Is Mechanical Breakdown Insurance Better Than an Extended Car Warranty?

When you buy a car, the salesperson is likely going to offer up a bunch of add-ons before you drive away with your new ride. Two of the most common add-ons are extended car warranties and mechanical breakdown insurance. Both forms of optional coverage promise to shield your finances from expensive surprise repairs.

But both also come with exclusions and restrictions that are important to know about before buying either.

As the cost of cars rise, you're left wrestling with the need to keep that up-front cost down while weighing the risk of costly repairs down the road. Here's what you need to know about mechanical breakdown insurance, how it compares to an extended car warranty and whether it makes sense to buy either one.

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What is mechanical breakdown insurance?

Mechanical breakdown insurance is very similar to an extended car warranty. In the first three to five years, while your car is still under a standard warranty, it acts like supplemental protection to pay for covered repairs when your warranty won't. After that standard warranty expires, you can maintain mechanical breakdown insurance for a few years longer, and it will continue to cover a lot of the same things your warranty used to cover.

The insurance is usually sold as an add-on to your car insurance. But some insurers and financial institutions will offer it as a standalone policy. Here's how the coverage works for standard mechanical breakdown insurance:

• The insurance will cover breakdown-related repairs when your standard warranty fails to cover it or after your warranty expires.
• Coverage is usually limited to internal mechanical issues, not externally-caused damage. For example, weather-related damage would be excluded (for that, you need comprehensive insurance). But if the transmission suddenly fails or your air conditioner stops working – and the failure isn't related to an external cause or to misuse on your part – your mechanical breakdown insurance may cover it.
• Most policies come with a deductible, ranging from about $50 to $250 per covered repair.
• It excludes routine maintenance costs, damage related to normal wear and tear or damage that was caused by improper maintenance. Sometimes, other parts or components exclusions also apply.

The policy requirements will vary from one provider to the next, but in general, you have to meet the following criteria in order to get mechanical breakdown insurance:

• Your car must be new, usually under 15 months old and with fewer than 15,000 miles.
• You must be the first owner of the car.
• You can renew the policy annually, but most providers won't offer coverage once the car hits 100,000 miles or is more than seven years old.
• You will need to keep up with all recommended maintenance, including oil changes and tire rotations. Without records of regular service, the insurer may deny a claim, citing improper maintenance on your part.

How much does mechanical breakdown insurance cost?

On average, expect to pay around $100 per year for mechanical breakdown insurance. Rates will vary by your car's make and model, though. If your car is more expensive to repair, the coverage will be more expensive, too.

This makes mechanical breakdown insurance a cheaper alternative to an extended car warranty, which can run between $1,000 to $3,000 total for a warranty lasting three to five years. However, the insurance comes with a deductible, while warranties don't require you to pay anything at all for a covered repair.

Mechanical breakdown insurance vs extended car warranty

As mentioned above, mechanical breakdown insurance and extended car warranties are very similar in terms of what they cover. Both give car owners a way to extend the protection that a standard car warranty provides. Both cover many of the same kinds of repairs and carry very similar exclusions.

With that said, there are a few key differences to consider if you're trying to decide which one to buy:

• Mechanical breakdown insurance is usually cheaper per year. But plan to pay a deductible for any covered repairs.
• The insurance can usually be added on to your existing car insurance, meaning you can use the same claims process you would for an accident. But it also means you'll be locked in with your current provider for as long as you want to maintain the added coverage. That means you wouldn't have the flexibility to shop around and switch car insurance to keep your premiums low.
• It can be more comprehensive than some extended warranties, as it's less likely to exclude entire systems or components.
• You can use any licensed repair shop you choose with mechanical breakdown insurance. With a warranty, you're usually required to take your car to the dealer.
• Extended car warranties are less restrictive about who can buy them. You can wait until your standard warranty is about to expire to buy it, and you can even get an extended warranty on used cars. Neither of those is possible with mechanical breakdown insurance.
• Extended warranties may last longer than mechanical breakdown insurance or offer coverage for higher mileage cars.

In short, an extended warranty tends to cost a little more (though you can and should negotiate the price), but often means $0 out of pocket for a covered repair. Mechanical breakdown insurance is usually a lot cheaper, but you'll be on the hook for the deductible for any covered repair.

Both can be rendered useless if you don't meet strict criteria. Many of the same things that can trigger a warranty to be voided can result in your mechanical breakdown insurance claim being denied. That includes things like a lack of proper maintenance or making aftermarket modifications to the car.

Should you get mechanical breakdown insurance?

To decide if it's worth buying mechanical breakdown insurance at all, you'll need to do some math. Most owners will spend around $1,000 to $1,500 over the first five years of ownership on maintenance and repairs, according to Consumer Reports. After that, costs jump to about $4,000 to $5,000 spread over the next five years.

A lot of that money, especially in the first five years, is going toward routine maintenance that you would still be responsible for, even with mechanical breakdown insurance or an extended warranty.

Meanwhile, the average repair cost after a breakdown is about $218, according to a 2019 Agero analysis. Though that's likely a little higher now with inflation and tariffs, and costs can vary widely, depending on the cause of the breakdown. Still, that means you might be on the hook even for a covered repair if it costs less than your plan's deductible.

So, in order for mechanical breakdown insurance to pay off, the repair needs to be unrelated to normal wear and tear, on a car that is up to date on all of its routine maintenance, and the covered repair needs to be higher than your deductible.

If your car were to suffer a serious breakdown requiring an expensive repair within the time frame that your mechanical breakdown insurance was in effect, you could potentially save thousands. But the odds of that happening are pretty slim.

Cars under 10 years old are about half as likely to break down in any given year as older cars, according to AAA. Keeping up with routine maintenance further reduces that risk. And some of the most common repairs a car of any age will need – like battery or tire replacements – are usually excluded anyway.

There's a high chance you'll end up paying for coverage that expires before you can use it. You'd typically be better off just skipping the mechanical breakdown insurance and saving that cash in a high-yield savings account to pay for repairs as they come up.

With that said, more expensive cars might be an exception to the rule. If you have a luxury or imported car with expensive parts, even a minor repair can end up costing thousands.

The same is true for cars with more complex technology and components. In these cases, a mechanical breakdown insurance policy could pay off. But you still need to check your policy documents carefully to make sure those costlier parts aren't excluded.

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