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.