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EXTENDED CAR WARRANTY- TOP 5 QUESTIONS in 2024 (Service Contract, Prepaid Auto Maintenance) THG
Jan 8, 2024
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Extended Warranty, Vehicle Service Contracts, Prepaid Maintenance
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Is it worth getting this stuff from a car dealer finance office? Five critical questions help you nail it down
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Hi, I'm Kevin Hunter, also known as the Homework Guy and author of Is That The Best
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You Can Do? This video brought to you by YouTube's best channel on car buying and selling, courtesy
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of the Homework Guy team and our super high intensity training for car buyers
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If you like the Homework Guy videos, check the merch shelf down below. If you want to sport some of our awesome swag, like this one right here, you just got
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done negotiating the price of your car and your salesman shakes your hand and says, I'm
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glad we made a deal or it's a pleasure doing business with you
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You breathe that big sigh of relief. This is where many car buyers fall into the trap of thinking it's over
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However, a visit to the number one profit producer in the dealership is coming up next
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The person known as the F&I manager or finance and insurance office
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You still have to sign a car contract before you leave, right? Today we're going to focus on a couple of specific plans that are going to land on the
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desk in front of you. Prepaid maintenance plans, vehicle service contracts, or anything that resembles what
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is widely known as extended car warranty. While extended warranty may not be the technical name for a plan that you're offered, everyone
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knows exactly what we're talking about. We'll jump right in right after this short message from the Homework Guy team
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Back to you, Kevin. Extended car warranties, also known as vehicle service contracts, can provide peace of mind
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to people purchasing a new car. Auto dealerships are particularly fond of them because they add an additional profit
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center for the dealer. First, let's cover some basics. Simply put, an extended car warranty is repair coverage that kicks in after the typical manufacturer
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auto warranty has expired. It is widely understood that an extended auto warranty will cover most major breakdowns
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and will, in theory, prevent you from busting your budget with the cost of parts and labor
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associated with car repairs. Sometimes an extended warranty is available through an automaker
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In other cases, they are third-party administrators. Here's an important fact for you to understand
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At any time, either when you buy the vehicle or at a later date, you have the option to
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purchase additional coverage, especially if the manufacturer warranty hasn't expired. You're under no pressure to buy it today or from the dealer you're sitting at, even if
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the finance guys say so. You can purchase an extended warranty after the manufacturer warranty expires, but you
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should expect to pay a higher price for it then. Now, are you a good fit for an extended warranty or prepaid maintenance or a vehicle service contract
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You should expect the finance office to put a lot of pressure on you to buy one of these plans
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And it starts with questions like, how long do you plan to keep your car
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Or do you worry about breaking down? And you need to protect your investment
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All questions and comments should be understood to be sales speak, not advice
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They aren't valid concerns, as if the finance manager is more concerned about your car and
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your livelihood than you are. So ignore all that pressure and fake concern and instead concentrate on five critical questions
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Number one, what have you typically paid for repair costs in the past
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Have you had good experiences with car choices you've made or bad experiences
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If you've had bad luck, I certainly hope you're not buying the same kind of car again
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You're not, are you? On the other hand, if you've had a great experience with your car choices and never even have
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so much as a flat tire, why are you buying road hazard, glass coverage, maintenance plans
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and worried about a warranty? I've never bought a warranty, but I also had an amazing record of buying great cars and
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I always do my homework on reliability. I base my decision also on how much I've spent out of pocket on repairs, even if I've had
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to fix my vehicles. Have I had expenses in the hundreds of dollars or has it been in the thousands of dollars
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If you've spent big money on repairs or a small amount on repairs, either way, you have
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to weigh that against the cost of the extended warranty. Of course, you won't have the same repair history on any two vehicles, but if you are
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buying a vehicle from the same carmaker, it stands to reason you're not going to be clueless
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about what you might spend. Number two, do you know what's actually covered
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Most extended warranties are not all encompassing. The repair that you fear most may not be covered at all
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Also many wear and tear parts, items that typically break or wear out are not covered
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by most vehicle extended warranties. To complicate things more, most extended warranties come in coverage packages, which sound like
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good, better, best or silver, gold, platinum. Each plan has its own price and level of coverage
