Is an extended car warranty worth it?

Start with your own situation

A service contract is a way of trading an unpredictable large bill for a predictable smaller one. It makes the most sense if a sudden repair bill of a few thousand dollars would be a real problem for your budget.

When it tends to make sense

You plan to keep the car well past the factory warranty. The vehicle has complex or expensive systems, such as a turbocharged engine, air suspension or a continuously variable transmission. You depend on the car daily and have no backup.

When it may not

You trade cars every few years while still under factory coverage. You have savings set aside for repairs and would rather carry the risk yourself. The car is old enough or has enough miles that it no longer qualifies for meaningful coverage.

How to compare offers

Compare the same coverage level across providers, the deductible, the total price over the full term and the cancellation terms. The lowest monthly payment is not always the lowest total cost.