Is an extended car warranty worth it?

If you own an older car or a secondhand vehicle, you may want to consider an extended car warranty or “aftermarket warranty” to help protect you from unexpected, costly repairs.

Extended warranties can help to cover the cost and inconvenience of mechanical and electrical failures that occur once a manufacturer’s warranty expires. But is an extended car warranty really worth the upfront cost when your car seems to be doing just fine for now? 

The answer to that question depends on the specifics of your situation. Factors like your vehicle’s age, mileage, and your budget all come into play.

To help you decide if an extended car warranty is worth the investment, here are the most common reasons vehicle owners choose to purchase a warranty for a used car.

Avoid paying out of pocket for breakdown costs

What’s the point of investing in coverage right now? Couldn’t I just put money aside every month to cover repairs?

This is probably the most common question vehicle owners ask when they’re sizing up the value of an extended car warranty.

And truth be told, yes—you absolutely could put money into a rainy day repair fund for your used car. But do you have the resolve to follow through? And will the money that you’ve saved be enough to cover all of the costs associated with your car breaking down?

To help you figure this out, let’s take a quick look at the math. Let’s say your car’s transmission fails suddenly and the cost of the repair is $4,000.

Scenario A: You have an extended car warranty

You signed up for a GuardTree warranty subscription 24 months ago. Your plan is $59.95 per month with a deductible of $250 and a repair limit of $5,000. You pay the deductible and your repair is 100% covered by your warranty.

Total out-of-pocket cost to cover the repair:

Cost of warranty ($59.95 x 24 months = $1,439)

+ Deductible ($250)  

= $1,689

Scenario B: You put money into a rainy day repair fund

Let’s say you put the same amount into a rainy day fund. After saving $59.95/month for 24 months, you’d have $1,439 in savings. 

You use your repair fund to cover a portion of the bill and then make up the difference to cover the bill.  

Total out-of-pocket cost to cover the repair:

Rainy day repair fund ($1,427)

+ Additional funds required to cover the repair ($2,573) 

= $4,000 

Based on these scenarios, you would have saved ~$2,300 by opting for GuardTree instead of the rainy day fund. However, nobody can predict the future.  And an extended car warranty won’t necessarily save you money in every scenario.

Here’s how the math breaks down when we adjust the timeline:

  • If your transmission failed after 63 months, you would spend the same amount regardless of the option you selected. 
  • If it failed after 67 months, you’d save $59.95 per month in Scenario B providing you experienced no other eligible breakdowns.
  • If you experienced no breakdowns at all, you’d still be left with your rainy day repair fund if you opted to not purchase a warranty.

Repair costs can add up

Some repairs might sound simple...until you get a bill for thousands of dollars. Here's a look at how repairs can stack up.

Reduce the risk of buying a used vehicle

Used cars are older and have higher mileage than their brand-new counterparts, so they tend to require more repairs.

Secondhand car repair costs typically come out of the blue and can range from hundreds to thousands of dollars. For example, a failed transmission can cost anywhere from $4,000 to $6,000 to repair.

While an extended car warranty can't prevent breakdowns, it does reduce the risk of being caught off guard by a large surprise bill you can’t afford. It can also help get you back on the road quickly if you rely on your vehicle to commute to work or take your kids to school.  

Vehicle repair frequency


Maintain coverage once the manufacturer warranty expires

With most Canadians holding onto their vehicles for an average of 9 years, cars are a long-term investment. Unfortunately, most manufacturer warranties don’t last that long. 

An extended car warranty can provide coverage from when your manufacturer’s warranty expires to when you sell the vehicle. That way, you ensure coverage for as long as you own the car.

Warranty period diagram


Avoid paying for hidden extras

Extended car warranties can also provide coverage for the extra costs that you’ll incur while your car is in for repairs. 

Things like car rental, roadside assistance, and travel expense reimbursements are typically covered in a good extended car warranty.

Peace of mind

An extended warranty isn’t just an investment in your vehicle. It’s an investment in your peace of mind.

Typically, an extended car warranty is often the right solution if you’re someone who worries about things like:

  • Paying for unexpected, expensive car repairs
  • Living without your vehicle while it’s in for repairs
  • Ensuring your vehicle lasts a long time beyond the factory warranty

You’ll get peace of mind in knowing you’re prepared for the unexpected. For many car owners, this kind of assurance is priceless.

Not all extended warranties are created equal   

If an extended warranty sounds right for you, make sure you understand the fine print before you make a purchase. We’ve listed some things you’ll want to investigate here.

Get more for your money. Get GuardTree.  

GuardTree is a comprehensive, monthly extended warranty subscription that you can cancel at any time. GuardTree provides protection from most major electrical and mechanical repairs and offers additional benefits like roadside assistance and car rental and trip interruption costs.

See what’s covered and use our price calculator to decide if an extended car warranty is right for you.


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