Dealerships push these contracts because they are high-profit items, often with markups of 30% to 50%.
Surveys by Consumer Reports have shown that more than half of owners with these plans paid more for the coverage than they ever received in repair benefits.
Despite the odds, there are scenarios where a contract makes sense:
If you roll the cost of the warranty into your auto loan, you aren't just paying the $1,500 to $3,000 sticker price; you are also paying interest on that amount for years, significantly increasing the total cost. When It Might Be Worth It
When you purchase a new vehicle, the finance office will almost certainly offer you an extended warranty. While these plans—technically called "vehicle service contracts"—promise peace of mind, they are one of the most debated financial products in the automotive world. For most drivers, an extended warranty is a poor investment, yet for a specific subset of owners, it can serve as a vital hedge against catastrophic repair costs. The Illusion of "Warranty"
From a purely statistical standpoint, extended warranties rarely pay for themselves.