Extended Warranties And Certified Used Cars

The line between extended warranties and certified used cars is relatively blurry because both options represent a similar end product to the consumer - a used auto that is covered by a warranty.

After all, one can easily argue that a certified used car is little more than a previously owned car which has passed an inspection and had an extended warranty rolled into the price. But does buying an extended warranty for your used car actually present an equal, if not better, deal?

In most cases, consumers place a high value on certified used cars. A certified used car has undergone a thorough inspection, the manufacturer has signed-off on the car's mechanical condition and has even put the vehicle under a warranty program.

Since it's expensive for manufacturers to bring poorly maintained used cars up to the standards of their certified programs, the typical certified used car will be a low-mileage model with little maintenance history - typically a lease return. Furthermore, the price of a certified used car offers a good value-for-money alternative to an expensive new model.

"Some customers tend to gravitate toward certified used cars because they can get a loaded, warranty-backed used car for the same price as a stripped down, basic new model," says Duane Fiene, General Sales Manager at Saturn of Concord in Concord, CA.

The downside of certified used cars is that, due to their quality mechanical condition and manufacturer-backed warranties, they are sold at a premium over their non-certified counterparts. Additionally, certified used car warranties typically aren't transferrable to future owners, meaning they don't offer much in terms of future resale value. For these reasons, it's easy for consumers to be tempted to purchase a non-certified used car at a bargain price, and then buy an extended warranty for the vehicle.

This is not the best idea for a few reasons, however. By bypassing the manufacturer's inspection, the responsibility of assuring the vehicle's mechanical condition falls solely into the consumer's hands. For most buyers, it's best to rely on an expert and not assume they can ascertain a vehicle's mechanical condition on their own. This is a time-consuming process, and paying for an expert mechanic's inspection time can become expensive, adding to the total vehicle cost.

Furthermore, once a used car has been purchased, the owner must then buy an extended warranty that brings it in line with a certified used car. The problem here is that extended warranties are often not as comprehensive as those tied to certified used cars. For example, the extended warranty may not cover wear and tear items while the certified used car's warranty does. Depending on the car's mileage, reliability and condition, the extra cost of the wear and tear repairs, in addition to the cost of the extended warranty, may end up pushing the total cost of the non-certified used car above that of a certified model.

Overall, the consumer's choice between buying a certified used car or an extended warranty depends on how much warranty coverage is desired and how well the buyer is able to determine a vehicle's condition.