In addition to a standard warranty, CarMax also offers an extended warranty (technically it's called a vehicle service contract) under the brand “MaxCare”. This article hopes to give some guidance on whether the extended warranty is worth the price, what elements are covered, whether there are cheaper alternatives and its cancellation policies.
The extended warranty MaxCare is not perfect for everyone, but hopefully we can offer some guidance on whether it's right for you as a consumer and guide you through some of these stressful steps of the car buying process.
CarMax Warranty vs. Extended Warranty: What’s the difference?
All CarMax cars come with a CarMax Limited Warranty for 4,000 miles or 90 days. This product is officially a “warranty” since it's standard on all used vehicles, and doesn’t require the consumer to pay out of pocket for this contract, and doesn’t require any payment from the customer for any repairs performed.
The official documentation for this warranty is not available online but in general these warranties cover:
Mechanical, Electrical, and most moving parts:
All Mechanical components (e.g. Cooling System, Engine, Transmission, drivetrain)
Electrical Systems and components (e.g. alternator, lighting, ECU)
Climate Control Systems and Subassemblies
Lighting and accessories
Emergency Roadside assistance and rental reimbursement in most cases
The warranty typically does not cover:
Cosmetic items (such as bumper damage, or paint peeling)
Wear items (brake pads, clutches, wipers, tires)
Aftermarket additions (custom stereos, brush bars, etc)
Any mechanical item impacted by aftermarket parts (e.g. suspension damage caused by lift kits)
The MaxCare CarMax extended warranty (officially an extended service contract) works slightly differently.
The customer has to choose to purchase MaxCare at a CarMax Dealership - it does not come with the vehicle, and it can only be added at the time of vehicle purchase. Often users will finance the MaxCare plan over the life of the loan.
Firstly, the consumer can choose their coverage mileage and time amongst several options (often the warranty plans offer coverage up to 75k, 100k, and 125k miles).
The user also chooses the “deductible” or the amount the user wants to pay for each repair (often $50-300) before the extended service contract covers the additional expense. (E.g. if you have a $1,200 repair, you pay the first $300 then MaxCare covers the remaining $900)
The Extended Warranty is not administered (managed) by CarMax. Instead its managed through third party (so you will not be dealing with CarMax directly but with their warranty administrator). CarMax themselves list up 3 warranty administrators for their MaxCare warranty program listed here.
This warranty is only available to purchase at the time of purchase.
The coverage is similar to the 90 days warranty. It should also be noted that neither warranty covers standard maintenance services - so oil changes, brake pad replacement, and other normal regular maintenance all come out of pocket.
Should I get the CarMax Extended Warranty (MaxCare)?
Here’s the big question for you as a new owner - is purchasing the Extended CarMax Warranty worth it on a used car? I think this really depends on a number of factors:
What is the expected repair costs of the vehicle you are purchasing and how does that compare to the warranty cost?
Could you handle the cost of a large repair without undue financial stress?
Can you find an alternative service contract or warranty for cheaper?
How much is convenience worth to you?
Question 1: What is the expected repair cost of the vehicle you are purchasing and how does that compare to the MaxCare cost?
On average, Maxcare CarMax warranties are making money. So on average the carmax customers spend more money buying a MaxCare service contract than what the warranty pays out in repairs after factoring in for the deductible, denied claims, and un-cancelled contracts. For a normal dealer these plans make about $500-1000.
But, these figures are AVERAGES and so often there’s examples where the CarMax MaxCare Warranty is underpriced relative to the expected repair costs. Doug Demuro famously covers such examples for his Range Rover on his blog here.
In order to find some of the expected repair costs for a given make model, RepairPal is one of the best resources to find these costs, as well as Edmunds. Don’t forget to calculate the cost of the deductible when comparing CarMax Maxcare contract to the repair costs. Here’s an example below for a 2015 Nissan Altima SL with 30,000 miles covered over 5 years or up to 100k miles:
In this case above, we can see that the MaxCare plan cost is expected to be cheaper than the out-of-pocket expenses even when accounting for the deductible and interest expense incurred.
Question 2: Could you handle the cost of a large repair without undue financial stress?
Since warranties are often money-makers on average it's generally a good idea NOT to get them. That said, often these warranties can be a good means for financial discipline and protecting against extreme downside that might ruin your car experience and cause undue financial stress. Let’s take a money-making warranty case to make a point below.
Suppose you’re about to buy a 2010 Mercedes SL63 where the engine fails 1% of the time at a cost of $20,000. So, the average repair costs is $200 (1% x $20,000). As a company, CarMax can make money on the warranty by charging $500. And on average, this warranty is not a good financial decision since the repairs costs are only $200 expected vs. $500 cost.
