Buying a new car can be quite an investment. Depending on the make and model you purchase, you can easily spend $25,000 or more on a new vehicle.  Of course you want to protect that investment and your car dealership may offer you an extended warranty in order to do so. However, you need to consider whether or not you need to purchase an extended warranty on a new car.

What is an Extended Car Warranty?

Before you decide whether or not you need one, you should be aware of what an extended warranty for your car is and what it covers. An extended warranty for a new automobile is really a service contract that covers the cost of repairs on your vehicle. They can be purchased at the time you get your new car or they can be purchased before the manufacturer's warranty on your car expires.

If you purchase an extended warranty at the time you get your car, the price of the warranty is often rolled into the purchase price of your vehicle. However, with most car manufacturers offering standard bumper-to-bumper warranties of 3 years or 36,000 miles, you may wonder if you really need an extended warranty.

Do You Really Need an Extended Warranty?

Depending on the car you purchase, an extended warranty may be a waste of money. If you are purchasing a vehicle with a reputation for reliability, you may not ever use an extended warranty if you purchase one.

While they can be a good way to cover an expensive repair, if you don't have use for it before it expires, you may end up paying hundreds of dollars for nothing.

Before you make the decision to purchase one, find out what the extended warranty covers. They often only cover the cost of repairs to the power train of an automobile, which is the engine, transmission and the parts that move the wheels of your car.

While repairs to these parts can be expensive, your extended warranty is not going to cover the cost of parts that simply wear out over time.

Extended Warranty Alternatives

Since you have an extensive warranty on your vehicle when you purchase a new car, you can open an account specifically for repairs on your car and use that when you run across problems.

Set aside at least $50 per month to pay for any car repairs you may need in the future. If you have problems before the manufacturer's warranty expires, you are going to be covered and in the meantime, you can have a nice sized account set aside for when the warranty expires if you start saving money for repairs when you purchase your car.

Most cars probably won't have major problems until they get to be about 7 years old. By that time, you can have a good amount of money saved up for any repairs that you need or, if necessary, a good down payment on another car if the repairs needed are too expensive.