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Are extended warranties for cars a good idea?

2014 Mazda CX-5

Mazda

I recently purchased a 2014 Mazda CX-5 GS AWD. I've never purchased a brand new car before, and I'm wondering what your opinion is on purchasing extended warranty coverage? -- Margaret

Buying peace of mind at a car dealership can add up fast. Extended warranties are often unnecessary, but they might be a good idea for cars with iffy reliability, experts say.

"For an all-new Mazda design, the purchase of a bumper to bumper extended warranty from the manufacturer is probably a good idea," says George Iny, president of the Automobile Protection Association. "Several new Mazda models have had reliability issues in their first 2-3 years on the market."

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The APA, an auto industry watchdog, tells buyers to check out Consumer Reports or its own Lemon-Aid reviews to see if the model's reliability is below average.

"Extended warranties are a good idea if they cover vehicle systems that are likely to fail during the warranty period," the APA says.

Consumer Reports gives the same advice: don't buy an extended warranty if your car has a record of good reliability.

"In a 2008 Consumer Reports survey, 65 percent of respondents said they spent much more for the contract than they got back in savings on repairs," the magazine says.

If you do buy an extended warranty, the APA says to buy the extended warranty directly from the manufacturer instead of a third party. "Coverage is more complete, and manufacturers tend to honour claims more easily and with fewer restrictions," it says.

Read the warranty carefully before buying. There should be zero deductible, there should be no dollar limit per claim, and the warranty should be bumper to bumper instead of covering only specific systems.

The Globe's Richard Russell advises against extended warranties, period.

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"The company providing the coverage is betting you won't make a claim while you are willing to pay in case you need it," he writes. Russell says it's a better idea to take the money you'd spend on an extended warranty and put it in the bank. "Chances are you'll have enough to pay for repairs should they be needed."

Shopping around could save you a lot of money, says Iny. But buying services from a dealership may make sense for some people, he says. For one thing, dealers provide one-stop shopping. And, accessories and warranties provided by the manufacturer are usually a better bet than third-party products.

"Car makers usually provide a better warranty and more reliable assurance of quality control," Iny says. According to the APA, car dealers make typically mark up their manufacturer's warranty by 25-30 per cent.

If you can't afford to pay cash for an extended warranty or other extras, including them in low-interest dealer or manufacturer financing will cost you less in interest than the rate on your credit card, Iny says.

Do you buy extended warranties on your cars? Why or why not? Click here to add your comments.

E-mail your questions to globedrive@globeandmail.com

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