ALT-1 Extended Car Warranties why you should Avoid them
Gee! Another dealer add-on?
Extended car warranties are a rip-off for many reasons. This is an additional way for car dealers to bump up the price of your vehicle, just when you think you have finished negotiating with the sales team, and you think you have made a solid deal.
Everyone knows how it works: The customer enters the automotive dealership and begins browsing. Soon, the sales staff begins closing in. They circle, seemingly unnoticed, until one goes in for the kill.
"May I help you?" he sweetly asks.
"Yeah, right," the customer mutters to himself. "How about I just lay my retirement savings on the altar?'
Out loud, the customer clears his throat and replies, "I'm looking for a no-frills, basic commuter car."
"I have just the thing," the salesman chirps.
Within twenty minutes, the two are seated in a glass cubicle, hashing out options and pricing. The salesman excuses himself several times, presumably to run deep discount prices by his manager.
Finally, when the unwitting customer has all but waived his own rights to his eternal inheritance, the salesman swoops in for the kill. "Did you want an extended warranty?"
LET'S THINK ABOUT THIS FOR A MOMENT:
By now, the customer has heard the whole spiel. He has bought into the advertising claims of safety, durability, and reliability of the vehicle. If the car is all it's cracked up to be, will he really need an extra insurance policy for breakdowns?
The manufacturer automatically offers a basic warranty package. This may cover any number of variables for anything from 3-10 years (or from 30,000 to 100,000 miles).
By then, won't the dealer really want to sell you a new car anyway?
PROBLEMS WITH EXTENDED WARRANTIES:
First, by the time you finish paying for an added warranty, you have increased your monthly payments significantly. You would be better off to put more cash down, up front, and lower your payments. Perhaps you could opt for a shorter term of payment. If you pay off this care faster, you can buy a new car sooner anyway. Then you won't need the extended warranty anyway.
Read the small print. Extended warranties are quite particular. They state specifically what the do not cover, and the exclusions can be extensive.
What if you decide to sell the vehicle later? Many extended warranties are non-transferable. That means, they do not carry over to the person who purchases your car from you.
A BETTER SOLUTION:
If an automotive dealer quotes you a price for an extended warranty, here's another option.
You can decline his offer and simply discipline yourself to stash away that amount each month. That way, you can earn your own interest on the funds, and you will accumulate cash for any needed repairs for your vehicle. Why should the car dealer hold YOUR funds, just in case something breaks down on your car? What if it DOESN'T? Why not keep the money in your own account instead?
Just be sure you actually follow through and save. Eventually, every vehicle does require some repairs.
