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Pros and Cons of CPO Versus an Extended Warranty

car dealership 2022 20 customer dealership scaled jpg Car dealership warranty negotiations | photo by Christian Lantry

Most certified pre-owned vehicles come with at least one year of basic, comprehensive warranty coverage backed by the manufacturer, plus a powertrain warranty that usually stretches beyond the original time and mileage limits. Will those CPO warranties be enough, or should you buy a used car that isn’t certified by the dealership — which is typically cheaper — and buy an extended warranty instead?

Related: The Basics of Buying a CPO Vehicle

Here are some points to consider before choosing to buy a CPO vehicle instead of an extended warranty (or, more correctly, an extended service contract):

Pros of Buying Certified Pre-Owned Cars

  • If you’re worried a CPO warranty won’t cover everything that could go wrong with your certified car, don’t be fooled by a sales pitch for an extended warranty; that contract won’t cover everything, either. An extended warranty should cover more things for more miles, but every warranty and service contract has its own limits and exclusions. Read the fine print to compare CPO and extended warranties before you decide.
  • The cost of the warranties and other benefits that come with a CPO car are baked into the price, which should be negotiable. The cost of an extended warranty is negotiable, but it’s in addition to the price of the vehicle. If you buy a $20,000 vehicle and add a $2,500 extended warranty, you actually are paying $22,500. If you finance the extended warranty, you’ll pay interest on that purchase, as well, raising your
  • Though buying an extended warranty may help you sleep better at night, studies have shown the benefits you can claim in repairs can be less than what you paid for it. In other words, you’re buying insurance you might not use.
  • With factory CPO programs, the warranties are backed by the vehicle manufacturers. Brands may disappear, but manufacturers endure. In recent history, more warranty companies have gone out of business than car companies, leaving consumers with worthless service contracts.
  • If something that breaks is covered by a manufacturer’s limited warranty, an extended warranty you purchased won’t pay for it. Extended warranties kick in only when a repair is not covered by the manufacturer, so it is redundant coverage until the car company drops out of the picture.

Cons of Buying Certified Pre-Owned

  • Audio equipment, telematics and other electronics usually are covered only by a manufacturer’s remaining basic or CPO warranty, and on some pre-owned vehicles, the coverage might only be for the first two years. Replacing an audio head unit can get expensive, for example; other things, such as sensors and seals and gaskets on engines and transmissions, might not be covered by a CPO warranty. However, they might be covered by an extended warranty along with other items that the CPO warranty doesn’t cover. Check out the extended warranty contract carefully before you buy because they vary greatly.
  • With a CPO vehicle, the warranty tethers you to a dealer for that brand or manufacturer for covered repairs. Third-party extended warranties (those not issued by vehicle manufacturers) often let you take your vehicle to the repair shop of your choice, whether for convenience, preference or because you’re stranded far from the nearest dealer.
  • If you plan to keep a vehicle for seven years or more, an extended warranty can cover more items for longer periods than the manufacturer, though you’ll pay more for longer coverage. If your transmission gives up a year or two after the factory powertrain coverage ends, even a $3,000 extended warranty can be a money-saver if you need a $4,000 transmission repair.
  • Having an extended warranty means you won’t have to unexpectedly shell out hundreds or thousands of dollars for emergency repairs just to be able to get to work. Big repair bills can happen at the worst times, and an extended warranty can protect against that.

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