Should I buy an extended warranty on my new car?

You're ready to drive your new (or new-to-you) car off the lot, and the salesperson brings up an extended warranty. Should you take it? It’s a question many new car owners face.

An extended warranty can be worth it, especially if you plan to own your car past the original warranty or want peace of mind against surprise repair costs. In fact, Canada’s auto repair and maintenance industry brought in $26.4 billion in 2023, up 11.3% from the previous year, according to Statistics Canada. That jump suggests repair and maintenance costs are on the rise for many car owners.

Essentially, an extended warranty is extra coverage that kicks in after the manufacturer’s warranty runs out. It’s designed to help cover the cost of certain repairs and parts down the road. But whether it's truly worth the price for your needs and budget depends on a few variables. Below, we break down the pros, cons, costs, and considerations to help you decide if extended coverage is the right fit for you.

What is an extended car warranty?

An extended car warranty (sometimes called a vehicle service contract) is optional coverage you can buy to protect your new or used car after the original manufacturer’s warranty runs out.

An extended warranty is not the same as insurance, as it doesn’t cover things like accidents, theft, or weather damage. Instead, it’s there to help with unexpected mechanical repairs that may pop up over time.

What does an extended warranty cover?

Depending on the company and the particular plan you select, extended auto warranties can have different levels of coverage. For example, some, like a powertrain warranty, only cover the drivetrain, engine, and transmission, while others, like a bumper-to-bumper warranty, provide more comprehensive warranty protection. Nonetheless, the following parts and systems may be covered depending on your chosen warranty coverage:

• Powertrain parts like the engine, transmission, and drive axles

• Drivetrain parts, including the transfer case and differential

• Fuel system, which includes the fuel pump and injectors

• Electrical systems, such as the alternator, ignition system, and starter motor

• Cooling system parts, including the water pump and radiator

• Parts of the suspension system, like the shock absorbers

• Air conditioning and heating system, including the compressor

• Parts in the steering system, like the steering gearbox

• Thebraking system, including the master cylinder

• Software components, like the GPS and assisted driving

What it doesn't cover

Items and services an extended warranty doesn’t cover:

• Routine maintenance, like oil changes, brake pads, and filters

• Cosmetic damage, like paint chips or rust

• Wear-and-tear items, like worn tires, wipers, or burnt-out lights

• Damage from accidents or weather

How does it differ from a manufacturer’s warranty?

According to the government of Canada, a manufacturer’s warranty is basically a promise from the maker of your car that says they’ll repair or replace certain parts if something goes wrong within a set time after you buy it. Generally, car warranties typically range from one to five years, depending on the manufacturer and the specific components covered. For example, it might be for three years or 60,000 kilometres.

An extended warranty takes over once this coverage expires. It can come from the manufacturer or a third-party provider. Manufacturer-backed extended warranty plans often mirror the original coverage, while third-party plans vary widely, so it’s important to read the fine print and work with a trustworthy provider.

Pros and cons of buying an extended warranty

Deciding whether or not purchasing an extended car warranty is worth it really depends on your car, your budget, and how long you plan to keep the vehicle. To help you decide, we've broken down some important considerations:

Pros of buying an extended warranty

• You are covered for unexpected repairs after the original warranty expires

• It helps you avoid any large, surprise repair bills that could strain your finances

• You can choose the level of coverage that fits your needs

• You may be more likely to repair issues quickly when you know the cost is covered

• It may include extra support, like roadside assistance or rental car coverage

• Some can be transferred to a new owner, which may boost your car’s resale value

Cons of buying an extended warranty

• Higher upfront costs

• Some plans have limitations on where you can get repairs done

• You may have to pay a deductible before repairs are covered

• Depending on the level of coverage you choose, some things may not be covered

• If your car is reliable or you sell it early, you might not get much value out of it

• If your car is still covered by the manufacturer’s warranty, an extended warranty could overlap

Who should consider purchasing an extended warranty?

Now that we've weighed the pros and cons, let's consider who may or may not benefit from one. According to Statistics Canada, nearly 2 million new motor vehicles were sold in Canada in 2024, and there were approximately 25.7 million registered road motor vehicles. While recent statistics specific to Canada are unavailable, Consumer Affairs reports that 47% of vehicle owners in the United States have an extended warranty.

The truth is that extended warranties aren’t for everyone. Whether one makes sense for you depends on how you drive, how long you plan to keep your car, and what kind of vehicle you own. Here’s a quick guide to help you figure out if an extended warranty's worth it. Keep reading to find out more:

When you might consider an extended warranty

• You plan to keep your car longer than the factory warranty covers (usually 1–5 years)

• Your car is used and either out of warranty or close to the end of coverage

• You put a lot of kilometres on your car each year

• You own a make or model known for costly repairs or reliability issues

• You don’t have a rainy day fund set aside for unexpected car expenses

• You want to avoid any surprise repair bills

When you might not need one

• Your car is still under a manufacturer’s warranty for a while

• You plan to sell or trade in your car within a couple of years

• You drive low mileage annually and take good care of your vehicle

• You own a reliable brand with a strong repair track record

• You are comfortable paying out of pocket for occasional repairs

How much does an extended car warranty cost in Canada?