However, if you ARE the 1 customer who has a $20,000 engine failure, you would be ecstatic to pay the $500. Not to mention, a $20,000 bill would cause other financial stress, and you may not even have the money to pay for this expensive repair. So now you’re left having to sell a broken vehicle, find new transport, and your perception of the Mercedes SL63 will be forever ruined.
So if the “bad luck” of expensive repairs could bankrupt you, cause undue stress, or ruin the vehicle experience than an Extended car warranty could be a safe means to buy peace of mind and avoid “car induced bankruptcy”.
Question 3: Can you find an alternative extended service contract or warranty for cheaper than the CarMax Warranty?
Up until now, we’ve focused on whether to buy “the CarMax warranty” or not to buy. The reality is there’s a third alternative - buy an extended warranty/service contract through another third party. Before buying the warranty from CarMax, you can also compare warranty options through a variety of different warranty companies:
Make sure to be comparing plans with similar plans, deductibles, and mileage limits to get comparable costs. Additionally, ensure you vehicle doesn't already have some existing factory warranty coverage. For many car companies, the manufacturer's warranty is often still valid until 36,000, 50,000, or 100,000 mile intervals for the new car.
Question 4: How much is convenience worth to you?
Another benefit of CarMax’s MaxCare warranty - you don’t need to think too hard when your car requires unscheduled repairs. Instead of price shopping repairs, getting cost estimates, and renting a car while yours is in for repair - you can just drop off your car at your favorite repair shop and get a rental car through MaxCare. Additionally, if your vehicle fails on the side of the road - the Extended CarMax Warranty even covers roadside assistance, towing expenses and other emergency roadside needs.
So while it might be possible to find cheaper alternatives, save money on repairs longterm, the CarMax Maxcare warranty just helps reduce the need for you to think too hard about repairs and maintenance.
What are the consumer reviews on the CarMax Warranty?
Consumer and third party reviews on the MaxCare extended warranty are mixed (but we’ll add our own commentary here).
Consumer Affairs Review - 2.1 / 5.0 Stars
Motor 1 Review - 3.5 / 5.0 Stars
Best Company Review - 3.5 / 5.0 Stars
As an extended service plan, the CarMax Warranty is better than these ratings suggest. Unfortunately, the majority of reviews come from users have experienced major (uncommon issues) and the vast majority of consumers have positive experiences.
If you read closely many of the reviews, coverage is often denied for legitimate reasons (“the cost of repairs exceeded the cost of the vehicle”, “the car was driven without coolant”).
Can I cancel my Extended CarMax Warranty (MaxCare Plan)?
Most people don’t know that the CarMax MaxCare Extended Service Plan can be both (a) transferable and (b) cancellable.
To transfer your MaxCare warranty to the newest buyer, there’s no easy online forms. In addition, not every MaxCare plan is transferable, often it varies state by state. For your specific policy, please check your policy documents, and call MaxCare directly at (800) 519-1511.
Luckily ALL CarMax MaxCare plans are cancellable. From CarMax’ own page “You may cancel your MaxCare plan at any time. The amount of your refund is calculated based on a pro-rata term and/or mileage and may be subject to a cancellation fee. If you financed your car through one of CarMax's finance sources, any refund amount will be credited to your finance account.”
You’ll be reimbursed based on remaining mileage or time (normally whichever is less). So if you’ve got 24 months remaining on a 36 month contract (and have driven less than ⅓ of the allotted miles) then you’ll be eligible for a 66% refund.
How do I book repairs with MaxCare?
CarMax partnered with RepairPal to make booking maintenance and repair. RepairPal is a nationwide network of certified ASE repair facilities and service centers that can help find good, reliable, and convenient mechanics for car repairs.
Booking these repairs is as easy as:
Find a shop and book a repair here.
Ensure to bring in your MaxCare service plan details (you’ll need a policy number).
If the repair is overnight, book an accompanying rental car for pickup nearby.
Pay the repair-shop deductible after the repair is complete.
Lowering your monthly car payments
When you purchased your car and added your extended warranty / service plan, the dealer (e.g. CarMax) rolled the price of the protection plan into your loan. As a result, you likely don't even know exactly how much you paid for it.
Moreover, you're also paying interest on the loan you used to purchase the protection plan. Many people don't know that you can lower your monthly payments by refinancing your auto loan.
WithClutch.com is a fully digital platform that lets car owners like you do so from the comfort of their own home. No need to set a foot in a bank or credit union. You can lower your rate or get cash in as little as 20 seconds.
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