The purpose and principal benefit of undercoating is protecting vehicles against rust. Undercoating is applied to the inside of the vehicle's body as a barrier between the exposed metal and the elements. The greatest drawback of undercoating is the cost. It can be an expensive process that is not always necessary.
Generally, undercoating is most beneficial for vehicles primarily used in places where inclement weather can have a negative impact. Even in areas that have snowy winters, undercoating may not be necessary, as the majority of modern vehicles are designed to be protected against rust. Even in climates like Chicago's, where the winters are quite intense, most cars do not show rust until about their fifth year of operation.
Salt is often the biggest concern when considering whether undercoating is worthwhile. Vehicle owners in areas that receive heavy snowfall, such as South Dakota, or that have naturally salty air, such as Hawaii, may want to consider undercoating. Salt water tends to rust cars at a greatly accelerated rate.
Undercoating is most expensive when purchased from a dealer. However, there are kits and even third-party services that allow owners to undercoat their cars at a fraction of the price. Typically, deciding whether to purchase undercoating comes down to evaluating the cost against the extremity of the local climate.