How to Decide if You Need Mechanical Breakdown Insurance

Mechanical breakdown insurance isn’t mandatory. Your vehicle’s value, and your extended car warranty can help you decide.
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Auto insurance is mandatory in the U.S., but mechanical breakdown insurance is left to the buyer’s discretion. In order to make the right choice, you need to understand what mechanical breakdown insurance does (Part 1), and how it benefits you. You also need to understand the value of those benefits in relation to your personal car (Part 2), and knowing what your extended warranty covers (Part 3).

Part 1 of 3: How to understand mechanical breakdown insurance

While car insurance protects other drivers’ property and finances from your own errors, mechanical breakdown insurance is for your car alone. Whenever part of your car breaks, even if it isn’t due to an accident, mechanical breakdown insurance helps with the cost of repairs and replacements. Vehicle insurance is basically a legal protection. Mechanical breakdown insurance protects against wear and tear.

Part 2 of 3: How valuable is your car?

Before you buy optional insurance, you have to decide if your car is worth the additional cost. After all, mechanical breakdown insurance is about protecting an investment. If your car does not have enough value to validate further investment, then you should reexamine your options. Contributing factors to this decision range from your lifestyle to your car’s resale value. Your car’s value may depend on:
  • Age
  • Make/model
  • Mileage
  • Recent major repairs
  • Average commute
  • Failing secondary systems
These points all boil down to a single factor: how long do you expect your car to continue operating? If you drive an old car and put up with the occasional inconveniences so you can build up your down payment for a new vehicle, it probably doesn’t make sense to spend extra money on breakdown insurance. However, if you need that old car to stay operating for another year or two so you can get to work every day, then the slight cost of mechanical breakdown insurance may prevent further, more costly setbacks.
The most valuable cars are new cars. Since vehicles begin losing value as soon as they roll off the lot, it’s important to ensure your investment will serve you for as long as possible. Your car will not fetch the same price you paid for it, even if you sell it a day after bringing it home from the dealer.
Mechanical breakdown insurance allows you to drive your car longer, and it also protects resale value. If you can fix minor issues as they develop, you will face fewer major repairs in the future, which will appear on the vehicle’s history report when it comes time to sell.

Part 3 of 3: What does your extended car warranty cover?

Extended car warranties cover very different services depending on the package you selected and the amount you paid for it. Basic, mid-level, and premium warranties cover specific systems tied to price-tiered packages. The greater the chance you’ll actually use the warranty, the more it will cost upfront.
For example, if you have a basic extended car warranty, the warranty may only cover engine and transmission problems. New cars rarely suffer from such major setbacks until well after your extended warranty has expired. A premium warranty usually covers everything from the air conditioning to your brake lines and pads. Mid-level packages fall in the middle.
Mechanical breakdown insurance fills the gaps left by extended car warranties. If you recently bought a new car, but you only selected a basic or mid-level extended warranty package, mechanical breakdown insurance can protect your investment. Supplementing an extended warranty with mechanical breakdown insurance may also help you secure lower rates.
If you buy a used car, your chances of receiving any kind of warranty drop dramatically. The lower costs of buying older vehicle trade with value. Not only do you pay for a shorter lifespan for your investment, but you also lose the perks of buying new. Of those perks, extended vehicle warranties are probably the most valuable.
Second-hand vehicles have a higher chance of breaking down, and while you may pay a higher premium for mechanical breakdown insurance, it will help you keep your vehicle running longer. Since these vehicles rarely come with extended warranties, mechanical breakdown insurance acts as a safety net.
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