AUTO INSURANCE ARTICLE

Do You Really Need Extended Car Warranties?

By: coppeneur

Whatever you buy these days - laptops, cameras, videos – the salesman invariably gives you a pitch on extended warranties. Before, warranties come with the product bought, and in fact part of the selling points of certain brands. But this changed in the last half decade or so, with companies shortening their warranty validities. And partly, extended warranty sales, play on the buyer’s fear. For small, inexpensive gadgets some buyers opt not to buy. But for big-ticket items like a smooth top of the line DSLR camera or a car, buyers are always thinking twice. But is it worth it to buy extended warranties? To be more precise, do you really need extended warranty for your car?

So, what’s a car owner to do? Want to know what was the experience of fellow car owners like you? We have done our research to answer this question for you.

Consumer Reports argues that extended new-car warranties are by far, expensive deals. In its annual auto issue in April, their survey shows that 65 percent of about 8,000 Consumer Reports readers said that they have spent significantly more for buying a new-car warranty than the actual repair costs for their cars. In fact, 42% of those who joined the survey claim that they have never at used their extended warranties. Only 5% said they were able to have a net saving from having an extended warranty.

Consumer Reports further say that extended warranties allow dealers to get a profit of about $800 on each extended warranty sold. This even excludes the incentives that many manufacturers offer to dealerships if they sell as many of these warranties.

But while the report says that most dealership-sold extended warranties are poor deals, it still leaves a huge gap of concern for drivers who want to have an extended warranty at the best deal they could get. So, again, what’s a car owner to do?

If you decide to buy an extended warranty, you still have choices. We have asked around. And this is what we got.

Delay buying an extended warranty for your car. And if cheaper, choose an extended warranty offered by independent contractors or other dealers. Let us explain.

There is no rush at all to buy the extended warranty at the same time that you are paying for your brand-new car. Most likely, dealers will often try to convince you that it will be cheaper when you are buying your new car because you get a better deal when the car is in good shape. But don’t forget that you still have your regular warranty coverage. And in six months to a year’s time, you have ample chances to assess whether your car will be needing a lot of repairs or not. If you find that the car may be repair-hungry, then it is time to buy an extended warranty by then. And don’t worry, experiences show that the price goes down if you wait for the right time.

It pays as well to delay buying. A senior consumer advice editor for Edmunds.com cautions that “when the warranty is rolled into the purchase price of the car, it is easy for them to hide the true cost you’re paying.” Experiences of buyers in many blog accounts for example, show that waiting for a few months AND buying from third party contractors will get you a warranty as low as 75% cheaper than the one quoted for you by your dealer.

But what you should remember, if you are buying the warranty from another provider is to buy the exact manufacturer’s warranty. A valid manufacturer’s warranty is good in any state, and there’s nothing wrong with buying it online.

But Consumer Report has another suggestion – perhaps unexpected. Open a $1,500 to $2,000 interest-bearing account. Don’t touch it but use it as a “trust fund” when your car needs repairs.