Extended Warranties - Financial Car Buying tip

  Contrary to some beliefs. Extended warranties are a valid product and they do basically what they say. They cover items beyond the factory's specified original warranty. Depending on the extra coverage you purchase. An extended warranty may cover more items than the factory warranty and allow you to stay under warranty for a period of time and/or miles beyond the factory warranty's life. They could allow you to do anything from extend a powertrain warranty by a year to extending "bumper to bumper" warranties for years beyond factory conditions.

  Generally speaking. When I sold cars I frequently would inquire on the various costs of these warranties for my own personal knowledge. I can honestly say I never felt anyone was getting their heads ripped off by the dealership for the price of the coverage they were receiving. Like anything else that the Finance Office will be selling though. They do carry a markup and that finance officer is trying to make a commission. For the most part they usually were marking them up around 25%. Warranties they sold for $1600 were costing them around $1200 in just one example. That was also the price I saw most warranties start around. From that point. Upgrading to a Gold or Premium coverage usually only costed hundreds more rather than thousands. Kind of like buying in bulk. The more coverage you buy in the beginning, the better break they give you on the cost. Upgrades can also include things like reducing or eliminating deductibles all together and/or adding roadside assistance and covering rental cars while vehicles are being repaired.

  Extended Warranty cost is gong to vary greatly from brand to brand. The costs are based on the repair trends per vehicle. Some vehicles are of greater financial risks than others and does reflect what the costs of the warranties will be. I have seen the costs on some European brand extended warranties and found them to be astronomical. However, the reality is they can be vary expensive cars to repair and getting someone to just pop the hood and look at it could cost $500. Just one more reason an extended warranty may be something you may want.

  I won't endorse buying such coverage outside of your dealership though for a number of reasons. One reason being. I don't think you will find any better coverage out there for the money on your own. I have seen people get burned buying their own warranties and anything that they thought was covered really wasn't when it came down to using the warranty. Dealerships use reputable companies for extended warranties simply because the store's reputation is at stake. By buying your extended warranty though a dealership you also have a mediator between you and the extended warranty company if there is ever a dispute. The finance officer is going to have a good understanding of the warranty terms and will review these with you upon purchase. Buy a warranty from a third party company and you could find yourself frustrated and trying to take care of matters over the phone rather than just going to the dealership and getting repairs swiftly handled. Buying the warranty at the dealership will also make cancelling the policy later much easier should you ever chose to do so. Yes they can be cancelled at any time and will be pro-rated to you based on the amount of unused coverage.

  Let me give a personal example to help extenuate the value of an extended warranty. A personal friend of mine was very interested in a vehicle we had for sale. A vehicle I personally did not hold a high regard for quality on. I even told her that over and over again. However, she wanted what she wanted and her heart was set on the vehicle. There was no talking her out of it. I told her though. The only way I would sell her that vehicle is if she bought extended coverage because I wanted to keep her as a friend. She was reluctant at first because she was so payment conscious and the warranty was adding $30 a month to her payment. She did finally agree though and for the sake of our friendship I was so glad. As nice of a vehicle as it was. As I predicted. It turned out to be all the mechanical nightmare I thought it would be. Her navigation and A/C compressor took a crap on her in the first year of owning it. If you have any idea what these two repairs cost you will quickly understand the value of one of these warranties. To put it simply. She spent around $2200 on the warranty and had well over $3000 worth of warranty work done. Do the math. The warranty actually saved her money in the end and we stayed friends.

  I wanted to write this short article to alleviate any concerns about buying extended warranties. They are a legitimate product and the only "smoke and mirrors' in them is what it will cost you so don't be shy about dickering on the price of one. Personally, I think they are a great product and I would consider buying one if I were to buy a car. Based on a vehicles reputation for quality though I can say there would definitely be times where I wouldn't be as concerned about buying an extended warranty. If you are someone unlike me though that repairs their own vehicles. The peace of mind you get from these warranties could carry great value to you for the extra $20-$40 a month. Like any type of insurance. We love it when we have it but hate to pay for it when we never seem to need it. If there is a financial car buying tip I can give on extended warranties it's buy them at the dealer and at least give them a consideration.

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