Do I need an Extended Auto Warranty? There are a lot of articles pro and con out there, but most of the cons are from the fact that dealers try to charge so much for an extended warranty, and the detractors will tell you that your better off putting the money in a fund and drawing from it when you have problems. The fact is that Extended Warranty sales are a significant profit center for dealers, and paying too much for one is one of the deterrents of buying one, there is no limit to what they can charge you. My view is that an Extended Service Agreement (aka Extended Warranty) should be affordable and sufficiently cover your vehicle to protect you against major out of pocket expenses. No Extended Warranty covers everything, but my company always sells exclusionary coverage when possible. That means it covers most everything except for normal wear and tear items, and it closely mirrors your factory coverage except for a small deductible (usually $50 to $100). With vehicles being increasingly electronics-controlled, the dependability is better, but the repairs are much, much more costly. It is not unheard of to have upwards of five to seven thousand dollars, for an average major repair. Over the lifetime of a vehicle, even two significant repairs could be 25 percent or more of what you paid for the automobile! Insuring yourself against that is 'income protection' for the consumer. It allows us to live our lives without the worry or threat of a repair that will dig into our retirement, savings, college funds etc.
I know these things all too well, because I was the guy selling financial products at the dealership. I went out and got two of the major players in Extended Service Agreements and GAP insurance services to let me sell their products. Money has to be made, of course, but fortunately we don't have to depend on it to support a whole dealership. That allows these services to be provided for what usually amounts to half or less than half of what a lot of dealers have to charge, with no negotiations needed. So look into your options, you may be surprised at the coverage you can get.
