party warranty, including our own. The only downside is most bumper to bumper policies only last around 3 years / 30,000 miles, while the powertrain coverage extends out to around 5 years / 60,000 miles.

The soonest you should consider looking at a 3rd party warranty is after your bumper to bumper coverage expires, if you have it.

That will again, usually be at the 3 year mark, 30,000 mile mark, although there are exceptions that run up to 60,000 miles, such as Hyundai’s excellent 5 year / 60,000 mile bumper to bumper warranty coverage.


Manufacturer Warranty Period (2018 or newer) Notes
Acura 6 years or 70,000 miles  
Audi 4 years or 50,000 miles No specific powertrain warranty, only new vehicle limited warranty.
BMW 4 years or 50,000 miles No specific powertrain warranty, only a new vehicle limited warranty.
Buick 6 years or 70,000 miles For all model years 2013 or newer.
Cadillac 6 years or 70,000 miles For all model years 2013 or newer.
Chevrolet 5 years or 60,000 miles  
Chrysler 5 years or 60,000 miles  
Dodge 5 years or 60,000 miles  
Ford 5 years or 60,000 miles  
GMC 5 years or 60,000 miles  
Honda 5 years or 60,000 miles  
Hyundai 10 years or 100,000 miles  
Infiniti 7 years or 70,000 miles  
Jaguar 5 years or 60,000 miles No specific powertrain warranty, only a new vehicle limited warranty.
Jeep 5 years or 60,000 miles  
Kia 10 years or 100,000 miles  
Lexus 6 years or 70,000 miles  
Mazda 5 years or 60,000 miles  
Mercedes-Benz 4 years or 50,000 miles No specific powertrain warranty, only a new vehicle limited warranty.
Mitsubishi 10 years or 100,000 miles  
Nissan 5 years or 60,000 miles  
Ram         5 years or 100,000 miles (diesel)



5 years or 60,000 miles (gas)

Subaru 5 years or 60,000 miles  
Suzuki 7 years or 100,000 miles  
Tesla 8 years or 100,000-125,000 miles No powertrain warranty, only a new vehicle limited warranty. Length of coverage depends on model purchased.
Toyota 6 years or 60,000 miles  
Volkswagen 6 years or 72,000 miles No powertrain warranty, only a new vehicle limited warranty
Volvo 4 years or 50,000 miles  


Back on the topic of caveats, a new car warranty is certainly worth it if you want additional coverage after your manufacturer bumper to bumper warranty expires.

As previously mentioned, most bumper to bumper policies end after 3 years. At this point, it’s questionable if your car is still new, but for now we’re going to just call it new.

You won’t judge me, right?

As I was saying, your manufacturer powertrain warranty will cover components associated with your engine and transmission, but other systems including brakes and electronics will be left without coverage.

This can include some potentially pricey repairs.

Up to you to decide how much coverage you’re comfortable with. Chances are, when your car is still new, you won’t be having too many mechanical issues.

It might make sense to wait a little bit longer, because your car will start to have more breakdowns as it ages.


Should I buy an extended warranty on a used car?

In my opinion, extended warranties really shine as your car starts to age. The cost of car ownership increases as your vehicle ages – which is something we’ve talked about before. AAA estimates that the average car costs around $9,000 dollars a year to own and operate a car (including insurance, fuel costs, etc…).

Personally, I winced a little when I saw that number. That’s only slightly less than the $12,144 dollars that the median US renter pays out per year. And these costs start to climb as your car ages. Older cars break down more often, it’s just a fact of life.

I always think back to the 2001 Honda Accord my sister owned when we were teenagers. Despite it’s billing as one of the most reliable cars ever, I saw that rust bucket sitting idle on the side of our street more than I saw it driving. I say that affectionately, because she did take good care of the car. It was just a lemon. In a 2-year period, everything you could imagine went out. The timing belt. The transmission. Struts. The head gasket.

Her Accord was supposed to be in the prime of its life at only ~125,000 miles.

She would have saved thousands of dollars if she had a warranty.

Of course, just because she had bad luck doesn’t mean you will too.

But, having the security of an extended warranty on your used car does feel good – because you know you’ll never pay more than your out of pocket maximum. That way, when something goes haywire, your bank account will stay covered.

Plus, used car extended warranties don’t have to be expensive. In fact, our average policy costs about $70 dollars a month, which I bet is less than your phone bill. For the record, my “cheap” phone bill only costs $81 a month.


So, who is an extended warranty really worth it for?

If you have a brand-new car that’s already covered under your factory warranty, you don’t really need an extended warranty. You have great coverage already built in.

Now once your factory warranty has expired, then you can start thinking about getting an extended warranty.

In our experience, there are 3 types of people who really benefit from having an extended warranty.


1) People that appreciate consistency and don’t like getting surprise bills

With an extended warranty, you know exactly what you’re going to pay every month for your warranty cost. You won’t have to set aside much for a rainy-day fund, as you’ll only be paying your deductible.

You never have to worry about a financial surprise, or even handling getting your car towed if it breaks down.

