Used Car Extended Warranty: Pros and Cons in Australia
- James Reynolds
- 10 hours ago
- 12 min read
Buying a used car can be a great way to save money compared with buying new, but it can also mean taking on more uncertainty when it comes to future mechanical and electrical repairs.
As vehicles get older and accumulate more kilometres, components can fail - and some repairs can be expensive.
A used car extended warranty can help protect against some of those unexpected repair costs. But like any warranty product, there are advantages, disadvantages, exclusions and conditions that should be understood before deciding whether to purchase one.
One of the biggest surprises for many consumers is that an extended warranty does not necessarily have to be purchased when you buy the car. Subject to eligibility, you can purchase extended warranty cover for a vehicle you already own.
The important thing is not simply whether an extended warranty is "good" or "bad".
The real question is whether the cover, cost and conditions of a particular warranty make sense for the vehicle you own or are considering buying.
In this guide, we'll look at the pros and cons of a used car extended warranty in Australia and the things you should compare before making a decision.
What Is a Used Car Extended Warranty?
A used car extended warranty is designed to provide cover for certain mechanical or electrical failures during the warranty period, subject to the product's terms, conditions, exclusions and claim limits.
Depending on the warranty and level of cover selected, covered components may include parts associated with the:
engine
transmission
cooling system
fuel system
electrical system
steering
braking system
air conditioning
turbocharger
differential and driveline
However, not all extended warranties provide the same level of cover.
Some products provide broad component coverage and higher claim limits, while others cover a much smaller list of components or have lower limits on the amount that can be claimed.
That's why comparing extended warranties purely on price can be misleading.
Pros of a Used Car Extended Warranty
1. You Can Purchase an Extended Warranty for a Car You Already Own
This is one of the biggest misconceptions about extended car warranties.
You do not necessarily have to purchase an extended warranty when you buy the vehicle.
Many consumers are surprised to learn that extended warranty cover can be purchased for an eligible car they already own - including a vehicle purchased some time ago.
For many years, extended warranties have commonly been offered to consumers as part of the vehicle purchase process at motor dealerships. This has contributed to a widespread perception that the dealership is the only opportunity to purchase cover, or that once you drive the vehicle away, the opportunity is gone.
That isn't necessarily the case.
Subject to the vehicle and product eligibility requirements, you can arrange an extended warranty independently after purchasing the vehicle.
This can apply whether you:
purchased the car from a motor dealer;
purchased it privately;
have owned the vehicle for some time;
still have manufacturer's warranty remaining; or
want to arrange cover now with a future commencement date.
This also means you don't necessarily need to make a decision about extended warranty cover while you're sitting in the dealership completing the purchase of your car.
You can take the time to understand the available levels of cover, compare claim limits and exclusions, read the warranty documentation and consider the cost before deciding whether to purchase.
There is, however, an important limitation:
You cannot wait until a vehicle develops a fault and then purchase an extended warranty to cover that existing problem.
Extended warranties are designed to provide protection against eligible future mechanical or electrical failures. Existing or known faults are not covered.
2. Protection Against Unexpected Mechanical and Electrical Repair Costs
Probably the biggest reason people consider an extended warranty is protection against unexpected repair bills.
Modern vehicles can contain sophisticated mechanical, electrical and electronic systems. Even a single component failure can sometimes result in a significant repair cost.
If an eligible component fails during the warranty period, an extended warranty may contribute towards or cover the cost of the authorised repair, subject to the warranty's terms and applicable claim limits.
That can reduce the financial impact of an unexpected mechanical or electrical failure.
3. More Predictable Motoring Costs
Some motorists are comfortable putting money aside and paying for repairs themselves when something goes wrong. Others prefer greater certainty.
An extended warranty involves a known cost in exchange for protection against certain unknown future repair costs.
That doesn't necessarily mean you will financially "come out ahead". You may own the vehicle for the entire warranty period and never make a claim.
For some motorists, however, the value lies in reducing exposure to potentially large unexpected repair bills rather than trying to recover more in claims than they paid for the warranty.
