Buy reliability, not a warranty

Posted by Matt

Here's another chance for you to learn from my mistakes. I'm embarrassed to admit it, but the first time that I bought a car (used) from a dealership, I got talked into buying an add-on warranty. It was an unusual one in that it required that you apply some kind of treatment to the car, but ultimately that helped me because I was able to return the unopened box of chemicals when I came to my senses a few days later. Anyway, I was young and naive.

Thanks to a recent newsletter from Clark Howard, I found a great Consumer Reports article to back up what most people already know: extended warranties are a horrible deal. In case you are part of the 25% of their survey respondents who BELIEVE in extended warranties, let me hit you with some highlights:

• Only 1 in 5 people in the survey who purchased extended warranties achieved a net savings.


• 42% of the extended warranties were not used AT ALL, in most cases because the vehicle didn't need repairs or the standard manufacturer's warranty sufficed.


• The car brand that required the most warranty claims was Mercedes-Benz, but still, only 38% of those owners came out ahead.

The numbers weigh heavily against extended warranties, so instead of spending your hard-earned money on one, put it towards a more reliable car! After all, a warranty AT BEST can only reimburse you for repairs; wouldn't you rather stay out of the shop altogether?