#used car worth
Peace of mind comes at a cost
After dedicating an afternoon (or more) to test driving, negotiating, and completing a pile of paperwork for your shiny new car, don’t be surprised if a bubble-bursting finance manager at the dealer gives a compelling pitch for an extended warranty. It is for your peace of mind, right? Well, not really.
The last-ditch effort to sell you a warranty, or various other unnecessary services, is the dealership’s final assault on your checkbook before you tuck it securely away and drive off. Sure, the pitch is convincing: Should an expensive repair be necessary after the factory warranty ends, you’d be protected. No one wants a big, financial surprise, nor wishes to be stranded roadside. (Read Watch for These Dealer Sales Pitches . )
But breathe deep and think this through. A survey conducted by the Consumer Reports National Research Center in late 2013 found that 55 percent of owners who purchased an extended warranty hadn’t used it for repairs during the lifetime of the policy. And, on average, those who did use it spent hundreds more for the coverage than they saved in repair costs.
Among survey participants who used their policy, the median out-of-pocket savings on repairs covered by extended warranties for all brands was $837. Based on a $1,214 average initial cost, that works out to a net loss of more than $375. Factoring those who didn’t use their policy, the median savings was zero. And that may have something to do with why satisfaction with automobile extended warranties is among the lower rated of all products and services surveyed by Consumer Reports, and why only about a quarter of respondents said they would definitely get it again.