The average new car costs over $25,000 which means buyers expect their purchase to be hassle and trouble free; however that’s not always the case.  Here are five things to know if you’re looking for an extended warranty for to protect your investment.

1.  Determine whether or not you actually need it.  Most manufacturers offer at least 3 years or 36,000 miles (bumper to bumper) protection on new cars. However, if you drive more than the 12,000 miles per year or plan to keep your car for a lengthy time period, you may want to play it safe with the extended warranty.

Insider tip:  It’s typically less expensive to purchase an extended warranty while the vehicle is still under the manufacturer’s warranty.

2.  Chose a provider that’s right for you.  There are three basic organizations that offer extended warranties:  automobile manufacturers, car dealerships and independent companies (third parties). Each has its own benefit, however if you’re looking for minimal haggle about repairs then you may want to go with the manufacturer. Although going with the maker does typically require a higher upfront cost.  The benefit of purchasing from a dealer is that there’s a lower up front costs but the down side is they’re the only location which can service your issue.  Purchasing from an independent company is typically the cheapest option, however you have no recourse if they go out of business.

3.  Be aware of what’s good and bad. If the plan lets you choose the dealership you’d like for service, has a transferable warranty, is BBB certified and offers a free loaner car, those are all signs of a smart purchase.  However if there are out of pockets expenses for repairs, caps on repair cost benefits, multiple exclusions and it’s non-transferable, those are generally signs of a bad deal.

4.  Pick that plan that works best for you.  If you want bumper to bumper coverage, it’s going to be the most expensive up front, but it also offers the most comprehensive coverage.  If you select a plan with a higher per repair deductible, it can lower the initial cost of the plan, however cost you more in the long run.  Regardless of what type of extended warranty you chose, it’s always imperative to read the fine print, terms and conditions so you know what’s covered and what’s not.

5.  Know what you’re buying.  Warranties are a service and like most services, you get what you pay for.  If you purchase the cheapest plan you can find, more than likely you’ll get the least amount of coverage.  Ultimately, you need to determine your needs as a driver and pick the plan you’re most comfortable with.

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