4. Cover Can Continue After the Manufacturer's Warranty Has Expired
Many used vehicles are sold after their original manufacturer's warranty has expired or with only a limited amount remaining.
An extended warranty can provide additional mechanical and electrical breakdown protection after manufacturer warranty coverage ends, subject to the extended warranty's own terms and conditions.
It's important to remember that an extended warranty doesn't extend the manufacturer's warranty itself. It is a separate warranty product with its own coverage, exclusions and claim limits.
5. Cover May Be Available for Older and Higher-Kilometre Cars
An older vehicle or one with higher kilometres isn't automatically excluded from extended warranty cover.
Eligibility depends on the particular warranty product, vehicle and applicable age and kilometre requirements.
Different levels of cover may also be available depending on the age and kilometres of the vehicle.
This can make extended warranties relevant not only to relatively new used cars, but also to motorists keeping vehicles for longer periods.
6. Unlimited Kilometres May Be Available During the Warranty Term
Some extended warranty products available through MrWarranty provide unlimited kilometres during the selected warranty term.
This can be particularly useful for motorists who travel substantial distances each year and don't want their warranty to end simply because they reach a kilometre limit during the term.
Vehicle eligibility requirements still apply when the warranty is purchased.
7. A Defined Claims Process
An extended warranty provides a contractual claims process for failures covered under the warranty.
Typically, when a mechanical or electrical problem develops, the vehicle is inspected and diagnosed and the repairer seeks approval before covered repairs are undertaken.
If the failure is covered under the warranty, the authorised repair can then proceed subject to the terms, conditions and claim limits.
This can provide a clearly defined process for dealing with eligible mechanical and electrical failures.
8. Some Extended Warranties Can Be Transferred
Depending on the warranty terms, cover may be transferable if you sell the vehicle privately during the warranty period.
Having remaining warranty coverage may also be attractive to a prospective buyer because eligible mechanical and electrical protection can continue after ownership changes.
Always check the applicable warranty terms because transfer conditions may apply.
Cons of a Used Car Extended Warranty
There are also disadvantages and limitations that should be considered.
1. You May Never Make a Claim
This is perhaps the most obvious disadvantage.
Your vehicle may remain reliable throughout the entire warranty period.
If that happens, you may pay for an extended warranty and never make a claim.
That's why an extended warranty shouldn't be viewed as an investment where you expect to receive more money back than you paid.
You're paying to transfer some of the financial risk associated with eligible unexpected mechanical and electrical failures.
2. Not Everything on the Vehicle Is Covered
An extended warranty doesn't mean every component of your vehicle is covered.
Coverage depends on the particular product and level of cover.
Items such as routine servicing, maintenance, consumable items, excluded components, pre-existing faults and certain wear-and-tear related failures may not be covered.
This is why reading the warranty documentation before purchasing is important.
Don't simply ask: "Does this car have an extended warranty?"
Ask: "What exactly does this extended warranty cover?"
3. Claim Limits May Apply
One of the most important things to compare between used car extended warranties is the claim limit.
A warranty may state that a particular component is covered, but that doesn't necessarily mean there is unlimited cover for the cost of repairing that component.
Depending on the warranty, limits may apply to particular components, individual claims or the total amount payable during the warranty period.
For example, two warranties may both advertise engine coverage while providing very different financial protection if an engine failure occurs.
Always consider the level of cover and the applicable claim limits, not simply the list of covered components.
4. Servicing Requirements Must Be Followed
Extended warranties generally require the vehicle to be properly serviced and maintained.
The warranty documentation will explain the servicing requirements that apply.
Keeping invoices and service records is also important because they may be required when making a claim.
An extended warranty shouldn't be viewed as a substitute for maintaining the vehicle properly.
5. Existing Faults Aren't Covered
An extended warranty is designed to protect against eligible failures that occur during the warranty period.
It isn't designed to pay for faults that already existed before the warranty commenced.
For example, if a transmission is already slipping, an engine is already overheating or a warning light indicates an existing problem, purchasing an extended warranty doesn't turn that existing fault into a future warranty claim.
