automobile extended warranty pricing

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ZedThou
Posts: 20
Joined: Tue Sep 13, 2011 9:01 pm

automobile extended warranty pricing

Post by ZedThou »

I've just bought a new car. While my wife and I were in the finance manager's office going over the last bit of paperwork, we were given the usual extended warranty sell. This warranty was obviously overpriced at $3500, for years four through seven. The odd thing was that there was a 45% discount for cash buyers, as opposed to financed buyers. This brought the price down from $3500 to $1900, and the offer was good only at that particular moment. I told the manager that I did not wish to purchase the warranty at that time because of the pressure to make an immediate decision, instead of letting us consider it for a week or whatever. Eventually he offered it to us for $1250, and the option to cancel the warranty, along with a full refund, within the next three months.

This entire experience was very strange to me. Are they really only giving this 45% discount to non-financed buyers? Is it even real, or are we just being given an anchor? If it's real, then what is the reason? Are financed buyers more likely to accept a much higher price for the warranty as long as the monthly payment is not affected too much?

The process of buying cars from dealers is so distasteful to me, as well as everyone else I know. The Tesla model would be far superior, in my opinion.
2comma
Posts: 1241
Joined: Thu Jul 15, 2010 11:37 pm

Re: automobile extended warranty pricing

Post by 2comma »

I don't know all of the details on how dealership warranties are priced and haven't found the article that gives the entire story but in general my readings say they are a bad deal. First I have to figure they won't offer something that works in your favor. Then the quick retreat to a lower price plus the option to cancel tells you everything you need to know. I doubt that the cash buyer discount means anything as anyone financing could negotiate a lower rate - I'd guess $1200. Soon you'll be getting even cheaper offers in the mail from independent companies. For me it's all a no go. Looking at the exclusions it is sometimes very hard to determine if some things are are covered or not. I try to buy reliable things and self insure the outlier events - so far it's worked out very well as the odds are heavily in my favor.
If I am stupid I will pay.
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mike143
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Joined: Thu Feb 02, 2012 7:55 pm

Re: automobile extended warranty pricing

Post by mike143 »

What is the make of the vehicle. Warranties are usually a losers game but they can usually be found online for cheaper.
Nothing is free, someone pays...You can't spend your way to financial freedom.
carolinaman
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Joined: Wed Dec 28, 2011 8:56 am
Location: North Carolina

Re: automobile extended warranty pricing

Post by carolinaman »

Consumer Report, Clark Howard and other consumer advocates strongly advise against extended warranties. I have always refused these but 3 years ago I bought a used Avalon and decided to take Toyota's offer of an extended warranty. I immediately began having second thoughts and asked my BIL, who sold cars for 20 years, what he thought. He said absolutely never buy one of these warranties. One of the problems is there is a lot of gray in the warranty as to what is covered. Is a defect a "wear and tear" item (excluded from warranty) or a warranty item? Many things you might think are covered are often not covered even by reputable companies like Toyota. Defects are subject to interpretation and you are at the mercy of the warranty provider. I googled extended warranties and found scores of horror stories about these warranties. I called car dealer and fortunately they allowed me to cancel the warranty.

I have read that extended warranties and financing are more profitable to dealers than selling cars. Bottomline: never buy these warranties.
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mike143
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Joined: Thu Feb 02, 2012 7:55 pm

Re: automobile extended warranty pricing

Post by mike143 »

I told the dealership the day I need a warranty on a Honda is the day I don't buy a Honda. Have owned many Honda's over 200k and even one with 400k. I would never buy a make that I had to seriously consider a warranty.
Nothing is free, someone pays...You can't spend your way to financial freedom.
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yatesd
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Location: MD

Re: automobile extended warranty pricing

Post by yatesd »

In general, extended warranties are bad deals. It is almost always better to self insure.

That being said, you can confirm whether you got a good deal by searching on your models car forum and seeing what others have gotten. Many dealers will provide internet quotes. Make sure the warranty is from the manufacturer and you are comparing apples to apples.

As an example:

http://www.8thcivic.com/forums/dealersh ... ranty.html

That being said, my Cadillac CTS included a 100K warranty so not much out of pocket other than oil changes & tires. My Honda Odyssey only had a warranty for 60K (on power-train). Most of my expenses on the Honda have been non power-train related ($2,200 Air conditioner, $800 timing belt (considered maintenance on foreign cars), $400 sliding door, $200 rear hatch shocks, power steering pump $320, etc.)
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widestance
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Joined: Fri Jun 07, 2013 5:37 pm

Re: automobile extended warranty pricing

Post by widestance »

He wasn't offering you a 45% cash discount, he was offering a 45% discount on a warranty already marked up 500%.

I went round and round with a finance guy on gap insurance. I normally wouldn't buy such a thing, but i felt it was prudent for me at the time.
The price went from $500 to something like $80. After a couple years when my car value was equivalent to the outstanding loan amount, I canceled it and was refunded about $35.
Everybody's got a plan until they get punched in the face - Mike Tyson
Topic Author
ZedThou
Posts: 20
Joined: Tue Sep 13, 2011 9:01 pm

Re: automobile extended warranty pricing

Post by ZedThou »

This was a Subaru Gold Plus, no-deductible for 70/70000. I've since learned that just about everything the finance manager told us was a lie, so I''m going to cancel this warranty for a refund.

I certainly understand that, statistically speaking, self insurance is preferable to these extended warranties. But after the experience we had with our last car, my wife is insisting on purchasing one. So I'll get the same thing somewhere else for a good deal cheaper.
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