One of these days I’m going to sit down and write a real book that will help people to understand the way that car dealerships function and ploys that are used in advertising and marketing schemes, rehearsed sales presentations and what really goes on in a dealership finance department. There are so many things that the public is just not aware of that goes on.
Extended warranty service contracts for used cars are no exception.
Used-car extended warranty service contracts are generally one of the most overpriced products that are sold in a dealership finance department. There are so many different extended warranty companies that it can make your head spin and the details of how each company works would require more space than it is on this page.
It’s all about profit…
Generally speaking, the particular extended warranty company that a dealership uses is based upon the amount of profit that the dealer can make on selling extended warranties. I have seen with my own eyes, extended warranties that only costs 100 bucks, be sold to customers for upwards of $1200-$1300. When you consider the amount of money paid in the finance charges over the course of the auto loan, it can amount to $2000. That’s $1800-$1900 that a customer did not have to spend.
There are MAJOR differences in extended warranties…
There are bumper to bumper used car extended warranties that cover nearly everything on a used vehicle, with the exception of general maintanance parts. There are “middle-of-the-road” extended warranties that cover the powertrain and additional items such as the air-conditioning system, starters, and other items that commonly break down. At the bottom of the barrel are extended warranties that only cover items that rarely ever break down. These lower end extended warranties that offer very little coverage, can be presented in a way that they appear to cover more than they do.
In summary, you are much better off if you do a little bit of research before you sign on the dotted line at a car dealership. You can save money on interest rates and you can also save a tremendous amount of money on a used car extended warranty. You can get more coverage and generally, you can get a better extended warranty for your car for pennies on the dollar in comparison to what you will pay at the dealership.