Extended warranties: are they worth buying?

You've made the call. This is the car. At the right price. Now you've just got to sign the papers and drive off into the sunset. But your decision-making's not done yet. First the salesperson will tempt you with various accessories, add-ons and other features, including asking if you’d like to tick the box for an extended warranty.

An extended warranty seems logical if you're planning to keep your car beyond the timeframe of its standard factory warranty, or you’re buying used. After all, what could be wrong with a little extra peace of mind? But it helps to know exactly what’s included – and what you’re covered for anyway. Here’s a guide.

An extended warranty shouldn't be confused with promotional deals run by carmakers that give you a longer warranty. These will typically be an extension of the factory warranty you get from new cars and you won't have to pay for it.

Extended warranties, contrastingly, are offered by the dealership and kick in once the manufacturer's warranty has ceased. Coverage generally runs up to five years and, depending on the policy, the cost ranges from a few hundred dollars per year into the thousands.

But here's the rub. While a manufacturer's warranty is backed by the factory, extended warranties are sold by the dealer and administered by third-party operators. That means the cover you get could be completely different to your factory deal.

Regardless of how long a warranty is and what it covers, you are automatically entitled to a range of consumer protections under Australian Consumer Law if you are sold faulty goods.

If you are considering purchasing an extended warranty, the Australian Competition and Consumer Commission (ACCC) recommends making sure it actually provides benefits beyond what you'll automatically receive.

Salespeople are required to explain what benefits an extended warranty will provide and cannot mislead you into paying for rights you already have or pressure you into buying a policy, so you need to read the product disclosure statement (PDS) closely and ask them exactly what you're getting for your money.

With more and more carmakers now offering five, six, seven and even 10-year factory warranties, the appeal of an extended warranty is increasingly limited.

Ultimately, it comes down to priorities. If what you're being sold does actually give you protections beyond automatic consumer guarantees and you're happy to pay for them, then sign on up.

But don't be pressured into it. Do the research and ask the questions. If you think you'll just end up paying out good money for nothing, you can always say no.

^Disclaimer

^{Viva Energy Australia Pty Ltd (“Viva Energy”) has compiled the above article for your general information and to use as a general reference. Whilst all reasonable care has been taken by Viva Energy in compiling this article, Viva Energy does not warrant or represent that the information in the article is free from errors or omissions or is suitable for your intended use.}