You ask your friends for opinions on the possible cars you might purchase, and most of them will recommend you something that they believe are reliable. The car companies and salesman will have you believe that today’s cars are more reliable than ever before. Therefore you can skip the extended warranty, right?
You’ve done all the research and due diligence. The car you are about to sign for, in the finance office, carries a very high reliability score on many surveys, magazines, and websites. But, the finance manager makes a convincing case on why you need the extended warranty. You never buy extended warranties for anything you purchase, so why should you purchase extended warranty on a car?
Ask yourself these simple questions.
How long are you going to keep your car?
That is the first and the most important question you should answer. Most manufacturer’s basic warranties (bumper-to-bumper) are 3 years or 36,000 miles and 5 years or 60,000 miles on the powertrain/drivetrain (engine and transmission). If you are going to keep your car for more than 4 or 5 years and/or 50,000 miles, you should lean towards getting the extended warranty.
The reasons for the extended warranty will vary between the make and model you’re considering, but most new vehicles since 2005 will carry at least 8 computers (electronic control modules) and over 200 sensors onboard. Some makes protect these electronics better than others, and some cut cost by using inferior pieces. Another big factor is that most people think that drivetrain warranty is enough. Remember, your car is more than just engine and transmission. You have suspension, steering, braking systems, cooling systems, interior and exterior trim pieces, and other electronics.
Most manufacturers realize that the average vehicle ownership in the U.S. is only 2.8 years (until 2007 and in 2008 it rose to 3.7 years), and major automotive ownership surveys talley scores for the first 3 years of ownership. The most famous industry survey, the J.D. Power and Associates’ Initial Quality Score is only for the first 90 days of the ownership.
What are you buying?
If you are buying a Japanese brand such as Honda or Toyota, you probably will shun away from purchasing extended warranties. On their bread-and-butter vehicles like Civics, Camrys (4 cyl), Corollas, Accords (4 cyl), Tacomas (4 cyl), you will probably be okay foregoing the extended warranty. The general rule of thumb is that no matter what you’re purchasing the more power, moving parts (4 wheel drive), and/or electronics and gadgets the car has the more you’re in need of extended warranties.
Because of the abuse these vehicles take from their owners, sports cars, and 4-wheel drive (and AWD) vehicles are often in need of repairs. Vehicles that have reliable reputation are also excellent candidates of extended warranties. The Honda/Acura V6 equipped vehicles are notorious for transmission failure at around 75,000 miles, the Toyota Camry V6′s are known for having sticky valves right under 100k miles, most German cars have annoying electronic gremlins that pop up at any mileage, and domestic vehicles traditionally have issues with parts quality/longevity.
If your last vehicle purchase was pre-2002 and had absolutely great reliability and think that you don’t need extended warranty on the new one you’re purchasing – think again. Due to globalized economics, no matter what brand of vehicle you are purchasing, the parts suppliers are shared by most manufacturers (Toyota and GM share more than 300 suppliers).
They are charging too much money for the warranty, how much should I pay?
Do not skimp out on the coverage, be sure to get the top coverage and $0 deductible. Make sure that you are getting the manufacturer backed warranty. There maybe too many annoying issues with the aftermarket warranty. The catch is that some F&I Managers (finance managers) are greedy and try to overcharge you for these protections.
Visit the manufacturer’s website before you go into the finance office. They actually have Manufacturer’s Suggested Retail Prices for their own extended warranties. If the finance manager asks more than what the website says, then reject the whole purchase of the vehicle. That will force the finance manager to drop the price to MSRP, but you should question his/her ethics and turn that offer down. He/she will be pressured into discount even further. However, if they offer it at MSRP or below it from the start, then you should feel comfortable with the purchase.
Some dealers actually have a money-back guarantee service. If you really are unsure about the extended warranty, ask for it. If the dealer you are dealing with does not carry the reimbursement guarantee, then shop around for it from other dealers. You do not have to purchase extended warranty from the dealer you bought your car from.
-KF
