Car Buying Tip #8 -- Extended Warranty -- Get One

If the thought of an extra $25 - $30 a month seems like more than you can handle to get an extended warranty, then you probably need one.

I see it all the time, customers come to the car dealership I work for and are looking for a $300 payment. By the time all is said and done their base monthly payment is $350, already exceeding their "max" payment by $50, and now they are faced with the decision to protect their personal finances and credit rating with an extended warranty, but the increase in payment is more than they feel they can bare.

First off, I'd suggest you work a deal on another vehicle where payments would be more comfortable for you. One of the number one reasons people face repossession is that they simply can't afford the vehicle and have no choice but to give it back. This is especially true when a customer is maxed out on payment and the vehicle breaks down.

Think you are having problems with a $350 payment, what happens when you take that $350 payment and add a $900 unexpected repair to that? To simplify this, your monthly payment would have been more like $1250, with repairs, vs. a $380 payment with the extended warranty. I hope you catch my drift on this, because it can mean so much to your present financial condition and to your future credit rating.

If you do opt to purchase the extended warranty, legally referred to as service contract, read the contract carefully. You'll want to know if you are purchasing a stated components coverage, or an exclusionary coverage. Exclusionary coverage is always the better option.

Exclusionary coverage will simply state that everything on the vehicle will be covered except for what is listed in the Items Not Covered section of the contract. A stated components coverage will state that the items listed are the only parts that are covered. Unless you are a Master Mechanic, how will you know what the items are that won't be covered? This is where a lot of people have had bad experiences with extended warranties.

It all comes down to the Finance Manager at the car dealership not explaining the warranty in depth and customers not knowing the right questions to ask.

To sum this up, unless you've got several thousand dollars available that you could comfortable part with over the course of your ownership of this vehicle, buy an extended warranty.

I hope this car buying tip sheds some light on the sometimes confusing issue of extended warranties.

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