As I mentioned in the Finance section, the Finance Manager will offer you a menu with some products that you can purchase at an additional cost. These will of course raise your payments. Some people would go in to the finance office with their minds already made up that they weren’t going to purchase anything additional. Some think they’re not worth it, others can’t afford a higher payment and others thought they were just junk products. Dealerships do make additional profit from selling these products and the Finance Managers make commission off of them as well. Are they worth it?
Probably the biggest product they push is an extended warranty. If you’re purchasing a new car, it will come with the standard warranty. Typically that warranty is 36 months/36000 miles comprehensive and 60 months/60,000 miles power train. Some manufacturers’ warranties may vary somewhat from that but that is pretty much the standard. If you purchase a used vehicle, if it’s a certified pre-owned, it will probably come with some warranty as well. Some used cars will not come with a warranty. Every dealership is different on what type of warranty would come with a pre-owned vehicle. Some may give a 30 day/1000 mile warranty, some cars may be sold as is.
SHOULD I BUY AN EXTENDED WARRANTY
An extended warranty is similar to buying insurance. I’ve been a homeowner most of my adult life and have paid a lot of homeowners’ insurance over the years and collected very little in return. There is usually a deductible and I could handle replacing a faulty window for a couple of hundred bucks but when I had to replace a roof at a cost of $7000, I was glad I had insurance.
It’s great that auto manufacturers put a nice warranty on their vehicles, but usually not a lot goes wrong during your warranty period. It’s after your warranty expires that you start having problems. If your transmission goes bad at 61,000 miles, can you afford a $3000 bill? So there is much to consider here. How many miles will you put on the car annually? How long will you keep the car? What’s the deductible? What does and doesn’t it cover? Usually they will offer you different levels of coverage and call them Silver, Gold and Platinum or something along those lines. Each will come with varying levels of coverage. Be sure you understand the details. Many times people take their car to get it worked on and find out that something is not covered with their extended warranty. Ask questions and have the Finance Manager go over the coverage with you.
The prices of the warranties are negotiable. Dealerships typically mark up the price of the warranties anywhere from 100-200% so there is room to deal. Shop around beforehand so you have a good idea of what’s available. You don’t have to buy the warranty at time of purchase. You can buy it later. It is convenient at the dealership because you can include it in the financing if you want but not mandatory. They may pay the warranty company $700 and offer it to you at $2100. Ask for a better deal. If you say no, it’s too expensive but you would consider it perhaps at a lower price, they can do better. This is true whether you’re purchasing a new or a used vehicle. On a used vehicle, the price and coverage available will depend on the make, year and mileage. If it’s too old or too high of mileage, an extended warranty may not be available, or may be quite expensive. But always negotiate.
OTHER PRODUCTS
The list may be long of what they’re offering. The following are some of the standard ones:
Gap Insurance – If your car is totaled and you owe more than it’s worth, this will usually pay the difference. Some though may only cover a certain percentage. Make the Finance Manager explain the details. Also, check with your insurance company to see if gap is included with your policy or if it’s available. It’s a pretty good investment and not extremely expensive but do your due diligence. If you’re putting a large down payment on the vehicle, it may not be necessary.
Exterior Protection – In my opinion, not worth it.
Windshield Protection – In my opinion, not worth it. Check with your insurance company. You probably have some type of coverage. It may be a separate deductible from comprehension or collision.
Road Hazard for Tires – Your tires on your new car come with a warranty. That warranty is usually directly from the tire manufacturer, not from the vehicle manufacturer. Like other warranties, it covers defects but won’t cover a flat from a road hazard or anything other than from a defect in parts or workmanship. Many dealerships will offer you a hazard package. Again, it’s negotiable. I always buy my tires from Discount Tire. I’ve had terrific service from them and I always buy the road hazard insurance. I’ve had to use it a couple of times and it pays off. The package the dealership offers may also include damage to wheels as well as the tires.
Again, I would suggest going in to Finance with an open mind but remember that the price on most products is negotiable.