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Take the time to read the fine print to determine what is and isn't covered
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You also need to know who will front the costs for the repair bill
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Are the repairs fully covered? Do you have to pay a small deductible or one of those great big fat ones
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Is it possible that you might be paying for repairs out of pocket and then have to submit
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these costs for reimbursement later? Some warranties are set up like that
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That's how some of them work. You also have to know if you can take the vehicle to any repair shop
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Many third party warranty providers limit the repairs to only the dealership or repair
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shop specified in the contract. Make sure that you know. Number three, who guarantees the extended car warranty you're buying
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Third party warranty companies have a very sketchy track record, but that doesn't stop
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dealers from selling them. If you are going to purchase an extended car warranty from the dealer, we recommend that
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you make sure that it's backed by the automaker, not just the dealership or some other company
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Manufacture backed extended warranties are good at any franchise dealer around the country
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who carries the same make of vehicles. A third party vehicle contract, on the other hand, is commonly only good at the dealership
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that sold it to you. Not always, but it's a typical trap
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If you are considering an extended warranty for a specific purpose, check for online reviews
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to see what others are saying about it. There's a lot written about any warranty that you might be looking at
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Number four, do you really need a warranty? F&I managers are great at making you feel like a complete idiot for saying no to an
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extended warranty, as if you're engaging in some form of financial suicide, driving
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away without their product. While it's true that a cost of repair bill can come along, cars are being built more
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reliable than ever before. When you consider how many people actually used the warranty they bought, data supports
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the idea that most people don't need one. J.D. Power's study support showing several vehicles steadily improving in reliability
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You've also heard me say several times that you ought to be considering just putting aside
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a few dollars each month to cover repairs. The fact that many people get caught in a bad place is simply due to the fact that they
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did nothing to plan ahead. I totally agree with Dave Ramsey's advice that you should be setting aside half of what
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you'd expect to pay for an extended warranty, and then have the discipline to use that money
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for the repairs it was intended to cover. For some of you, you can't sleep at night unless you're insured, every which way from Sunday
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You'll buy an extended warranty because it seems convenient, even if it's very costly
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You'd rather be comfortable having an insurance-based plan to cover repairs, and that's fine
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Just make sure you ask the right questions before you decide to get an extended warranty
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Number five, have you done your homework so that you know the best price for a warranty
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Time to shop for extended warranties while you're sitting in the finance office is a little too late
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Sure, you can sit there for 30 minutes checking things out, but proper research is best done
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long before visiting the dealership. The F&I manager at the dealership at which you're buying the vehicle might say that the
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price of the extended warranty is not negotiable. That's rarely ever true
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If you check with other dealers, you'll find that some of them do have a lower asking price
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for the same exact product. Expect the finance office to be willing to negotiate
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Keep in mind that the only benefit to getting an extended auto warranty at the time of your
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vehicle purchase is that you can wrap your warranty's cost into your financing
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But unless you've shopped in advance and can negotiate a lower price for the extended warranty
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on the spot, this route is likely to cost you a lot more money in the long run
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Here's how you can get that. Get a price quote from the finance office for the warranty you want before you visit
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the dealership, and then shop it around by phone to other dealerships
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You'll be surprised how low many will go and with what you can learn about the different
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packages and the actual warranty cost. After you've done your homework and discovered what the actual cost of the warranty is, if
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you still want it, make an offer that isn't a cent over $300 above the actual cost of
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the warranty. You heard me right. You can buy any warranty on the market at $300 over actual cost
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The truth is, many warranties without any negotiation are offered at prices even double
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what the actual cost is. Don't pay that big fat price. If you want the warranty, always negotiate it
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Never roll over and pay what you're asked on the first pass
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As return viewers through the Homework Guy channel know, there are tons of videos on this channel
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some time ago on the channel. No problem. Just make sure you check out all of the great videos we have
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You guys rock. I'm Kevin Hunter. Until next time, take care everyone
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