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Are Extended Car Warranties Worth it?

Are Extended Car Warranties Worth it?

The average price of a new car in Canada exceeded $40,000 in 2021, an all-time high. With new vehicles becoming more technologically advanced and expensive to repair, many drivers wonder if purchasing an extended auto warranty is a smart investment.

Extended warranties, also known as vehicle service contracts, provide repairs coverage beyond the manufacturer’s warranty period. Typically ranging from 1-7 years, they can provide peace of mind by limiting unexpected repair bills. However, they also come with a significant upfront cost, ranging from $1,000-$4,000 on average.

This guide examines the key pros and cons of extended warranties to help Canadian drivers decide if purchasing one is worth the cost for their situation.

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What is an Extended Warranty?

An extended warranty, sometimes called an extended service plan, is an optional add-on that extends your vehicle’s coverage for repairs and services beyond the factory warranty period. While the manufacturer’s warranty typically covers the first 3 years or 36,000 miles, whichever comes first, an extended warranty kicks in after that initial coverage expires.

Extended warranties are offered by the automaker, dealership, or third-party providers. They come in various lengths like 2 years/24,000 miles or up to 10 years/150,000 miles. The provider agrees to pay for the cost of covered repairs during the extended warranty period, protecting you from expensive surprise bills.

These plans vary widely in terms of what’s covered. Some are quite comprehensive, while others focus on the main components like the engine and transmission. Exclusions typically include normal wear and tear, maintenance, and damage from accidents. You’ll want to read the fine print closely.

The cost also ranges widely, from $1,000 up to $4,000 or more, depending on factors like the vehicle, coverage, and provider. Monthly payment plans are commonly available to spread out the cost over time.


When Are Extended Car Warranties Worth Considering?

While new cars come with comprehensive manufacturer warranties, once those expire after 3-5 years you’re on the hook for repairs. Extended warranties become more appealing for older, high mileage vehicles with no existing coverage.

Here are some situations when an extended warranty starts to make financial sense for Canadian drivers:


  • Used Cars Without Manufacturer Coverage: Once a used car hits 5-7 years old, the original warranty has long expired. Repair costs come straight out of your pocket. An extended plan can provide coverage against those expensive repair bills.
  • High Mileage Vehicles: Many manufacturer warranties expire at 60,000-100,000 km. For vehicles with over 150,000 km an extended warranty can provide continued peace of mind.
  • Specific Repair-Prone Models: Some brands and models like Mini Coopers, Land Rovers, and Chrysler vehicles are notorious for expensive repairs. Extended coverage provides a buffer against those costs.
  • Long-Term Ownership: If you plan to keep a vehicle more than 5 years and put significant mileage on it, the added protection of a warranty has extra value.


While every vehicle and driver’s needs are different, carefully weighing these factors can help determine if an extended car warranty makes sense for your situation.


What’s Typically Covered and Excluded

Extended car warranties kick in after the manufacturer’s defect warranty expires, usually 3 years or 36,000 miles for most new vehicles. During the extended warranty period, which can range from 1-7 years depending on the plan, the provider will pay for repairs and replacements due to mechanical breakdown of major components.

Typical inclusions are:


  • Engine
  • Transmission
  • Drive axle
  • Electrical system
  • Air conditioning
  • Steering
  • Brakes
  • Fuel system
  • Seals and gaskets


While extended warranties cover mechanical defects and failures, they do not cover maintenance or wear and tear items. Common exclusions are:


  • Oil changes
  • Fluids
  • Wiper blades
  • Brake pads
  • Tires
  • Batteries
  • Alignments
  • Damage from accidents


It’s important to read the fine print to understand exactly what is and isn’t included in any extended warranty plan before purchasing.


Cost Considerations

One of the biggest factors in deciding whether an extended warranty is worth it is the cost. Extended car warranties can range in price quite a bit depending on the vehicle, coverage and provider.

Typically, most extended warranties fall within the range of $1,000 to $4,000 in total cost. However, luxury vehicles or those with complex systems may have warranties exceeding $5,000 or more. The length of coverage also impacts cost – longer warranties that go out to 7 or 10 years will be more expensive. Older, high mileage cars will also be on the higher end for warranty costs.

When looking at cost, it’s important to consider the following:


  • Monthly payment plans are available from most providers, which spreads out the cost over time rather than one lump sum.
  • Compare the total warranty cost to your potential repair costs. Would you rather pay $2,000 now for peace of mind, or potentially pay thousands out of pocket for repairs later?
  • Newer vehicles under the factory warranty may only need a 1-2 year extended warranty, reducing costs.


Getting quotes from multiple providers is key before making any decisions. And don’t forget to negotiate on the pricing – most retailers will be willing to lower the price especially if you ask about discounts.