When you have a policy with us, all it takes is one call to our 24/7 road service hotline to get a tow to a mechanic of your choice.

After that, all you need to do is call our claims department, and they’ll handle the repairs with your mechanic.


2) If you drive a “high risk” type of vehicle like a Mercury or BMW

High risk vehicles either cost a lot to repair when they do break down, or they break down frequently and unexpectedly. In either case, having an extended warranty saves you from taking a financial beating.

We’ve talked about both BMW and Mercury before. BMW has one of the highest costs of ownership for any vehicle. With a staggering 10-year maintenance bill of nearly $18,000 dollars, BMW far outstrips its next closest competitor, Mercedes-Benz by nearly $4,000 dollars.

On the other hand, the since canceled Mercury brand has a history of being unreliable, with the entire line being up to 28x more likely to suffer from a fuel pump malfunction.

If you want to get a rough idea of if your car is a “high risk” take a look at the tables below.

Tables Courtesy of

Which Car Brands Cost the Most to Maintain?
Based on estimates of total car maintenance over 10 years
Rank Car Brand Cost
1 BMW $17,800
2 Mercedes-Benz $12,900
3 Cadillac $12,500
4 Volvo $12,500
5 Audi $12,400
6 Saturn $12,400
7 Mercury $12,000
8 Pontiac $11,800
9 Chrysler $10,600
10 Dodge $10,600
11 Acura $9,800
12 Infiniti $9,200
12 Ford $9,100
14 Kia $8,800
15 Land Rover $8,800
16 Chevrolet $8,800
17 Buick $8,600
18 Jeep $8,200
19 Subaru $8,200
20 Hyundai $8,200
21 GMC $7,800
22 Volkswagen $7,800
22 Nissan $7,600
24 Mazda $7,500
25 Mini $7,500
26 Mitsubishi $7,400
27 Honda $7,200
28 Lexus $7,000
29 Scion $6,400
20 Toyota $5,500


Unusually Common Car Issues
Based on issues found by YourMechanic and compared to the median car
Car Brand Car Issue Issue Frequency
Mercury Fuel pump replacement 28x
Chrysler Exhaust gas recirculation/EGR valve replacement 24x
Infiniti Camshaft position sensor replacement 21x
Cadillac Intake manifold gasket replacement 19x
Jaguar Check Engine Light is on inspection 19x
Pontiac Intake manifold gasket replacement 19x
Dodge Exhaust gas recirculation/EGR valve replacement 19x
Plymouth Not starting inspection 19x
Honda Valve clearance adjustment 18x
BMW Window regulator replacement 18x
Ford PCV valve hose replacement 18x
BMW Idler pulley replacement 18x
Chrysler Overheating inspection 17x
Saturn Wheel bearing replacement 17x
Oldsmobile Not starting inspection 17x
Mitsubishi Timing belt replacement 17x
BMW Drive belt tensioner replacement 16x
Chrysler Camshaft position sensor replacement 16x
Jaguar Battery service 16x
Cadillac Leaking coolant 16x
Jeep Crankshaft position sensor replacement 15x
Chrysler Engine mount replacement 15x
Mercedes-Benz Crankshaft position sensor 15x


3) If you don’t have the savings to absorb a potentially costly repair

If you’re living paycheck to paycheck, it might seem impossible to come up with the money needed to pay for an expensive auto repair.

A fairly common “emergency” fund is at least $2,000 dollars, but CNBC reported this summer that nearly 60% of hardworking Americans can’t cover an unexpected expense of more than $1,000 dollars without going into debt. It’s a situation I’ve found myself in at least twice in the last several years.

And it sucks.

You know it, and I know it.

Luckily, we’ve already written about alternative options for paying for car repairs if you ever find yourself with a hefty repair bill without the cash to pay for it.

If you have an extended warranty, you won’t be paying the out of pocket price for any covered repair. That means no worrying about what credit card has enough of the balance remaining, and no struggling to pull together cash. It also means no predatory payday loans and their outrageous interest rates.

Just one simple monthly payment and no worrying about catastrophic repairs.


Let’s Wrap Up

Extended warranties aren’t worth it for everyone. I wouldn’t want to lie and tell you different. If you can save a few thousand dollars, you’re probably better off not getting an extended warranty.

But if that’s not the case, having an extended warranty can be an excellent way to keep your car running so you can get to work or school.

And if you want an extended warranty, you should shop with the best.

Our rates are more than competitive as I’ve shown above, and our prices won’t be beaten.

But I have some even better news.

If you get a quote with us, we’ll work with you to negotiate you an even lower monthly payment. Remember when I said that our average monthly payment is about $70 dollars a month? 50% of our customers pay even less!

Are you going to be one of them? Click the button below to get a free quote.

About Protect My Car

Protect My Car is an extended auto warranty company. Our goal here at Protect My Car is to eliminate your worry of being financially responsible for an expensive mechanical breakdown. With our extended auto warranty, you don’t have to worry about being fully burdened with the cost of a covered repair.

Want to protect your vehicle?

Or give us a call at 1-800-253-2850