You are in the process of buying a new car, and the Finance & Insurance manager is pitching various optional add-on services to you. One of them is a maintenance plan. Should you buy it? Or perhaps you are sitting in the living room watching TV, and a commercial from an auto warranty company pops up on the screen. Is the deal worth it?
A variety of sales pitches come your way, and choosing whether to opt for one, and which one to choose, can be confusing. Both options have their pros and cons.
Finance & Insurance managers often recommend prepaid maintenance plans to buyers when signing the final paperwork, using strong sales tactics based on protecting the vehicle and wallet.
They introduce these plans in a way that hides their true cost under “monthly installments.” Moreover, if you are financing a new or used car, the maintenance plan is typically bundled into the auto loan, to be repaid monthly. Thus, you will also be paying interest on the maintenance plan.
If you do decide to purchase such a plan, it is advisable to pay the full amount separately rather than including it in the loan. Here are some things to consider before making a purchase:
Finance & Insurance managers may pressure you at the signing to buy the maintenance plan immediately. However, even if you are interested, there is no need to make an on-the-spot decision.
According to Consumer Reports, you can purchase a maintenance plan from any dealer, and the prices of different plans are usually negotiable.
If you plan to keep the vehicle for only a few years, a transferable plan may be advantageous. Some plans allow transfer before selling the car, but you must confirm this in writing before purchasing.
If you want a prepaid maintenance plan, opt for one provided by the car manufacturer or a company approved or authorized by the manufacturer.
Buying a prepaid plan from a single dealer limits your repair options.
Manufacturer’s plans are usually accepted at any franchised new car dealer’s service department.
For example, according to Edmunds, Mercedes-Benz’s prepaid maintenance plan can be used at over 380 dealerships and claims to save buyers up to 30% on costs.
Do your homework before making a purchase: Some plans may cost more than paying for maintenance directly to the dealer. Inquire about the specific costs for each maintenance interval to understand the plan’s actual value. This is also why even if you are interested, waiting before purchasing is advisable.
If you intend to have maintenance done at a specific dealer, be cautious with third-party maintenance plans. Many such plans have restrictions on repair locations.
Moreover, not all maintenance items are included. Prepaid plans usually do not cover brakes, tires, or wiper blades.
Extended car warranties can provide peace of mind by preventing unexpected repair bills. They often include roadside assistance services as well.
However, there are some drawbacks such as difficulty in canceling the contract and the possibility of never using the warranty. This is especially common if you do not plan to keep the vehicle for an extended period.
When purchasing an extended warranty, consider the following:
According to Consumer Affairs, extended warranties are generally divided into three types:
Consumer Affairs notes that extended warranty companies do not always clearly state what is included or excluded in the contract. Be sure to read the contract carefully before signing.
Both manufacturers and third-party companies seen on TV do not have fixed prices. The price is determined by factors such as your car model, brand, mileage, and the deductible you choose.
According to Marketwatch, the average annual cost of an extended car warranty in 2025 is $1,297.
Typically, the cost of a powertrain warranty is about 50% lower than a platinum plan, while a gold/silver plan is about 30% lower than a platinum plan.
Many extended warranty sales pitches may appear legitimate but are not.
Scammers may contact you by phone or text, claiming to have detailed information about your vehicle, pressuring you to buy overpriced or bogus contracts.
These pitches often ask for payment or personal information before showing you the contract details.
According to the Federal Trade Commission (FTC), these scammers may send texts or make calls warning you that “your warranty is about to expire,” creating an illusion that they represent a car dealership or manufacturer.
They either sell forged contracts or trick you into providing personal information.
Do not be swayed into purchasing a prepaid maintenance contract due to the excitement of buying a new car. Take the time to calculate the costs and carefully research if it makes financial sense.
Extended warranties can be a good option for older vehicles, but be prepared to pay at least $1,000 annually. You may also face coverage limitations.
The original article titled “Are Vehicle Warranties and Prepaid Maintenance Plans Worth It?” was published on the English edition of Epoch Times website.
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