I recently bought a used car and yet again was presented with an opportunity to purchase an extended warranty from the dealership. The last time I bought a used car, I did not purchase the extended warranty and that turned out to be the exact right move. But this time, I agreed to it reluctantly, and regretted it the next day after the rush of buying a new vehicle wore off and I read through the contract I somewhat hastily signed - mainly the part about the extended warranty.
In my situation, I bought a used 2016 sub-compact SUV with about 45k miles, that still had 1.5 years left (or up to 60k miles) of a power train manufacturer's warranty left. I agreed to a 4 year, bumper-to-bumper extended warranty, that cost me just under $1500, that the dealer packaged into the car loan, which also means I agreed to pay interest on that $1500 over the life of the loan.
What I also wasn't aware of at the time of signing was this extended warranty came with a $200 deductible, meaning any time I were to use it within those 4 years (or 48K miles, whichever came first) I had to pay $200 of any repair they covered BEFORE my warranty covered the rest. And also keep in mind a bumper-to-bumper warranty doesn't cover every repair either, you have to be very careful to read what it does cover. In my case, it covered most everything within reason that wasn't my fault or cosmetic in nature. But still, I didn't fully appreciate I had a year and half left of power train coverage, which is what I really wanted to insure against anyways.
So I agreed to come out of pocket $1500+, making the gamble that my car with low miles was going to have major repair costs in the relative near future that exceeded $1500 total + $200 per event. In hindsight, that wasn't smart and I am better off putting that $1500 into a savings account on the off chance I need it for repairs. And then just purchasing a vehicle that has no known issues or accidents on the Car Fax report, and that I can generally expect little issues from, if I maintain it properly over the next 4 years.
Every situation is a bit different, but anyone nowadays that goes to a dealership to purchase a used vehicle gets asked to also purchase an extended warranty. And usually the finance person pushes this option especially hard, making it almost feel like if you don't, your stupid.
There is a reason for this. In most all cases, that finance person makes a very good commission from getting you to purchase an extended warranty. That's because extended warranties are incredibly profitable for dealerships and those issuing them, because in truth, a majority of the people that purchase them end up LOSING MONEY from them, not saving:
This video is from 2014, but the numbers haven't really changed. In fact they have likely gotten worse, as vehicles have got safer and tend to last longer. That's not true across the board, but on average that is what the data says. Here's a more current read on this, from Consumer Reports -- Should You Get an Extended Warranty for Your Car? (Short answer, they say no, in most cases.)
I ended up going back to the dealership and cancelling my extended warranty. Which is something you can do at any time over the course of your car loan by the way. You can cancel anytime and get a prorated amount back. In my case, cancelling days after I got the car, I should get 100% of my warranty amount back, deducted from the principal of my loan.
I wish I would have not gotten the warranty in the first place though, as it would have made my monthly less. And getting a refund does NOT lower your monthly, keep that in mind. But either way, I think its important to be aware its very often not worth it to get an extended warranty, especially if you package it into a loan that you pay interest on.
The only times I would consider an extended warranty in the future is if I am getting a very good deal on it, toward a vehicle that is known to be very problematic and that has high mileage. But then, you have to ask yourself, why are you buying a problematic vehicle with high mileage in the first place? So even then, I wouldn't recommend it.