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Evaluating Extended Warranty Offers

Extended Warranty Advice:

One of the biggest money makers for automakers is extended warranties. An extended warranty is just a service contract that kicks in when your warranty expires. It may also offer other services during your standard warranty term such as oil changes and flat tire repair.

After you have made a deal and decided on the car to purchase you end up sitting down with the finance manager and the real sell begins. The finance manager will try to convince you that you should protect your investment with an extended warranty. He or she will begin telling you all the things that can go wrong with your vehicle and how expensive it can be. The deal will push the extended warranty as hard as they can because frankly it’s a huge money maker for the dealership and the finance manager who gets a big commission on every warranty sold. The markup on extended warranties is easily 100% or more when purchased from the dealer.

Most cars come with good standard warranties, usually for three years. If you are planning on keeping the car for longer than three years and do want the peace of mind of an extended warranty to prevent any large unplanned expenses you can still get a good deal on one by shopping around. You can try to negotiate the price of the extended warranty with the dealer; they do have room to work with on the price usually. Another option is to simply shop around for a good price on an aftermarket warranty. An aftermarket warranty is offered through a third-party company. An extended warranty from an independent company may cost half as much as an extended service contract from the carmaker. You need to be careful on aftermarket warranties because the quality of this kind of contract varies widely from company to company so do your research and read reviews on the company before you signup for the warranty.

The Bottom Line:
If you do decide that the extended warranty is right for you make sure you get the best price. Never take the first offer that the dealer presents you with, if you negotiate with them you may be able to get them to come down up to 50% on it. If you cannot get the finance manager to move enough on the price then look into buying an after market warranty or call that dealer or another dealer from the same automaker at a later date and ask them about purchasing an extended warranty, they may be eager to sell you one.

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