April 27, 2015 - by
When you are in the market for a used car, you are accustomed to asking a lot of questions about the car itself. You consider the car’s history, the cost, gas mileage and check out the reputation of the dealer. Additional protections available are often far from your mind until you are sitting down with the F&I manager, being presented a range of coverage plans like theft-recovery systems, a road hazard warranty for your tires, prepaid maintenance, paint protection, and the extended warranty. These warranties, sometimes referred to as ‘service contracts’, have the potential to be a great investment with the right consideration.
Generally, these extended warranties will kick in once the manufacturer’s bumper-to-bumper warranty has expired. The idea behind this coverage is that you’ll gain protection from increases in cost on parts and labor for necessary repairs over time. You can purchase extended warranties at any time before the manufacturer’s warranty expires and even after, though expect steep price hikes if you purchase it belatedly.
Does an Extended Warranty Make Sense for Me?
You’ll need to assess the benefits associated with an extended warranty to determine if it’s worth purchasing. The first and most useful question is how long you typically retain cars. If you like to change up your ride every few years, then an extended warranty is likely not a great option for you. The manufacturer’s initial coverage will likely still be in effect. If, on the other hand, you are the sort of driver who keeps your car until it is on its last legs, consider acquiring the warranty.
Who is Offering the Warranty?
- You want to select coverage backed by the automaker to ensure that you’ll retain the coverage wherever you may go. If the backer is your dealer or a local third-party vendor, you may not have national coverage. You may only be able to get repairs done through the dealer or third-party vendor locally.
- It’s also a great idea to read online reviews on the company offering the warranty, particularly if you are looking to add specialized extras like the theft-recovery systems and maintenance plans. The experiences of others can help you avoid potential pitfalls.
Take Your Time and Be Informed
A wise consumer is an informed consumer. Before you sit down to sign paperwork, do a little shopping around. Come prepared with quotes from other F&I managers at local dealerships. Much like you likely did when you started your search for a new car, shopping around on service contract pricing can get you a better deal.
Many times, F&I managers will tell you they are unable to wiggle on price. That may change if you present them with the same product from competitors at lower prices, so do your homework.
What Benefits are Offered?
Again, be attentive to the details of the service contract. The job of the F&I manager is to convince you that this is a perfect solution to your repair needs. Be aware that many parts considered ‘wear and tear’ will not be covered under the used car warranty.
There may also be levels of coverage, each with its own price and inclusions. Read the fine print before you sign to ensure you are getting the package that makes the most sense for you.
Further, know who is footing the bill for repair visits. You may be covered completely, you may be asked to pay varying deductibles for each covered visit, or you might even be required to pay the bill in full and ask for reimbursement.
Your Mileage May Vary
Not all car owners have the same repair needs. Consider your own driving history before purchasing an extended warranty. If your area has a lot of potholes and you end up with flat tires often, for example, it’s probably in your best interest to purchase road hazard protection. If you are in a theft prone neighborhood, the theft-recovery system also makes sense.
Another good way to get a solid calculation on the value of the service contract is to consider the out-of-pocket expenses you’ve had on vehicle repair in the last few years. If your expenses exceed the amount you’ll be spending on the warranty for that same duration going forward, then the warranty is likely a sound investment for you. Each car will have different repair needs, but it’s a good way to estimate the value of the investment.
The final consideration is the reliability of your car versus your peace of mind. Most modern cars have excellent reliability. You can weigh your used car’s track record against the assurance of knowing that if it does break down, it’s handled. If you go in prepared, ask the right questions, and know what you want, you are more likely to walk out confident in your investment.
Want to Know Even More?
Watch this informative video by Lauren Fix. She does a great job explaining what are some of the Pros and Cons of purchasing an extended coverage for your used vehicle.