Extended warranty on a new car: What should I know before buying?
Posted by Pretty_Eabab_0014@reddit | askcarguys | View on Reddit | 23 comments
Just picked up a new SUV last week and the finance manager immediately started pitching an extended warranty. I've always been on the fence. Some people say they're overpriced, others claim they've saved them thousands. I plan on keeping the car for 7-10 years. For anyone familiar, what should be considered before committing to one?
vandd27@reddit
Extended warranties are essentially insurance products. Dealers push them hard because they're profitable, but buyers don't have to purchase immediately. They can usually be added later, as long as the factory warranty hasn't expired.
Prices vary a lot between dealerships. The same coverage could be thousands cheaper if purchased elsewhere, even from a dealer across the country. Researching options and negotiating are key before locking in.
Sea-North7215@reddit
Some people look at third-party providers rather than sticking with the dealer. One of my cousins, for example, had a CarShield plan that covered several repairs after the manufacturer's warranty expired.
The reality though is that results often vary depending on the vehicle, coverage level, and timing. The safest route is weighing the total cost against how long the car will be kept and deciding if peace of mind outweighs the potential risks.
owensurfer@reddit
Read the contract carefully. Dealers will sell both OE backed and 3rd party service plans or “extended warranties”. The OE plans are always better. 3rd party plans are not worth the paper they are printed on. Dealers push the 3rd party plans as there is a big commission. In any case as others have said, these plans make money for the issuer. On average you will be money ahead of you set the 3k aside if you ever have an issue. If you don’t then you have a nice down for the next car.
Gunk_Olgidar@reddit
Never buy anything in the F&I Mgr. office.
Ever.
You have until the expiration of the original bumper to bumper warranty (3/36 to 5/60 depending on make) to purchase an extended warranty.
If you want wheel and tire insurance -- which is not a terrible idea on a 1st model year car when replacement wheels are hard to get at a reasonable price -- buy a road-hazard rider from your insurance company. Never from the F&I manager.
SignificantLock1037@reddit
Don't.
Here's why. Yes, some people "save thousands". Others don't. But, analyze it logically.
Those "extended warranties" aren't offered by the manufacturer. They cost extra and are backed by some other company. You can ask the finance manager for this information and they'll tell you what company is backing it (paying for repairs).
100% of the time, that company is a "for profit" company. They are in business to make money from selling insurance (which is all that an extended warranty really is). In order to make money, they MUST take in more money from premiums than they pay in repairs. If you ask the finance manager, s/he will agree with all of this.
You'd be FAR better off taking that same money ($1000, $2000, $5000, whatever) and sticking it into the stock market or a similar investment. If you invested $2000 in a Nasdaq-indexed fund on January 2 this year, you'd have $2,280 right now. Over 3 years, you'd have almost $3000. If you need repairs (and can't do them yourself), just liquidate those funds and use them for repairs. Yes, you are going to lose some money to capital gains tax, but it's only $150 on the above situation ($1000 gains * 15% capital gains tax).
jrileyy229@reddit
Uhh....I think you missed the fact they bought a NEW suv. Those are often through the manufacturer or through a subsidiary they own. If it's BMW, is through BMW. If it's GM, it's through GM financial. Etc
seighton@reddit
I’ve never had an extended warranty thru a manf when bought at a dealer.
SignificantLock1037@reddit
No, they aren't. They make it sound like they are. But, it's always a completely separate company, or a separate subsidiary of the company (one that is just there to sell insurance).
For instance, one might say, "Look, here is GM Financial selling extended warranties on their own site - https://www.gmfinancial.com/en-us/lease-or-buy/extended-protection.html ." Well, first of all, GM Financial is not making cars - their job is to sell you financing. They aren't doing the warranty, Chevy is. But, second, read the fine print below:
"The Obligor of the Protection Plan product is GM Protections, LLC, 801 Cherry Street, Suite 3500, Fort Worth, TX 76102, (833) 959-0105. The Administrator of this Plan is Safe-Guard Products International, LLC, Two Concourse Parkway, Suite 500, Atlanta, GA 30328, (833) 959-0105. In Florida, the Obligor is GM Protections, LLC, Florida License Number 52217 801 Cherry Street, Suite 3500, Fort Worth, Texas 76102. The Administrator is Safe-Guard Warranty Corporation: Florida License Number 60126; Two Concourse Parkway, Suite 500, Atlanta, GA 30328, (833) 959-0105."
