You've
been there for hours. You've thoroughly studied every picture in the
dealer's office. You're feeling numb from long negotiations. You are ready
to just give in and get your new car so that you can drive home
fast.
This is when the real hard sell begins.
The finance manager will suggest
that you purchase an extended warranty. The extended warranty is actually
an extended service contract that covers the costs of repairs and problems
after the original warranty expires.
Don't feel pressured into making a
split second decision. You might not need an extended warranty.
If you buy and trade cars
frequently, say every three or four years, you won't need an extended
warranty. The vehicle will still be under the original warranty when you
trade it in.
But if you are keeping the car for a
long time, you should ask a few questions:
Are you able to handle
surprise expenses?
Will the cost of replacing parts bust your
budget or your emergency money?
How long will you keep the
car after the warranty expires?
Would you be less stressed knowing
that major repairs are covered under an extended warranty? Or would you
rather just risk it?
Think about the car in question. New
cars are pretty reliable, but when repair costs are necessary they can be
quite high due to the computers and technology required to diagnose and
repair new cars.
If you do plan on keeping the car,
you might want to buy an extended service contract. But you don't have to
buy it right then - you can buy it at any time.
The price isn't set in stone either. Feel free to
negotiate. Ask at several dealerships, they all charge different prices.
You will
receive the lowest price if you purchase the
warranty within the first year of ownership of the vehicle.
Don't forget that an extended
warranty starts the day you purchase it, not the day the old warranty
expires. You don't need to have double warranty protection. So, it may
actually pay off to wait.
There are two types of extended
warranties: those backed by the manufacturer and those offered by
independent companies.
An extended service contract backed by the
manufacturer is the best choice. This type of contract will cover a wide
range of repairs and services. The repairs can be done at any authorized
dealership. You don't pay for the repairs unless your
contract
includes a deductible.
An extended warranty from an
independent company, also called an aftermarket warranty, is often cheaper
by as much as 50%. But what you are getting varies widely from company to
company. Shop around and ask questions. Find out what the repair network
is - what garages are authorized to do repairs and where they are
throughout the country.
Aftermarket warranties require that
you pay for the repair upfront and then they will reimburse you. This
could take weeks. Make sure that you ask about the process before you sign
any paperwork.
There are a lot of bad extended
warranties out there. Be wary of unsolicited offers. Do business with
reputable companies that you know and trust. Often you can look to your
local credit union for an extended warranty.
Some dealers will try to sell you a
dealer warranty. This isn't the same as a manufacture's warranty. Often,
the repairs and services must be done at the dealership you buy your
vehicle from. If you break down out of town, you are out of luck. If the
warranty does not cover expenses when you are traveling, steer
clear.