With an original factory warranty, the cost is typically included in the price of the vehicle, so you are covered right from the start. But for an extended car warranty, you'll have to pay extra. In Canada, extended car warranties usually cost anywhere from $1,000 to $3,000, according to CarHub, a car dealership in Canada that specializes in selling new and used vehicles. It says the final price depends on:

• Your vehicle’s make, model, trim, age, and mileage

• The type of coverage you want

• The length of the warranty

• Whether you are buying it from the manufacturer or a third-party company

Who can I purchase an extended car warranty from in Canada?

As we mentioned earlier, you can purchase an extended warranty either through the original manufacturer or through a third party or independent company. Third-party warranty providers can include:

• Dealerships

• Lenders

• Insurance companies

Types of extended warranty options

When shopping for an extended warranty, it’s important to know who you are buying it from. Not all warranties are created equal, and the provider you choose can impact everything from the quality of coverage to how easy it is to file a claim. Here's the difference between buying an extended car warranty from the original manufacturer, a dealer, or an insurance company. Below we will discuss types of extended warranty:

Manufacturer-backed extended warranties

These come directly from the automaker or are endorsed by them. They are often an extension of the original factory warranty and can be added at the time of purchase or before the manufacturer's warranty expires. This type of warranty usually offers coverage similar to what came with the car originally, things like the engine, transmission, and electrical systems.

With a manufacturer's extended warranty, you’ll get your repairs done at authorized dealerships, using genuine parts and technicians who know your vehicle inside and out. However, this type of warranty tends to cost more than other third-party options, and you typically need to purchase it before the original warranty runs out.

Extended warranties through dealerships

These car warranties are offered directly through the dealership and may be backed by the manufacturer or by a third-party provider. They are usually presented at the time of vehicle purchase and can sometimes be rolled into your financing. Coverage can range from basic powertrain protection to more comprehensive plans, depending on the provider behind the warranty.

Dealer warranties can be convenient since everything is handled in one place, and some may include perks like roadside assistance or rental car coverage. However, the quality of coverage and claims process can vary widely. That's why it’s important to ask who underwrites the warranty and read the fine print carefully.

Extended warranties through lenders

These warranties are offered by banks, credit unions, or other financing companies, usually as an optional add-on when you finance a vehicle. They are typically provided by third-party warranty companies rather than the automaker, and can be applied to both dealership and private vehicle purchases.

Getting a warranty through a lender can be convenient if you are not financing through the dealership or if you are buying a used car outside of a dealership. In some cases, you can include the warranty cost in your loan, spreading out the payments.

However, since lenders partner with third-party companies, the quality and coverage can vary, so it's important to research the warranty provider first and make sure you fully understand what is and isn't covered.

Extended warranties through insurance companies

These are extended warranties offered through insurance companies, sometimes known as mechanical breakdown insurance. They are typically available for new or used vehicles and can be purchased at any time, even after your original warranty expires.

While these warranties sometimes cost less than manufacturer options, they can still provide bumper-to-bumper coverage, with additional benefits like roadside assistance or rental car coverage.

They can also be more flexible when it comes to coverage levels, and some plans even let you choose your own licensed repair shop. However, the claims process may not be as simple as with a manufacturer’s warranty, and coverage terms can be more complex with more exclusions or fine print. Contact BrokerLink today to learn more about what types of repairs car insurance covers.

Unfortunately, not all third-party warranty companies are trustworthy. When getting an extended car warranty through a third-party company, it’s crucial to go with someone reputable. Before you buy, check reviews, confirm what’s actually covered, and make sure the provider has a solid track record for customer service and claims support. Use sites like Canada's Business Registeries and the Better Business Bureau to help you find legitimate companies.

Things to consider when you buy an extended warranty

To help you make a well-informed decision when buying an extended warranty for your vehicle, here are some things to consider first:

Coverage details

Make sure you completely understand what is and is not covered. Extended warranty plans vary in how much coverage they give you, so make sure the one you choose fits the demands of your car.

Cost

Examine rates offered by multiple vendors. Take into account each warranty’s possible out-of-pocket costs, deductibles (if applicable), and initial costs.

Reputation of the provider

Select a reliable supplier of warranties. Examine consumer feedback, rankings, and the track record of the business and how they honour any claims.

Terms and conditions

Read the small print. Recognize any restrictions, limits, or special circumstances that might affect coverage.

Deductible amount

Know the amount of the deductible that you have to cover before the warranty pays for repairs. This is similar to the deductible you pay with your car insurance in Canada, where you need to pay out of pocket first before coverage kicks in.

Transferability

Check whether the warranty can be transferred from one car to another, as this may have an impact on your vehicle's market value.