How to Choose the Best Extended Warranty

Choosing the right extended warranty involves careful comparison shopping. Not all providers offer the same coverage or have the same track record for customer service. Here are some tips for selecting the best extended car warranty:

Compare provider reputation and ratings. Look at reviews, complaints, and the company’s history. An established provider with a solid reputation is preferable.

Read the fine print closely. Make sure you understand exactly what is and isn’t covered. Watch for exclusions, deductibles, and limits.

Opt for exclusionary coverage over inclusionary coverage when possible. Exclusionary coverage is more comprehensive, covering everything except specific exclusions. Inclusionary covers only listed parts.

Consider factory/manufacturer warranties first. They often provide the best coverage and service since they come directly from the maker. Dealership warranties can also be a good option.

Understand claims procedures. Make sure the warranty has a smooth process for getting covered repairs approved and reimbursed.

Compare costs carefully. Prices can vary widely, so shop around for the best rate.

Look into cancellation/refund policy. Make sure you can get out of the warranty if you sell the car.


Alternatives to Traditional Warranties

While extended warranties provide peace of mind for major repair costs, there are some alternatives to consider that can also protect you from unexpected expenses down the road:


Used Car Lemon Laws

All Canadian provinces have some form of used car lemon law that provides recourse if you purchase a used vehicle that turns out to have significant mechanical defects. These laws vary by province but generally require the seller to provide compensation or take the vehicle back if major problems arise soon after purchase. This can provide some protection without needing to buy an extended warranty.


Save on Your Own

Another option is to take the monthly cost you would pay for an extended warranty and instead put it into a savings account designated for future car repairs. This DIY “warranty” ensures you’ll have funds set aside in case repairs are needed down the road. However, the main risk is not having enough saved up if multiple expensive issues occur at once.


Credit Card Purchase Protections

Many credit cards provide some level of extended warranty or purchase protection when you use them to buy something like a used car. You’ll want to check the fine print, but this benefit can add 60-90 days of coverage for certain repairs. While limited, it’s a perk you may already have if you used a card for the down payment or full purchase amount.


Factors in Final Decision: Is an Extended Car Warranty Worth It?

When deciding if an extended warranty is worth the investment, there are a few key factors to consider:


Potential Repair Costs

One of the biggest factors is weighing the potential repair costs you may face once the manufacturer’s warranty expires versus the cost of the extended warranty. An extended warranty only makes financial sense if the price is less than the expected repair costs you’d have to pay out-of-pocket without coverage.

Do some research on the typical repair costs for your make and model, especially once it hits higher mileage. Repairs like engine or transmission work can easily run $3,000-5,000. If your car is prone to issues, the warranty may pay for itself after just one or two major repairs.


Length of Ownership

If you only plan to own the vehicle for a few years, an extended warranty likely doesn’t make sense. Most warranties run for 3-7 years beyond the initial manufacturer’s coverage. So if you’ll own the car for 8 years or more, the additional protection is more worthwhile.


Peace of Mind

For some car owners, the peace of mind of having extended repair coverage makes the warranty worthwhile even if they never use it. Knowing you’re protected from unexpected bills gives comfort. Of course, this intangible benefit needs to be weighed against the tangible costs.

By looking at these three factors – potential repair costs, length of ownership, and peace of mind – you can analyze whether an extended warranty is a smart use of your money. The ultimate decision depends on your individual situation.


Case Study 1: Used Sedan, Out of Warranty

John owns a 5-year old Honda Accord with 120,000 km on it. The car was purchased used 2 years ago after the original factory warranty had expired. Recently, John started experiencing transmission issues with the Accord. After bringing it to his mechanic, he was quoted $4,500 to rebuild the transmission.

This repair bill came as an unwelcome surprise, as John was not expecting to make such a large investment in the used Accord. Had he purchased an extended warranty when he bought the car, it’s likely the transmission rebuild would have been fully covered given the age and mileage of the vehicle. In this case, an extended warranty that cost $2,000 at the time of purchase would have paid for itself with just this single major repair.

For John, an extended warranty would have protected him from this expensive transmission rebuild. While he was hoping to avoid any major issues with the used Honda, it just goes to show that once a vehicle is out of the original factory coverage, the risk of an expensive repair increases, even on typically reliable models. This case illustrates how an extended warranty can provide valuable peace of mind and financial protection after the manufacturer’s coverage expires.


Case Study 2: New SUV Owner Who Didn’t Need Extended Warranty

John recently purchased a brand new SUV from his local dealership. While going through the finance process, the salesperson strongly pushed him to purchase an extended warranty for $2,500 that would kick in after his 4 year/80,000 km factory coverage expired.

