YOUR MONEY: Pros and cons (mostly cons) of an extended warranty

Question:

Any thoughts on an extended warranty for a 2011 Toyota Fortuner with almost 200,000km on the clock? The quote was about R340 a month on a month-to-month contract. Sounds like fully comprehensive cover, but I am waiting for the policy to be submitted. Is it a good deal? Or should I rather put extra money into my emergency fund? I’m concerned about the age and mileage of the car.

— A Fat Wallet community member

Answer:

Cars these days really do last a long time. You’ve done a lot of mileage but if your vehicle has been serviced regularly then it should be driving fine, and a quick check with some other Toyota owners found a bunch with many more kilometres on their cars, all doing great.

Second, check the small print of the policy: what is covered and, importantly, what is not.

Check with your mechanic about the eventualities that are covered; how likely are they to happen and at what cost? From this you can get a sense of whether you need the policy and what the out-of-pocket costs would be if you did not have it.

While R340 a month is not a lot, it does add up to more than R4,000 a year and if you pay for another five years, that’s R20,000. If you already have a good emergency fund I would seriously consider paying the R340 a month into that and essentially self-insuring the extended warranty.

— Your Money team

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