Questions Answered in This Article:
- What is the cost of an extended warranty?
- What is an extended warranty?
- VSC and MBI – Are They the Same?
- What Does a Used Car Warranty Cost?
- What Do New Car Extended Warranty Costs?
- How Do You Pay for an Extended Warranty?
- How to Calculate Extended Warranty Costs
For most of us, the thought of a new or “new-to-you” vehicle can be exciting. Should you consider a fuel efficient hatchback, a zippy sports car, a rugged SUV or a spacious and comfortable minivan? Gas, electric or hybrid? And the accessory options seem endless.
In addition to these choices, you’re also faced with decisions about protection for your vehicle. You’re most likely already tuned into the manufacturer’s warranties and probably budgeted for auto insurance, but did you account for the cost of an extended warranty?
The reality is that most likely, you’ll be asked if you’d like to “extend” your vehicle’s warranty before you are given the keys. In this blog we’ll discuss the extended warranty topic as it relates to costs so that when you’re inevitably asked the question about “extending” your coverage, you’ll be in a better position to respond. We’ll talk about what an extended warranty is and the costs of extended warranties for cars in case you’re wondering: How much does an extended warranty cost?
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Before we get into the specifics about the costs of an extended car warranty, let’s get clear on what an extended warranty is and why many consumers opt for this additional protection.
An extended warranty is added protection you can purchase to help cover the cost of repairs. For many consumers, extended warranties offer peace of mind in the event their vehicle breaks down unexpectedly. All extended warranties will vary in costs and what is covered depends on the type of plan you have. Regardless of your service provider, all extended warranties should detail the terms and conditions of what is covered and what is excluded.
Many consumers choose an extended warranty because they will cover repairs and labor costs to get their vehicle repaired in the unfortunate event it breaks down. For some consumers, they know they will have their vehicle for longer than the manufacturer’s warranty, so they opt for an extended warranty for future peace of mind, and while the vehicle is newer and with fewer miles, as this will most likely result in a better pricing structure.
There can be a lot of confusion when it comes to extended warranties because the term is so often used to refer to the coverage you buy to protect your vehicle AFTER the manufacturer’s warranties have expired. While this is true, let’s be clear about two things:
First, technically you can only purchase an “extended car warranty” from the original manufacturer, which is why you will almost always be offered the opportunity to purchase an extended warranty at the time of purchase. Regardless of whether you’re purchasing a new car or a certified pre-owned vehicle, the extended warranty coverage you buy from the manufacturer will extend your current manufacturer warranty, in most cases. This is why only they can truly sell you an extended warranty (because only they have the ability to extend the manufacturer’s warranty). This doesn’t mean you can’t purchase peace of mind for your vehicle when the manufacturer’s warranty expires, you can, but those “extended warranties” are called something different, which we’ll discuss next. Extended warranties from the manufacturer will be sold at the dealership when you buy a new car or could be purchased later from them as an aftermarket offering. And the extended warranty coverage will take over only after the OEM warranty expires.
Secondly, with the exception of California, an “extended warranty” is actually called a vehicle service contract (VSC). In California an extended warranty is called mechanical breakdown insurance (MBI). When a company that is not the original manufacturer offers you an extended warranty product, they are really offering you a VSC (or MBI if you’re in California). We understand that what it’s called is just a technicality. At the end of the day, whether you purchase an extended warranty, VSC or MBI, the most important thing is that you’ll be covered for the cost of repairs in the event your vehicle breaks down.
VSC and MBI – Are They the Same?
No, a VSC and MBI are not the same, not really. They are both extended warranty solutions, but they differ in the details.
A VSC is a contract paid plan that helps cover the costs of repairs needed once the manufacturer’s warranty has expired. Depending on the provider, there may be different VSC plans to choose from.
MBI is another type of vehicle breakdown coverage that is offered to residents of California. While MBI is similar to a VSC, the difference is that mechanical breakdown insurance is actually an insurance product as opposed to a warranty or a vehicle service contract and is regulated by the California Department of Insurance. MBIs are regulated because they are an insurance product, whereas “extended warranties” are not and usually not backed by an insurer. If you’re considering a VSC, it’s important to research the company to ensure they are reputable.
Pro Tip: At olive, every single policy, whether it be MBI or VSC, is backed by QBE, an insurer with $15 billion in global gross written premiums. They are a global underwriter with more than 12,000 employees spanning 30+ countries. You can trust olive because olive is backed.
VSCs and MBIs offer peace of mind in the event your vehicle experiences a breakdown because they will cover the cost of certain repairs when your car breaks down. The costs of each will vary depending on several factors, but typically age of the vehicle and number of miles are two consistent factors across the industry used to determine price…
If you’re purchasing an older vehicle or are already driving a car that is no longer covered by the original manufacturer’s warranty, you can still get a vehicle service agreement (often called an extended warranty) for your vehicle.
Determining the cost of an extended warranty for cars, or any type of vehicle, isn’t clear cut, meaning there isn’t a flat fee or a scale you can look up to gauge VSC/MBI pricing. This is because costs for extended warranties vary and are very specific to each vehicle.
What is consistent is that you can bet that both the age and number of miles on the vehicle will play important factors when determining the cost. Most extended warranties base pricing off of the year, make and mileage of the vehicle. These items tend to be standard across the board.
