An extended car warranty is probably not worth it

I purchased a 2015 Range Rover Sport with 10,800 miles in December 2016. I was driving a Honda Fit at the time but was looking for a larger vehicle as my wife was expecting in early 2017.

An extended car warranty has been introduced with purchase, offering coverage for seven years or up to 100,000 miles, whichever comes first. The cost of the extended warranty with no deductible was $4,500, while the $1,000 deductible option brought the cost down to $2,500.

I chose not to invest in an extended warranty on the car as the vehicle only extended 10,800 miles and was still under the original manufacturer’s warranty which provides coverage for four years or up to 50,000 miles until July 2019. Now that the car will be nine years old in In July 2024, we will review the maintenance costs incurred.

The Range Rover Sport serves as a good case study, especially thanks to Land Rover’s consistency low reliability rating. Given these ratings, an extended warranty would potentially be worth more in light of the brand’s historical reliability issues.

How much have I spent on the maintenance of a used Range Rover Sport

At the end of 2019, I spent $700 to replace the fan, an unfortunate expense that stemmed from a slight clicking noise I noticed just before the original warranty expired. It took a few months for the clicking noise to get worse, prompting me to have the car checked. It was my first out of pocket car expense.

I faced another repair in June 2023 and spent $1200 to replace a leaking water pump. The service also included flushing my cooling system. Water pump problems in particular are a prevalent problem with European cars.

A key takeaway from this experience is the importance of using the correct type of coolant when changing. It is essential to choose either orange or green coolant and avoid mixing them, as their combination triggers a chemical reaction that causes the coolant to solidify.

replaced water pump $1200
$1200 water pump replacement

On January 11, 2024 I had to spend $1050 to replace the vacuum pump and PCV valve after my check engine light came on. Having originally planned for a routine $212 oil change ($140 last year!), this unexpected expense was disappointing. However, it is necessary to include it for a more accurate and balanced representation of the recent car maintenance costs.

PCV valve cracked and needs to be replaced
$150 to replace a cracked PCV valve
$900 to replace the vacuum pump while considering the extended warranty
$900 to replace the vacuum pump

Total maintenance costs, except oil, tire and brake change: $2,950. $2,950 is after seven years and two months of ownership. The car has driven approximately 50,000 km.

Reasonable maintenance costs

$2,950 in maintenance costs seems pretty reasonable to me after that time and 40,000 miles. After replacing the water pump, vacuum pump and PCV values, these should hopefully last another 40,000-50,000 miles.

There’s also a good chance this could be the last of my maintenance expenses for at least two years, bringing the potential 10-year maintenance cost to $2,950. Or it could be the start of much higher maintenance costs. Let’s hope it’s the first.

If I were to factor in the cost of replacing tires, brake pads, brake discs and oil since ownership, I have to add another ~$3800. A set of four new 22” tires was about $2000!

Comparing maintenance costs with extended warranty costs

The $2,950 maintenance cost is cheaper than the $4,500 warranty cost with a $0 deductible.

The $2,950 maintenance cost is also cheaper than the $2,500 warranty cost with a $1,000 deductible.

Crucially, both extended warranties should it expired after seven years in July 2022. There may have been an opportunity to fix the water pump issue as it happened in June 2022. However, in January 2024 the vacuum pump and PCV valve were replaced at $1,050.

Simply put, if I opted for the non-deductible warranty, I would pay $4,500 plus $1,050, for a total of $5,550 in maintenance and warranty costs. Alternatively, with a $1,000 warranty deductible, the cost would include $2,500, $700 for the fan, $1,000 deductible for the water pump, and $1,050 for the vacuum pump, for a total of $5,250.

The inconvenience factor of having the car repaired at the dealer

The decision not to choose the extended warranty also stems from the inconvenience of having the car repaired at a Land Rover dealer. The repair shop is not very close to where I live, so it is impractical for me. If I were to take the car to a Land Rover dealer, I would have to rely on Uber to get me to and from the store.

I prefer the more convenient option of having my car repaired at a more affordable non-Land Rover dealer that happens to be within walking distance of my home. That’s exactly what I did with my last two repairs.

After taking my son to school, I left the car at the repair shop and then walked the kilometer back home. When it was time to pick up the car, I went to the repair shop and picked up my son from school. This not only resulted in significant time savings, but also allowed me to avoid the additional costs of using Uber.

Get an extended warranty or not?

Based on my 20 years of experience owning two used Land Rovers (LRD2 and RRS) I have decided that purchasing an extended warranty is not the optimal financial decision.

A more effective approach involves doing a thorough pre-purchase inspection of the car, reviewing all maintenance records, and securing an affordable and reliable mechanic.

While the peace of mind that an extended warranty provides is valuable, especially in the event of serious accidents such as engine failure, such cases are relatively rare. Most problems are usually associated with normal wear and tear, which can be adequately budgeted for.

For individuals like me who prefer it keep your cars for 10 years or more, an extended warranty may seem tempting. However, extended warranties rarely exceed 10 years. Financial experts in the extended warranty department have calculated the optimal duration and mileage to cover the car while maximizing profit.

That’s why I would waive the extended warranty.

The likely worst case scenario is to settle and pay out of pocket what the extended warranty would have cost. It’s more likely that you’ll end up spending less on out-of-pocket maintenance than the cost of an extended warranty. This means that a minority of people will be unlucky and end up paying a lot more out of pocket than if they had gotten the extended warranty.

remember car dealers offer extended warranties because they are profitable. If they weren’t profitable, they wouldn’t offer them or charge a high enough price to be profitable.

When to sell a car

As my car approaches its ninth year in July 2024, the thought of buying another vehicle within the next three years is becoming more and more appealing. I mainly watch drive a safe and fun car to transport my family.

Now that I’ve spent another $1,050 on maintenance, these parts should last at least another 40,000 miles. At my average mileage of around 6,000 miles per year, the car should last me another five years without major maintenance costs. However, as my auto mechanic pointed out, wear and tear on a car is not only determined by mileage, but also by time.

Given these factors, my plan will probably involve buying a new car in 2027, when my current vehicle will be 12 years old. This decision allows me to maximize the money spent on repairs in 2023 and 2024 for the next three years. Additionally, the goal is to sell the car before it incurs another significant expense in excess of $1,000.

Time to start saving for my car fund! When I buy a new one, for sure follow my 1/10 rule minimize financial stress. I hope you do too.

Questions from readers

Do you think an extended car warranty is worth it? If so, what type of cover did you get and how much did it cost you? Has your extended warranty ever covered something extremely expensive?

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