jrileyy229@reddit
Sure, valid... You're not wrong But if you're going to get one, you get it through GM financial... Which you can only get through a dealership on a car you bought new within a certain time frame.
regardless of who the underwriter is, GM is going to stand behind it. There's some synergy there that makes the experience way better. You walk into a GM dealer with an issue and have GMPP on the car, provided what you need is covered, it's as seamless as the factory warranty.
You get these random service contracts, the service manager might spend a week just trying to get them to sign off on the repair. Or they distribute enough policies then shut their doors and reopen under a different brand.
SignificantLock1037@reddit
All that is true. But, you're still going to be wasting money (statistically speaking). It's more likely that you will NOT need enough repairs to justify whatever the cost is.
jrileyy229@reddit
Sure...as a general statement, if they weren't making money on it, they wouldn't offer it.
There are some other considerations though. At least with GMPP, any dealer can sell it to you. Corvetteforum has a well known dealer that sells these things in bulk... They charge $200 markup over what GMPP quotes them, and that's it... They sell volume. Other dealers try to mark up 2k. Ultimately the dealership can charge whatever they want. It's really not a bad value if you "get it at cost"
SignificantLock1037@reddit
"Cost" already has profit baked in for the company that is paying for the repairs.
There are always some exceptions. For instance, I know of a guy who bought a used Range Rover at Carmax and it saved him a fortune. But, that's mainly because Range Rovers are notoriously expensive and Carmax sells the same warranty to everyone.
Donthatemeyo@reddit
This is not true you can only get gmpp at participating dealers and gm will do nothing if you have an issue with the company that's underwriting it so all the same extended Warranties still applies including delays while they send out inspectors not wanting to cover loaners etc. Also if you get the gmpp maintenance gm dealers don't have to accept it since they don't pay as much for services if your not a participating dealer.
seighton@reddit
You are guaranteed to lose money on it. The most expensive part of a car is the drivetrain and those are usually covered longer than the bumper 2 bumper. In order to get a roi you would need some major issues with the car, like radiator, ac, electrical etc. the odds are not in your favor
Interesting-Dingo994@reddit
I’ve never purchased an extended warranty for domestic or Asian vehicle. Finding a competent and honest mechanic is easy, parts are plentiful. I did pay for an extended warranty on a luxury European SUV manufactured by an automaker with a spotty reliability record. Warranty paid for itself. You can negotiate the price down of an extended warranty-I did.
mairu143@reddit
I used to think those plans were kind of pointless too..... until my transmission died a few years in:') If you’re keeping the car long-term, looking into a repair coverage plan (like CarShield) might be worth it once the factory coverage ends — just compare what’s included before signing anything. .
robbobster@reddit
You can buy them later from any number of online dealerships at a discount. Shop around. Get a genuine factory extended warranty only.
AwarenessGreat282@reddit
Don't do it. Every single professional will advise that it is a waste of money. The odds of using it is slim to none. It's equivalent to playing the lottery.
The better method would be to take the amount of money you would spend on it, like $2-4K, and invest it. If you need it, it's there but if you don't, you roll it into the next vehicle.
SupremeOHKO@reddit
What kind of warranty? And how new is it?
leatherslut69@reddit
Pull out your phone and ask ChatGPT right in front of of the guy, but use the microphone / audio option
Double-Efficiency538@reddit
I’d ask “Why are you pushing the extended warranty so hard? Are you trying to sell me a piece of shit?”
I always roll the dice but I keep up on maintenance.
leatherslut69@reddit
“Well this is a ford dealership”
seemee77@reddit
When you say new car… is it brand new? If so, you have a manufacturer warranty… the length of which is dependent on the manufacturer… and you won’t need it until that expires…
If it’s a used car… which is outside of the manufacturer warranty, then I would shop around myself for an extended warranty… as stealers, oops I meant dealers… charge a shit load more for something you can get cheaper online from the same warranty company the dealer is offering.