Extended Warranties – Worth the Cost?

By Merritt Hardy - November 15, 2017

In today’s times, with more and more people keeping their vehicles longer, it means that they will incur more mileage and also more breakdowns over the life of the vehicle.  But with the rising cost of repairs, is it worth it to purchase an extended warranty?  But what exactly is an extended warranty and what does it cover?  An extended warranty, sometimes called a service agreementservice contract or a maintenance agreement, is a prolonged warranty offered to consumers in addition to the standard warranty on new items. The extended warranty may be offered by the warranty administrator, the retailer or the manufacturer. Extended warranties cost extra and sometimes are for a percentage of the item’s retail price.  Additionally, some extended warranties that are purchased for multiple years state in writing that during the first year, the consumer must still deal with the manufacturer in the occurrence of malfunction. Thus, what is often promoted as a five-year extended guarantee, for example, is actually only a four-year guarantee.


Extended warranties usually have terms and conditions that often times do not match the original terms and conditions of the original warranty and these may not cover anything other than mechanical failure from normal usage. Exclusions often include commercial use, “acts of God”, owner abuse, and malicious destruction and will often exclude parts that normally wear out such as tires and lubrication on a vehicle but they will often offer other perks not included in a general factory warranty, such as trip interruption insurance and roadside assistance.


There are several things that you must consider when contemplating the purchase of an extended warranty:


  1. Do you plan on keeping the vehicle for a long time?
  2. Who is going to stand behind the warranty (dealership or third party)?
  3. Have you shopped around for the best price?
  4. Is the warranty being purchased from a reputable company and will it be honored at multiple locations or repair shops?
  5. Do you know exactly what is going to be covered and does it have an out of pocket deductible that you will have to pay?
  6. Have you considered your past repair history on your old vehicle and have you actually spent a whole lot?
  7. Will you have peace of mind if you don’t buy it and do you really need it?


Once you have considered all of these things, the final and ultimate decision will be left up to you should you choose or don’t choose to purchase the warranty but keep in mind that if the dealership that you are working with has Deal Pack, they will already have the ability and capability to have your newly purchased service contract price added in to your structured payments.  They will also have the ability to print out a copy of the contract for your records.


So, if you are a dealer, own or manage a dealership or plan on having a dealership in the near future and would like to see all of the features that the Deal Pack DMS (Dealer Management System) has to offer, or you would like to schedule a demo of our system, please call our customer support line at 1-800-526-5832 and we will be happy to assist you with that request.

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