This is particularly important when purchasing a used vehicle.
A pre-purchase inspection can help identify existing problems before you buy the car.
6. Wear and Tear Isn't Normally Covered
Wear and tear is one of the areas consumers can find confusing.
It doesn't mean that every component that eventually fails must automatically be considered wear and tear simply because the vehicle has been driven.
Under the warranty products available through MrWarranty, wear and tear is defined as a listed component that is determined to have reached its intended lifespan and naturally and inevitably requires replacing.
There can therefore be judgement involved in determining whether a failure represents a mechanical or electrical breakdown or whether the component has simply reached the end of its intended service life.
Vehicle age, kilometres, component condition and the nature of the failure may all be relevant.
7. The Cheapest Extended Warranty May Not Provide the Best Value
Price matters, but it shouldn't be the only comparison.
A cheaper warranty with low claim limits and limited component coverage may provide considerably less protection than a more comprehensive product.
The appropriate comparison is therefore not simply: "Which warranty is cheapest?"
It is: "What protection am I actually receiving for the price?"
When comparing used car extended warranties, consider:
the components covered
exclusions
claim limits
warranty term
servicing requirements
vehicle eligibility
kilometres permitted
transferability
claims procedures
8. You May Already Have Rights Under Australian Consumer Law
Purchasing an extended warranty does not replace your existing rights under the Australian Consumer Law.
Consumer guarantees can apply when purchasing new and used vehicles from businesses such as licensed motor dealers. The rights that apply will depend on the circumstances, including factors such as the vehicle's age, price, condition and what a reasonable consumer would expect.
An extended warranty provides contractual rights in addition to any rights that may already exist under Australian Consumer Law.
If you purchase a used vehicle from a dealer and something goes wrong, the existence or expiry of a dealer or manufacturer warranty doesn't necessarily determine whether you have rights under Australian Consumer Law.
Don't Confuse Manufacturer, Statutory and Extended Warranties
There are several different forms of protection that can apply to a used vehicle, and they are often confused with one another.
Manufacturer's Warranty
A manufacturer's warranty is provided by the vehicle manufacturer and generally applies for a specified period or number of kilometres from when the vehicle was first sold.
If you purchase a relatively new used car, some of the original manufacturer's warranty may still remain.
Dealer Statutory Warranty
Depending on where you live, certain used vehicles purchased from licensed motor dealers may also come with statutory warranty protection.
The eligibility requirements and coverage periods vary between Australian states and territories.
A dealer statutory warranty is not the same thing as an extended warranty.
Extended Warranty
An extended warranty is additional cover purchased separately.
Its coverage, exclusions, claim limits, duration and other conditions are determined by the particular warranty product.
An extended warranty does not remove or replace any rights you may have under Australian Consumer Law.
What Should You Compare Before Buying a Used Car Extended Warranty?
This is arguably more important than simply comparing prices.
Before purchasing a warranty, ask:
What components are covered?
What isn't covered?
What are the claim limits?
Are there different levels of cover available?
How long does the warranty last?
Is there a kilometre limit during the warranty term?
What servicing requirements apply?
Is there an excess when making a claim?
What happens when the vehicle needs repairs?
Can the warranty be transferred if the vehicle is sold?
Who is actually providing the warranty?
Most importantly, read the applicable warranty documentation.
Two products described as "extended car warranties" can provide very different levels of protection.
Used Car Extended Warranty Pros and Cons at a Glance
Pros | Cons |
Protection against eligible unexpected repair costs | You may never make a claim |
Can make repair costs more predictable | Not every component is covered |
Cover can continue after manufacturer warranty expires | Claim limits may apply |
Can be purchased for a vehicle you already own | Existing faults aren't covered |
Cover may be available for older vehicles | Servicing conditions must be followed |
Unlimited kilometres may be available | Wear and tear isn't normally covered |
Defined claims process | Coverage varies significantly between products |
Some warranties may be transferable | Additional cost of purchasing the warranty |
Who Might Consider a Used Car Extended Warranty?
