My mom just bought me a brand new car
Is an extended warranty from the dealer a good idea? It’s for 7 years/100,000 and costs around $1800. Please help. The dealer swears that it is the right thing to do.
Well any car can have major expensive repairs.
The profit to the salesman and company is usually over 50%. So for every $1,000 you spend the insurance company has less than $500 to pay for repairs or they will loose money, something insurance companies do not do. Some people will get nothing back and some will get a lot more than they pay. Most will get far less. In addition you need to keep in mind that the insurer has worded it to eliminate as many expensive things as they can.
Remember that the seller is out to make money and they get to write the rules and set the price. They are not going to sell them at a loss so one way or another they are going to have you pay more than they will pay out.
Would you gamble with a car dealer who gets to set all the rules and knows all the odds?
Your decision has to do with the value of the piece of mind it gives you. If that is worth the cost then buy it. Don't expect it to cover everything however, most are written to keep cost down and exempt what they know will cost them money.
Good Luck
Thanks for responding so quickly. It’s amazing how you cannot get a straight answer from anyone at a dealership.
The CR-V is one of the most reliable vehicles on the planet.
As long as you maintain it at least as well as Honda specifies, it is unlikely that you would have a serious mechanical problem in the 2 year gap between the end of your standard Powertrain Warranty and the end of the optional (and costly) extended warranty.
If you really want to prevent mechanical problems, you will service the car even better than Honda specifies. For example, even though the maintenance schedule does not list it, you should have the valve lash adjusted at least every 3 years or so, and likewise you should have the transmission fluid changed every 3 years.
That $1,800 will pay for excellent maintenance and you will still have some money left over. I suggest that you pass on this offer.
But, whatever you do DO NOT buy one of those aftermarket warranties that are advertised on TV!
They will offer a cheaper price than the warranty offered by Honda, but that money would be wasted in all likelihood. These companies invariably come up with some sort of technicality to decline claims, and as a result they almost never pay claims that are submitted. The Attorneys General in several states are currently pursuing legal action against a number of these scam operations. Don’t be their next victim!
Your CR-V comes with a 3 year/36,000 mile bumper to bumper limited warranty and a 5 year/60,000 mile power train limited warranty from the manufacturer. So depending on what is actually covered in the extended warranty, so you may just be paying for 2 years/40,000 miles of coverage with the extended warranty. Read the fine print for what’s actually covered, limitations, and deductables for this extended warranty.
Tester
Good to know! My 1997 Honda Civic lasted forever, so I thought it strange that the guy was saying I needed to extend the warranty. Thanks!
My sense is there is a lot of fine print. And thanks for clarifying the 3 year bumper to bumper and the 5 year mile power train. They make it incredibly confusing. Thanks
The salesman needs to sell you the warranty and get his 40% commison so he can make those alimony payments!
As others point out, the time covered is within the normal reliable life of such as car. The items covered are all items that seldom break, and EXCLUDES normal wear items and regualr manitenance, something the salesman did not tell you.
I declined the extended warranty on my Toyota 4 years ago; the regular warranty on the engine will be up in one year and the warranty on the rest of the car expired 10 months ago. So far, I have had one flat tire (not covered) and a stone chip in the windshield (not covered).
The $1800 or so should be put in the bank or invested, and your mother can then buy something really nice with it 6 years from now! Even after deducting the odd repair that IS COVERED.
On the other hand, if you were buying a Chevy Aveo, a car with a short design life, you could conceivably have enough repairs, as testified by several owners, to get your money’s worth.
Take The Time To Read (At Least Thoroughly Skim) Through Your Owner’s Manual, Warranty Information, And Vehicle Maintenance Information.
Also, new car owners are vulnerable. They want to protect their new babies. However, I believe Honda will sell you a service contract (extend your warranty) later on, as long as the vehicle is still covered by the original warranty. Therefore you don’t need to be concerned at this time. The salespeople won’t tell you this.
Call Honda and verify what I’m saying in case I’m wrong. See how it goes with the new car. If it proves to be very trouble-free you may get more comfortable just being covered by the car’s included manufacturer’s warranty.
CSA
The dealer will try everything to make you buy this warranty. They will stretch the truth, make you feel guilty, everything. Why? As other have said, they make a HUGE profit on these. That means it’s a bad deal for you, on average. I never buy them.
Agreed. This is one of the most negotiable items when buying a new car, and the only time to consider it is before you sign on the dotted line (i.e., while you still have a little leverage with the dealer). When I’ve bought new cars, I’ve found a little reluctance to go for the extended warranty will make the price drop dramatically.
Put the $1800 in a savings account and pay for repairs (not maintenance) with this money. Then take a vacation with the leftovers.
$1800 = DAP = Dealer Added Profit … Same goes for the “Diamond Coat” finish protector, Scotch-Guard interior protection, “Perma-Last” undercoating, the list goes on and on…
I am adverse to what has been presented, it does not apply to everyone but here is my logic. We put 10 to 15k per year on a new car, and take out a 6 year loan. In the cost per month 1800 is an extra 30 bucks or so max in the payment. Our budget is tight, and to know I will not have a massive repair bill 37 months or 84 months into ownership while I still have car payments gives me peace of mind. Though my experience was half that price for extended warranty. In fact you may be able to judge the reliability of a car based on the cost of extended warranty, as the cost varied model to model, and even deal on the price of the extended warranty, throw it in for free is always a good starting point. Insurance companies, be it auto health or home are in business to make money, like vegas do ya feel lucky? Would you propose we avoid auto, health, and home insurance also?
“Would you propose we avoid auto, health, and home insurance also?”
Of course not. The difference between paying out of your own pocket for…let’s say…a new transmission and the ultimate cost for uninsured hospitalization and major surgery is…huge. Most folks can manage to pay $2k to $3 for a transmission if they have to. But, without health insurance, a major illness could result in someone going into crushing debt for a decade.
Without car insurance, the potential liability from an accident could be in the hundreds of thousands of dollars–and possibly more.
Without home insurance, a fire in an uninsured dwelling could lead to someone losing his home.
How can you equate the cost of car repairs with the above catastrophic situations that could result from lack of insurance?
There are probably good arguments for an extended warranty on a car, but the argument that you used is…not an effective one.
I concur with all the reasons given previously for NOT buying the extended warranty. I have a '99 CR-V that has been totally problem-free for 11 years. These things are extremely reliable if you do the regular routine maintenance. Put the $1800 in the bank and save it for regular maintenance. Paying for an extended warranty on a Honda is like flushing money down the toilet, or just giving it away to the dealer for his next boat payment.
“Most folks can manage to pay $2k to $3 for a transmission if they have to.” Really? I am not most folks I guess as I do not have an extra 2 to 3k sitting around for a transmission, much less hundreds for a sensor, computer, pump, or bearing
By the way, thanks, Mom!
Unless most people park their car permanently when a new transmission is needed, then I do think that most folks can come up with the cash for a new/rebuilt trans. Maybe they need to take out a loan from family members or from their local payday loan company, but unless lots of folks are now permanently walking or biking after a transmission breakdown, then–yes–in one way or another they do seem to be able to pay for those repairs out of their own pocket.
In any event, your comparison of extended warranties with various types of insurance is…very weak.
It is absolutely the wrong thing to buy. In these economic times, you might need the $1,800 to buy food, pay rent or relocate to get a new job. If the economy recovers in two years and jobs should become plentiful, you can buy a warranty then. The same sun that shines today will shine tomorrow, but if it quits shining a warranty won’t matter a heck of a lot. Time is on your side, use it.