I’ve blogged about various after market extended auto warranties and why I think they’re bad deals, but today I thought I’d share some tips on negotiating an extended warranty from a dealer. 
Just to be clear, I still think it’s best to keep some money aside in your own high yield savings account for any unexpected repair bills. That way, you keep the interest earned and the money in the event that the odds work out in your favor (as they are likely to) and you end up not end up needing a costly repair. But I realize that’s not always possible, and there are times when extended auto warranties make sense – from the right vendor.
Anyway, this article is not about why I think many extended warranties aren’t worth the money, so on with the post.
This post is specifically focused on that stage of the car buying game where you’ve finished with the salesman, and you’re guided toward the Finance and Insurance Office. This is where the up-sell magic happens.
The F&I Office.
The Finance and Insurance Office is home to the F&I guy, who’s job is to sell you alarms, maintenance plans,GAP insurance,tinted windows, VIN etching (a theft-deterrent service) and warranties. In fact, this is where many dealers make their money.
But just because the dealer makes money on these extra options, doesn’t mean they aren’t worth a price… the trick is figuring out how much is the right price.
Here are some things to note about the options often offered by the Finance and Insurance Office:
- Be aware of the menu.
- Be mindful of compromise.
- Be a good student and study the market.
Be aware of the menu.
Dealers have gotten onboard the menu marketing concept and now offer “plans” or “packages”, such as the “gold package”, that bundle many extra options together. The dealer is generally going to bundle less profitable options with more profitable one, so those options lose less money. As a buyer, you should be aware that these packages can be broken up if the dealer is really interested in making a sale and the buyer is adamant about wanting specific items and not the whole package. Be clear and consistent in your request to unbundle the extended warranty. If all else fails, be prepared to walk away and buy elsewhere.
Be mindful of compromise.
When negotiating for an extended auto warranty, keep in mind that the dealer still needs to make a profit. It may seem simplistic, but many people get so caught up in not being taken advantage of that they end up trying to take advantage of the dealer instead! True negotiation is a compromise where both parties profit at least a little.
Be a good student and study the market.
Comparison shop at several dealers, and try to get a general idea of what the local market price is for the product you want. Be consistent with your search. For example, If you want a 5 year/100,000 mile warranty then be sure to ask each dealer what they would charge for that specific product. Don’t be afraid to ask the dealer what his cost is – what he pays for the product. Sometimes a dealer will quote what seems like a good deal, but once you’ve got the quotes from other nearby dealers you discover that his “cost” is much higher than the others. This could be a sign that he’s trying to take you for a ride.
Be up front with the dealer. Tell him what make and model of car you’re looking to buy, and that where you buy the car depends upon the best deal, including the extended warranty. If you get a good quote, be sure to get it in writing so they can’t claim they told you something different when you walk into the dealership.
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