A used car extended warranty may be worth considering if you:
intend to keep your vehicle for several years
would prefer not to carry the full financial risk of an unexpected mechanical or electrical repair
own a vehicle where some repairs could be expensive
drive substantial kilometres each year
are purchasing a used vehicle after the manufacturer's warranty has expired
prefer more certainty around unexpected repair costs
On the other hand, you may decide against purchasing one if you're comfortable carrying the repair risk yourself, have sufficient savings available for unexpected repairs or don't believe the available cover represents sufficient value for the cost.
There isn't one answer that applies to every vehicle owner.
Frequently Asked Questions
Can You Buy an Extended Warranty for a Privately Purchased Used Car?
Yes.
An extended warranty doesn't necessarily require the vehicle to have been purchased from a motor dealer.
Subject to vehicle and product eligibility, cover can be available for vehicles purchased privately.
This can be particularly useful because privately purchased vehicles generally don't come with the same statutory warranty protections that may apply to eligible vehicles purchased from licensed motor dealers.
Australian Consumer Law rights can also differ depending on whether you're buying from a business or a private seller.
Can Imported Used Cars Get an Extended Warranty?
Yes, extended warranty cover can be available for imported vehicles, subject to the eligibility requirements of the applicable warranty product.
The level of cover available will depend on the particular vehicle and warranty.
Can Modified Cars Get an Extended Warranty?
Yes, a modified vehicle may still be eligible for extended warranty cover.
However, the modification itself is not covered.
Modifications can also potentially affect a claim where the modification contributed to or caused the failure, so the applicable warranty terms should always be checked.
Can a Repairable Write-Off Get an Extended Warranty?
Yes, an extended warranty can also be available for an eligible vehicle that has previously been recorded as a repairable write-off.
As with any used vehicle, the vehicle must satisfy the eligibility requirements of the applicable warranty product, and existing faults are not covered.
Can I Start My Extended Warranty in the Future?
Yes.
An extended warranty does not necessarily need to commence immediately after you purchase it.
Some motorists choose a future commencement date, particularly where their vehicle still has manufacturer warranty coverage remaining and they want extended warranty protection later.
There are no fixed future-date restrictions applying to the products currently available through MrWarranty, although vehicle eligibility and the applicable product terms still need to be considered when the warranty is arranged.
Does an Extended Warranty Cover Wear and Tear?
Generally, no.
Wear and tear is different from an unexpected mechanical or electrical failure.
Under the applicable warranty definition, wear and tear relates to a listed component that has reached its intended lifespan and naturally and inevitably requires replacement.
This distinction can depend on the circumstances surrounding the failure.
Does Australian Consumer Law Still Apply If I Have an Extended Warranty?
Yes.
An extended warranty does not remove your rights under Australian Consumer Law.
Where Australian Consumer Law applies, those rights continue independently of the extended warranty.
The extended warranty provides an additional contractual form of protection according to its own terms and conditions.
Can I Transfer an Extended Warranty When I Sell My Car?
Some extended warranties can be transferred to the vehicle's new owner.
Transfer requirements and conditions can apply, so you should check the applicable warranty documentation before selling the vehicle.
Remaining warranty cover may also be useful when selling a vehicle privately because it gives the prospective buyer information about the mechanical and electrical protection that may continue after the sale.
The answer depends on the vehicle, the warranty and your circumstances.
A used car extended warranty can provide valuable protection against eligible unexpected mechanical and electrical repair costs, particularly for motorists who intend to keep their vehicle for several years or who prefer greater certainty around unexpected repair expenses.
But an extended warranty isn't a guarantee that every repair will be covered, and it shouldn't be purchased without understanding the exclusions, claim limits and servicing requirements.
Compare the cover - not just the price.
A lower-priced warranty isn't necessarily better value if it provides significantly lower claim limits or covers fewer components.
Equally, the most comprehensive warranty isn't automatically the right choice for every vehicle owner.
Understanding what you're buying is ultimately the most important part of deciding whether a used car extended warranty is right for you.
Want to see what extended warranty options are available for your vehicle?
MrWarranty can provide available warranty options based on your vehicle's age, kilometres and eligibility.
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