Claims process

Be mindful of the steps involved in making a claim, as it may involve different steps than when calling insurance after a minor accident. Opt for a warranty that is straightforward and easy to understand. Also, ensure that your warranty provider offers assistance along the way.

Maintenance needs

To ensure that the warranty is still valid, be informed of any servicing that is required on your vehicle from the time the contract begins. You may be required to perform routine maintenance on your car in order to keep your warranty intact.

Duration and mileage

Think about how long you want to keep the car and how many miles you expect to drive it. Select a warranty that fits your goals for ownership.

Coverage overlaps

Check for overlaps in coverage between your current dealer or manufacturer warranties. Don't spend money on insurance you already have.

Repair centre requirements

Determine whether you can only get repairs done at authorized facilities or whether you have other options.

Cancellation policy

Know the cancellation terms in the event that you choose to discontinue the extended warranty before its expiration date.

When can you purchase an extended car warranty?

As a car buyer, you can get an extended auto warranty at several points while you own the car. Here is a closer look below:

When you buy your car

When purchasing a new or used vehicle from a dealership, a lot of car owners choose to buy an extended warranty at the same time. This can be practical, as the price may be included in the total financing.

Before your manufacturer's warranty ends

If you didn't purchase it when you first bought your car, you can still buy an extended warranty through the manufacturer or a third party before the manufacturer's original warranty coverage expires. This guarantees ongoing protection against unforeseen maintenance expenses.

After your manufacturer's warranty expires

While you can no longer purchase an extended warranty through your car's manufacturer, you can still purchase one through a third-party company.

Anytime throughout owning your vehicle

Regardless of the age or mileage of the car, certain third-party warranty providers let you buy extended warranties at any time while you are the owner.

Learn more with BrokerLink

Do you still have questions about extended warranties in Canada? Whether you are curious about what they cover, how much they cost, or whether one makes sense for your vehicle, BrokerLink is here to help. Our expert insurance advisors can walk you through your options and even show you how the right car insurance and warranty combination can give you extra peace of mind on the road.

You can reach us by phone, email, or in person at any one of our locations throughout Canada. No matter how you choose to get in touch, a BrokerLink insurance advisor will be happy to assist you. We also encourage you to take advantage of our free online quote tool that can provide you with a competitive quote in minutes.

Get an auto insurance quote1-866-724-2372

Extended car warranty FAQs

Is extended warranty worth it for a car?

Purchasing an extended auto warranty is a decision that is influenced by the vehicle in question, your risk tolerance, and your unique situation. Examine the vehicle's current warranty, reliability, your financial resources, and the anticipated length of ownership. An extended warranty might provide important security if you're worried about future maintenance expenses, and your peace of mind is essential. This is especially true for used cars or cars that are no longer protected by the manufacturer's guarantee.

What are two reasons not to buy an extended warranty?

First off, since the cost of the warranty may surpass the cost of future repairs, extended warranties might not be worth it for dependable cars with low maintenance requirements. Second, certain extended warranties have conditions that restrict flexibility and may be inconvenient, such as deductibles and selected repair centres. Therefore, before opting to buy an extended warranty, it is essential to thoroughly examine the conditions of the guarantee as well as the reliability of your vehicle.

Do we really need an extended warranty?

Depending on the situation, an extended warranty may or may not be required. There may be no need for an extended warranty for people with dependable cars, cheap repair expenses, and a good budget. An extended warranty, however, can offer comfort to people with less reliable cars, more potential repair bills, or who like to know when and where they'll have to spend money.

Does my car insurance cover repairs?

Whether or not your car insurance covers repairs depends on your insurance provider and the specific policies you have in your portfolio. However, most insurance companies refrain from covering the cost of repairs for everyday wear and tear or mechanical problems. The primary coverage provided by auto insurance is for losses caused by things like theft, accidents, or natural disasters. Therefore, you, the owner of the car, is usually accountable for any mechanical problems or maintenance-related problems.

Does my insurance pay for rental cars?

This is a common question that really doesn't have a one-size-fits-all answer because it depends on the type of car insurance you have. In most cases, this is an optional coverage that can have an overall cap and a daily limit. To fully understand the precise rental car coverage specifics and limitations within your insurance plan, it's essential that you examine your policy or speak with your insurance provider directly.

Does insurance cover towing after an accident?

Towing charges resulting from an accident are often covered if you have comprehensive or collision coverage. Additionally, some insurance provides roadside assistance, which can involve towing. To be sure you are covered, it is essential to check your policy or speak with your insurance company. Remember that there may be coverage limitations and conditions, so being familiar with the specifics of your policy will guarantee that you know of the types of towing costs that are included.

How long does extended warranty last?

Often, extended warranties have a time limit or a mileage restriction. Depending on the details of the contract, coverage can usually range from 80,000 to 160,000 kilometres or more. Certain plans may have a three- to five-year time frame for this type of coverage. We recommend looking at the terms and conditions of your specific warranty for a more accurate timeframe.

If you have any questions, contact one of our local branches.