Extended Warranties - Are They Worth Purchasing?
Soon after agreeing on the price for a car or truck at a dealership, you can expect to be introduced to someone extolling the many benefits of an extended service contract for the vehicle. But, experts say, don't be in a hurry to get one.
Instead, take the time to read the standard warranty that comes with the car or truck-most are good for three years or 36,000 miles, whichever comes first. Rod Davis, vice president of dispute resolution for the Council of Better Business Bureaus, recommends looking into the reliability of the vehicle and considering how long you will likely own your new ride.
Davis explains, "If you're someone who is turning around a vehicle every four years, buying an extended warranty doesn't make any sense. But if you're someone who likes to hold onto a vehicle for an extended period of time and you want that safety blanket, it may make more sense to add it."
His remarks and those of others interviewed for this article came on the heels of a new survey by BuyingAdvice.com that showed that most people-specifically, 56.42% of the motorists polled-have never purchased an extended automobile warranty, compared to 43.58% of those who had.
Moreover, of the motorists who have purchased an extended warranty for a car or truck, the majority reported that they never used it.
The survey, conducted by BuyingAdvice.com, also found that of the 2,111 people who responded to the survey, only 28.04% said they would recommend purchasing an extended vehicle warranty to friends or family members. And 36.71% said they didn't know if they would, while 35.24% of those polled said they would not advise buying one.
Although the majority of those polled either were ambivalent or would not recommend extended warranties to others. Dale Willey, chairman of the National Automobile Dealers Association and owner of a GM dealership in Lawrence, Kansas describes the coverage as "extremely important". So important, in fact, that he would not sell a car or truck to any of his five daughters unless they purchase an extended warranty-or service contract, as he prefers to call it.
Willey cited two reasons for his position. First, none of his daughters has the money set aside to fix her vehicle should a major component (such as an air-conditioning system, motor or transmission) require replacing. "Those things don't happen too often," he said, "but when they do they are expensive."
The second reason he gave is that most extended warranties pay for a substitute car while your vehicle is being worked on. That can save you a bundle of money should your vehicle require a lot of work.
Willey believes that unless you're certain you will sell the vehicle within the time and/or mileage limits of the warranty that came with the vehicle; a buyer would be foolish not to buy an extended warranty.
Robert Gentile disagrees. A spokesman for Consumer Reports, Gentile says his company prefers to advise consumers to focus on choosing a vehicle that has an excellent reliability record and a generous basic warranty, rather than buy an extended warranty. Gentile explains that if you buy a reliable vehicle with a good basic warranty, chances are you won't need to file a claim; and that would save you hundreds if not thousands of dollars.
That said, if you're the type of person who absolutely must have an extended warranty on your car or truck to get a good night's sleep, Gentile reminds buyers to negotiate the price of the warranty down.
"Everyone's really focused on negotiating the purchase price of the vehicle, but more and more dealers are pushing what we call 'dealer's extras' such as extended warranties, and those items are usually marked up as much as 20, 40, 50 and sometimes as much as 100 percent." Gentile adds, "There's quite a bit of wiggle room there you can work with."
Also, if you feel you must get an extended warranty for your vehicle, Gentile recommends buying one from a dealership. "We've found that generally manufacturer-backed warranties are more comprehensive than third-party warranties, they are easier to make claims against, and third-party warranties often have more loop holes." Also reading the fine print is a good idea. Extended warranties often are not nearly as inclusive as standard warranties.
Published on Tuesday, October 16, 2007 - Email to a friend
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