I’m going to explain what you need to know to get a real used-car extended warranty service contract for pennies on the dollar. There are things that you probably do not know and not knowing them can make the difference of spending more money that you have to for both the cost of your extended warranty and the repairs & deductibles that are associated with it.
My career in the car business was something that I was passionate about for a number of years. I started out as a salesman and worked my way up into management , including as a
Used car extended warraties add a good chunk of profit to the sale of a used car. It’s normally a “back-end” product that is sold by the finance manager who usually tells you how much it adds to your payment, rather than telling you exactly how much you’re paying for it. Saying that, “a 3 year extended warranty is only going to add $20.00 to your monthly payment”, sounds a lot better than saying that, “you can get a warranty on this car for $1200.00″. I’m sure you catch my drift.
Here’s the real kicker when it comes to extended warranties. A finance manager at a car dealership that has spent any time in the business has polished the craft of presenting numbers to make them seem less intimidating. Reducing a total cost of a extended warranty down to a monthly or a daily cost can make the numbers seem much smaller than they really are. What will absolutely shock you is to know that an extended warranty that is sold for over $1000 and a car dealership can typically only cost the dealer around 100 hundred bucks.
So, an extended warranty for used-car that you could pay for directly from a used car extended warranty company, will cost you hundreds of dollars more, if not more than $1000 more if you buy it through a car dealership. That is 100% verifiable fact because I have written many, many extended warranty service contracts for people.
While the extended warranty can be stretched out and tacked on top of your auto loan for several years, it is only paid for one time by the dealership. Once the finance manager has the contract in hand and signed by you, the total amount that you end up spending for that service contract is paid to the dealership by the auto loan company is financing your car deal. The dealership then in turn, sends a check for the actual cost of the extended warranty to the warranty company.
That’s not all…
It can get very confusing for consumers when they are explained the differences between one extended warranty and another. In the car business, there is something that is referred to as a bumper to bumper powertrain warranty. What this is, is a powertrain warranty only, that sounds really good when the words bumper-to-bumper are put along with it. It covers only the engine and usually only the internal components of the engine, transmission and solid moving mechanical parts. This will not include your alternator, your air conditioning system, or any of the other more common items to fail.
By selling you a “bumper to bumper” powertrain warranty, the cost for the dealership of this finance product is incredibly low. Depending on the ethics of the dealer, what cost the dealership 100 bucks may cost you $1500 in warranty cost and in the finance charges that you pay on that amount that is tacked on to your auto loan.
My Recommendation: Used-car extended warranties are a very good thing. It is only when they are oversold and you’re overcharged that they become an evil of the car business. You can save loads by getting a warranty direct through a legitimate source.