Depending on the factors mentioned above, VSCs and MBIs can range anywhere from $20 to $80 per month on average. There may be outliers to this price range, and unfortunately there is no universal pricing.
What Does a Used Car Warranty Cost?
If you’re purchasing a used car, you can absolutely still buy extended warranty protection for your vehicle. As mentioned previously, an “extended warranty” for a used car is technically called a vehicle service contract (VSC) or mechanical breakdown insurance (MBI) if you reside in California. Both will offer protection when your manufacturer’s warranty expires.
What’s the average cost of an extended warranty on a used car? When determining used car warranty costs, the same methodology applies – make, model, mileage and location will factor into the price. As used cars are usually older, you can expect that the price will most likely be more than the same make and model that is newer and/or has less miles. Unfortunately, as age and miles driven increase, so does the price of the VSC (in most cases).
If you’re purchasing a used vehicle or your car is older and/or no longer covered by the manufacturer’s warranty because it has expired, you may want to consider an extended warranty solution. Unfortunately, the older a car gets, the more likely it is to need repairs and/or break down, so a VSC or MBI could help cover some of those costs and not break your piggy bank in the process.
When purchasing a used vehicle, in addition to checking the vehicle’s history, you should also ask if it was covered by a manufacturer’s extended warranty or possibly by a third-party VSC provider. Knowing this information may give you comfort knowing that most likely the vehicle was well taken care of. And while this is usually not standard in the industry, some reputable companies, like olive will allow a VSC to be transferred to the new owner at no additional cost.
What Do New Car Extended Warranty Cost?
If you purchase a new car from a dealership, you can bet that you’ll be offered an extended warranty. You may ask yourself why they would offer you an extended warranty when a manufacturer’s warranty is already included. The answer is simple…because they know that at some point their OEM warranty will expire and they would be remiss if they didn’t give you the opportunity to extend your manufacturer’s warranty through them.
As with all discussions regarding extended warranties, the cost is hard to pin down because coverage options vary widely depending on the make and model of your vehicle. You can also expect that there will be upfront costs associated with the dealership extended warranty, which can range anywhere from $1,000 to $3,000. When buying an extended warranty from the dealership on a new car or certified pre-owned, you’ll be able to roll those fees into the financing, just keep in mind that you’ll be paying interest on that extended warranty that won’t take effect until the OEM warranty expires.
How Do You Pay for an Extended Warranty?
Whether you purchase an extended warranty at the dealership or a VSC/ MBI through a third party company, the cost will be additional to the price of the vehicle.
When purchased at the dealership, often you are asked to pay up front or consider financing the cost of the extended warranty with your vehicle. While it may seem like a convenient idea to roll it into your car payment, you’ll end up paying more in the long run because of the interest you’ll incur.
Third-party VSC providers will offer you options as well, and those options will vary based on the company you choose. Some may give you the option to pay in full or pay a certain amount up front then disperse the remaining balance over monthly or quarterly installments. It’s important to note that if you pay for any part of the payment up front or roll it into your loan payments, you may have a difficult time canceling, if that’s even an option.
Pro-Tip: olive is one of the few extended warranty solutions companies that only offers monthly payment plans. And because they charge an equal amount monthly, their customers can cancel anytime.
If you decide to purchase an extended warranty or VSC for your vehicle, we strongly recommend researching third party extended warranty companies also to ensure you’re partnering with a trusted and reputable company. You’ll want to know that your preferred extended warranty company is transparent with their communication, has good reviews and is in good standing with the BBB.
How to Calculate Extended Warranty Costs – Use olive!
As you’ve gathered, getting a price for a VSC or MBI can be tricky because most companies don’t share their pricing structure online.
If you’re in the market for an extended warranty solution, consider olive. If your vehicle qualifies with olive, we will provide you with 9 different quote options. And if you use our online quote tool, you can quote and purchase online in less than 2 minutes. Try our online quote tool now. You can get a quote and buy 100% online with fixed rates for your term. There are no monthly price increases and you can cancel anytime. At olive you’ll have the choice of three coverage options to meet your budget needs with transparent pricing and the ability to choose your deductible.
For nearly 20 years our company and its affiliates have been providing extended warranty solutions for vehicles in a consumer-friendly way. Get peace of mind with olive’s vehicle service contracts or mechanical breakdown insurance options. You may ask: Why olive? Here’s why:
There are no annual mileage restrictions, and we offer coverage across the U.S. and Canada.
There are no contracts and you can cancel anytime which means olive is earning your business every month.
You pick your coverage plan and your deductible with low monthly payments that allow you to pay as you go.
Once you select a plan, your rate is locked in for a three-year term. That rate won’t increase for the three years you have coverage.
There is no waiting period. You can buy today, and you’re covered tomorrow. With no waiting period or inspection required, get the peace of mind you deserve quickly.
No fast-talking salespeople, just resources and tools online so that you can go from start to finish, 100% online. BUT if needed, there are Coverage Advocates standing by in case you need extra support or have any questions. You buy olive how you WANT to buy.
olive is transparent and reliable and is backed by global insurer QBE who receives a consistent “A” (Excellent) rating from A.M. Best.
Trusted and dependable, olive is an accredited business with the BBB and has earned an A rating.