Are Vehicle Warranties and Prepaid Maintenance Plans Worth It?

You’re inundated with various offers, and whether to choose one or even which one to choose can be challenging. There are pros and cons to both.

Prepaid Maintenance Plans

The F&I manager presents prepaid maintenance plans to buyers while the final paperwork is being signed. They make a convincing argument as to why you should purchase one, to protect your car and wallet.

The F&I manager will present the plan in terms of a monthly payment, which obscures the plan’s cost. And if you’re financing your new or pre-owned vehicle, maintenance plans are typically bundled into an auto loan and paid for monthly. So, you’ll be paying interest on the maintenance plan. If you want to purchase a plan, pay for the plan separately in full. Here are some things to take into consideration before buying a maintenance plan.

Resist the Pressure to Buy a Plan Immediately

The F&I manager may pressure you to purchase a plan at closing. But you don’t need to do this, even if you’re interested. According to Consumer Reports, you can buy a plan from any dealer. The prices for various plans are typically negotiable.

Transferable Plans Available

Transferable plans could be beneficial if you plan on only keeping the vehicle for a couple of years. Some plans can be transferred if you sell your car before they expire. But you’ll need to confirm this in writing before purchasing the maintenance plan.

Purchase a Plan Offered by the Carmaker

If you want a prepaid maintenance plan, purchase one offered by the carmaker or a company approved or licensed by the automaker. Buying a prepaid plan from a single dealership limits your options for service.

Carmaker plans are typically offered at any of the franchised new-car dealership service departments. For example, according to Edmunds, Mercedes-Benz prepaid plans are good at more than 380 dealerships, and they claim they can save buyers up to 30 percent.

Some Plans Expensive

Do your research: Some plans are more expensive than if you just paid for the maintenance service yourself from a dealer. Ask what each service interval costs so that you have an idea of the plan’s value. This is another reason to wait and buy later if you’re interested.

Prepaid Maintenance Plans Have Limitations

Be cautious of aftermarket plans if you want to use a specific dealership for servicing your car. Many have limitations on where the work can be done.

And not every maintenance item is covered. Prepaid plans don’t usually cover brakes, tires, or wiper blades.

Extended Auto Warranties

Extended auto warranties can provide protection from surprise repair bills. This can give you peace of mind. They also offer roadside assistance.

But there are, however, some drawbacks, such as difficulty canceling the plan and the possibility that you’ll never need the coverage. This is particularly true if you don’t plan on keeping the vehicle for an extended period. What do you need to consider when purchasing an extended warranty?

Extended Warranties Coverage

You can choose your coverage. For example, if your car is aged, you might want to cover the engine, transmission, and drive axles. This could help you go beyond 100,000 miles. In that case, you buy Powertrain coverage.

According to Consumer Affairs, extended warranties come in three varieties.

• Powertrain
• Silver/Gold: cover your electronics, cooling system, and maybe a few other components
• Platinum: These are bumper-to-bumper plans and cover more than 90 percent of the parts on your vehicle with specific exclusions. They are also referred to as “exclusionary” plans.

According to Consumer Affairs, extended warranty companies aren’t always upfront about what is and what isn’t included in your contract. Ensure you read your plan carefully before committing.

Extended Warranties Cost

Manufacturers and third-party companies you see on TV don’t have set rates for extended warranty costs. Instead, they use your vehicle, model, make, and mileage to determine pricing. The deductible you choose is also a factor.

According to Marketwatch, extended vehicle warranties in 2025 cost on average $1,297 per year.

Typically, powertrain warranty plans are around 50 percent less expensive than Platinum plans. Gold/Silver are around 30 percent less expensive than Platinum plans.

Avoid Extended Warranty Scams

Many aggressive solicitations from extended vehicle warranty companies look legitimate, but aren’t.

According to the Federal Trade Commission (FTC), they will text or call you and warn you that your warranty is about to expire. They often give the impression that they represent a car dealer or manufacturer. These scammers will either sell you a bogus contract or try to pressure you into giving them personal information.

Read the Fine Print

Don’t allow the excitement of buying a new car to convince you into purchasing a prepaid maintenance contract. Take the time to run the numbers and investigate whether it makes financial sense.

Extended warranty plans may be fine if you have an older vehicle, but plan on paying at least $1,000 annually. You’ll also have some limitations as to what is covered.

The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. NTD does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. NTD holds no liability for the accuracy or timeliness of the information provided.

From The Epoch Times