John decided to purchase the extended warranty for the peace of mind, even though he was already getting substantial coverage from the manufacturer. In the first few years of ownership, he didn’t have any major mechanical issues or repairs needed outside of regular maintenance.

By the time his factory warranty expired, John had only put on 60,000 km on the SUV. He drove it for 2 more years under the extended warranty but did not end up using it for any repairs before trading it in for a new vehicle.

In retrospect, John felt that the $2,500 spent on the extended warranty was wasted since he didn’t end up needing any major repairs during that coverage period. While it did provide some peace of mind, the money likely would have been better used elsewhere or saved for future repairs.


Who Should Consider an Extended Warranty?

There are certain situations where an extended warranty is more likely to provide value for the cost. Here are some of the drivers who may benefit most from this added protection:


Those with Used Vehicles

Once a vehicle transitions from new to used status, it loses the manufacturer’s original warranty coverage. This leaves the owner responsible for any repair costs out-of-pocket. For a used car with 50,000+ miles already on it, the risk of a major repair is higher. An extended warranty takes on this risk instead.


Owners of Unreliable Models

Some vehicles have a reputation for requiring more repairs and maintenance than others. Models from brands like Land Rover, Mini Cooper, and Fiat are notorious for issues. Luxury brands like BMW and Mercedes also tend to have higher repair bills. For unreliable models, a warranty can provide assurance.


Those Who Plan to Keep Their Vehicle Long Term

Drivers who keep their vehicles for many years or high mileages are more likely to encounter repair needs. The older a vehicle gets, the higher the chances of costly maintenance. An extended warranty matches the length of ownership, keeping such cars protected.


Who May Not Need an Extended Warranty

While extended warranties can provide valuable protection, there are some situations where they may not be the best investment:


New Vehicles Under Factory Warranty

Most new vehicles come with comprehensive factory warranties covering 3 years or 60,000 km. During this period, repairs for any defects are covered so an extended warranty is redundant. However, you can purchase an extended warranty later on, before the factory coverage expires.


Very Reliable Models

Certain brands and models have a strong reputation for reliability and low repair costs. Toyota and Honda vehicles are known for going hundreds of thousands of kms with minimal issues. With a reliable vehicle, you may save money by not buying a warranty and just covering any infrequent repairs yourself.


Short Ownership Periods

If you only plan on keeping a vehicle 2-3 years, an extended warranty likely won’t be worth it. Most issues arise later in a vehicle’s life so you may not face major repairs during a short ownership period. Of course, if buying used with no remaining factory coverage, a short-term warranty could still give useful protection.


Negotiation Tips for Extended Warranties

When purchasing an extended warranty, especially from a dealership, there is often room to negotiate on the price and get a better deal. Here are some tips to get the best price:


Don’t feel pressured to buy it right away. Salespeople may make it seem like you need to purchase the extended warranty on the spot, but you usually have more time. Don’t let them pressure you into a quick decision.


Shop around. Get quotes from various providers, including the manufacturer, dealerships, and third parties. This gives you leverage to negotiate and find the best rate.


Ask for discounts. See if there are any ways to lower the price, like multi-policy or loyalty discounts. There is often flexibility on extended warranty pricing.


Purchase at the end of negotiation. Add it on at the end once you’ve negotiated the best deal on the car itself. This way you maximize savings.


By using these negotiation tips, you can secure the coverage you want at a more affordable price point.



When deciding if an extended warranty is worth it for your vehicle, it’s important to weigh the pros and cons. The main pros of extended warranties are protection against unexpected repair bills and peace of mind knowing you’re covered. However, the cost can sometimes outweigh the benefits, especially if you don’t end up needing major repairs during the warranty period.

Ultimately, whether an extended auto warranty makes sense depends on factors like the repair history and reliability of your specific model, your intended length of ownership, and your personal tolerance for repair risk. For vehicles prone to issues or drivers wanting to avoid surprises, the extra investment can provide value. But for very reliable models or shorter ownership periods, you may come out ahead by saving the money instead.

While not right for everyone, extended warranties can provide budget-conscious drivers with peace of mind against expensive auto repairs after the standard warranty expires. By understanding your ownership plans, risk factors, and doing research to find reputable providers, you can make an informed decision about whether an extended protection plan is worth it for your situation.

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Questions About Extended Car Warranties

Extended car warranties can provide valuable protection in Canada for certain drivers. They cover repair costs after the manufacturer’s warranty expires. An extended warranty may make sense if you plan to keep your vehicle for a long time or drive a used car prone to expensive repairs. However, they come with extra costs, terms limits and exclusions to consider. Assess your budget, driving needs and risk tolerance.

