By Kimberly S. Johnson -- AP Auto Writer
DETROIT (AP) — Want to run your next car a little longer, without those unplanned repair bills? You're not alone. More Americans are trying to milk more miles from their jalopies, especially in an economy that's leaking jobs faster than a punctured oil pan. One strategy to consider is an extended warranty. Here's what your need to know.
PLAN BEYOND 5 YEARS
An extended warranty, literally extends the life of your current warranty, covering major repairs. The coverage kicks in after the manufacturer's original warranty expires. Generally, you have to purchase the extension before the original warranty expires.
Most people tend to focus on the three- to five-year bumper-to-bumper warranty that comes with a new car, because people typically trade in their cars by that point. But more and more Americans are keeping their cars longer — up to six years in some cases. According to a March study by R.L. Polk & Co., people now keep their cars an average of around 5 years, compared to 4 years in 2003.
So, if you plan on running your car into the ground and want to avoid shelling out hundreds on repairs after the warranty expires, consider the extra coverage.
It's also wise to look at reliability ratings and the cost of ownership over the life your vehicle to help gauge whether it is likely to need extensive repairs as it gets older.
BEWARE OF PADDING PROFITS
Before you make a purchase, be aware that dealers will try to sell buyers an extended warranty because it's a high-profit item, says Philip Reed, senior consumer advice editor for Edmunds.com. There's a wholesale price for the warranty, based on the average number and price of repairs a vehicle might need, but he says dealership can markup the price.
"Often you need to be careful. In bad economic times, it's one of the places where dealers can recoup profits they've given up in the car buying transaction," he said. "It's highly negotiable. Take a close look at it."