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The "Extended Warranty" is nothing more then a Service Contract for coverage AFTER the manufacturer's warranty runs out. The manufacturer's warranty is ALREADY INCLUDED in the price of the car, meaning you already paid for it when you bought the car. The Extended Warranty is an extra-cost item and is sponsored by an INDEPENDENT organization NOT working for the manufacturer. The cost of the Extended Warranty can run up to near $900 in some cases.
When discussing the Extended Warranty option with
the dealer, consider asking the following questions:
(1) Exactly what repairs are covered and exactly what repairs are NOT covered?
(2) Does the Extended Warranty cover BOTH parts and labor?
(3) Is the Extended Warranty work performed at the dealer by factory authorized mechanics?
(4) Can Extended Warranty repairs be made elsewhere? If traveling, can any dealer perform the Extended warranty service?
(5) What are my owner requirements to keep the Extended Warranty enforce throughout the duration of the contract? Do I have to follow a preset schedule for preventive maintenance including things like: regular oil changes, regular tire rotation, etc.? If the schedule is not followed, is the Extended Warranty voided?
(6) Should I decide to NOT continue the Extended warranty contract, is there a "cancellation" and "refund" policy?
(7) Is there a "deductible" amount attached to the warranty? If so, how much is it? (Generally, the smaller the deductible amount the better off you will be when Extended Warranty repairs are needed!) If the deductible amount is over $200 it is TOO MUCH and the Extended Warranty is nothing more then a rip-off!!!
Extended Warranty's can be good BUT only if you get coverage per the above 7-items and only if you can get it at dealer cost PLUS about 25%.
As an example, consider that the above items are covered in an Extended Warranty package covering 3 more years beyond the manufacturer's warranty and that the dealer wants $500 for it.
Since the dealer's cost for this package is generally about 50% less that what he tries to get from you, you should be able to get the coverage for about $313. This is figured as follows:
$500 x .50 = $250.00 (dealer's cost)
$250 x .25 = $ 62.50 (fair markup)
$250 + $62.50 = $312.50 (fair deal)
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