In Canada, extended car warranties go beyond the manufacturer’s coverage to pay for certain parts replacements and repairs due to mechanical breakdown or failure. Coverage varies, but may include the engine, transmission, electrical components, climate control, steering, brakes and more. Exclusions often apply for maintenance items, wear parts and damage from accidents or misuse. Read policies carefully.

Buying an extended warranty can make sense for a used vehicle in Canada, especially if it has high mileage or a history of repair issues. The older and higher-mileage a car, the more likely you’ll need repairs down the road. Just be sure to shop around for a reputable provider and read the fine print on coverage terms and costs.

A standard 5 year extended car warranty in Canada covers repair costs due to mechanical breakdown or failure of major systems like the engine, transmission and drivetrain. Specific inclusions depend on your coverage level, which ranges from basic powertrain to bumper-to-bumper. An upgraded plan covers more parts for a higher price.

Quality can vary substantially among third party warranty providers in Canada. Reputable insurers like WarrantyWise offer strong coverage with transparent terms. Some smaller firms use fine print to deny claims. When choosing, look for a provider backed by an insurance company, check policy reviews and understand exclusions.

In Canada, extended car warranty costs range widely depending on your vehicle, coverage and deductible. Basic powertrain warranties may start around $1,500 total for 5 years. Bumper-to-bumper plans with a $100 deductible can cost $3,000 or more. Luxury vehicles also command higher premiums. Get quotes tailored your specific vehicle.

Common actions that can void your extended car warranty in Canada include letting maintenance lapse, using non-approved parts or fluids and making unauthorized modifications. Things like lifted suspensions, oversized tires and performance chips often invalidate mechanical breakdown policies. Read your contract to understand what voids coverage.

Some extended car warranty plans in Canada allow one-time transfers to a private party buyer if you sell the covered vehicle. However, transferring typically comes with fees, paperwork and potentially altered coverage. And not all providers permit transfers in the first place. Check your specific contract’s transferability policy before purchasing.

Factory extended warranties in Canada can offer value because they’re backed by automakers with a vested interest in quality repairs. Lexus, Volvo, Hyundai and Kia have excellent extended warranty options. Just beware overly restrictive terms and the potential markup through dealers. Third parties sometimes beat OEM pricing.

Top extended warranty providers in Canada include WarrantyWise, Lubrico Warranty, First Canadian Protection Plans and Global Warranty. All offer different plan options and prices. Compare coverage levels, exclusions, costs, reviews and financial strength when choosing the best mechanical breakdown insurer for your needs.

When selecting an extended warranty provider in Canada, start by checking ratings from AM Best and the Better Business Bureau. Compare plan scope, costs and exclusions across insurers. Read sample contracts and real customer reviews. Confirm the ease of getting covered repairs approved. An independent agent can help you navigate these key considerations.

While rules vary in Canada, many extended auto warranty providers issue prorated refunds on canceled contracts minus a processing fee. For example, if you sell the car or want to cancel after using just 1 year of a 5 year policy, you may get roughly 80% of the original price back. Check cancellation and refund terms upfront.

Certified pre-owned (CPO) vehicles in Canada come with extended factory coverage, so an additional service contract may provide redundant protection during the CPO period. However, many drivers purchase extended warranties to take over once the CPO warranty expires for continued peace of mind. Assess repair risks beyond the CPO timeline.

When purchasing an extended warranty in Canada, prioritize coverage scope, reputation of the provider, ease of use and value for cost. Look for inclusions like roadside assistance and rental car reimbursement. Confirm the insurer pays repair shops directly. Read sample contracts and real customer reviews. Check ratings and complaints.

In Canada, extended auto warranty payment plans typically range from 12 to 48 months for the full premium amount. Shorter 12-24 month financing brings higher monthly costs, while longer 36-48 month terms have lower payments but more overall interest. Choose the term length that best fits your budget and financial needs.

Yes, dealerships in Canada can deny extended warranty claims they deem invalid, such as for maintenance items, wear parts or consequential damage. However, reputable providers like Lubrico Warranty thoroughly investigate all claims and provide reasoning for any denials. You can also appeal a denied mechanical breakdown claim with evidence supporting your case.

Quality extended warranties in Canada cover mechanical and electrical breakdowns after the factory warranty expires. At a minimum, look for inclusions like the engine, transmission, steering, brakes, electrical components and more. Upgrade to a bumper-to-bumper plan for more expansive coverage. But understand common exclusions for wear, maintenance, mods and damage too.

According to consumer studies, WarrantyWise consistently ranks as the top extended warranty provider in Canada thanks to its comprehensive coverage, reasonable pricing and strong customer service reputation. Lubrico Warranty and First Canadian Protection Plans also get high marks for flexible plans and dependable protection across the country.

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