14. FINANCE AND EXTENDED WARRANTIES
| After the negations are over and you think you know exactly how much the vehicle will cost you, you will be introduced to a Finance Manager. The sales pressure has JUST BEGUN. This person appears to be filling out the contract for the vehicle, i.e., price, tax, title, interest on the loan, dealer fees, etc. His or her REAL job is to sell you extended warranties, and there are a “boat load” of them. There are silver, gold, platinum, road, tire, gap, interior, exterior, and so on. This person works on straight commission only. If you do not buy a warranty or finance the vehicle through the dealership the finance manager doesn’t make a dime on the sale. These people generally work six days a week, ten to twelve hours a day. They are only interested in one thing, selling you as many warranties as possible and getting you to finance your loan through the dealership. Customers would come into the dealership and brag that they were paying cash for their vehicle. Nothing makes a Finance Manager more frustrated than customer paying cash and not purchasing the extended warranty, you’re wasting their time. |
My suggestion may surprise you. I think that Gap Insurance and an extended warranty are absolutely necessary. What does this mean?
Gap Insurance covers a financed vehicle that is in an accident, which is damaged beyond repair or commonly, known as, “totaled.” In other words, if you are in an accident and total the vehicle, you still owe the lending institution the balance plus the interest. Collision insurance is not going to cover the entire balance that you owe the bank, or credit union. Remember, when you drive off the lot your vehicle depreciates by hundreds of dollars. Check with your insurance company before you purchase the vehicle, they may provide gap insurance at a reasonable cost. If I were to purchase a vehicle and finance it, I would purchase some kind of gap insurance, either through the dealership or my insurance company, shop, shop, shop!
An extended warranty protects your vehicle past the manufactures warranty. If your vehicle has a 3 year / 36,000 mile warranty (whichever comes first by the way) the extended warranty protects you beyond the manufactures warranty, and kicks in at 3 years and 1 day or 36,001 miles. Please note that you do not have to purchase the warranty at the time of sale, you can wait until the manufactures warranty is about to expire. Waiting doesn’t cost any additional money. The catch is to remember to purchase the warranty and not put it off. Also, this warranty, as the manufacture’s warranty, does not cover wear and tear, only mechanical malfunctions.
My son got a brand new Toyota Tacoma in 2004. He drives a great deal for his job and within a year and a half he was almost out of warranty. We went back to the dealership and purchased an extended warranty for 7 years / 100,000 miles, (whichever comes first.) with a $50.00 deductible. The secret is, you can negotiate with the finance department for a better price for the warranty. Lots of companies offer extended warranties and the dealership wants your business. I told the Finance Department that I had done my homework and wanted the warranty for a discount. He turned this over to the General Manager and I got the warranty for a saving of $300.00. Now if my son’s vehicle has mechanical malfunction for 7 years or 100,000 miles (whichever comes first) the cost will never more than the $50.00 deductible. That is piece of mind.
Read the contracts carefully and beware of pitfalls.
