Posted: February 11th, 2010 | Author: Joe | Filed under: Tips | Tags: Extended Warranty, spending, Tips | 1 Comment »
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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Posted: April 24th, 2009 | Author: Joe | Filed under: Scam | Tags: auto warranty, Extended Warranty, Scam, U. S. Fidelis | 49 Comments »
I get A LOT of reader comments on my December post, Is us Fidelis auto warranty a scam?.
When I wrote that post, I was honestly just asking a question about Auto Warranties in general and U. S. Fidelis was my foil since they were on the television literally every time I turned around (they still are!).
Well, it seems many people are convinced that U. S. Fidelis IS a scam, and they’re not alone.
NBC’s The Today Show did a piece on Wednesday highlighting some of the dishonest practices employed by U. S. Fidelis.
Here’s the vid:
MSNBC's Today Investigates piece on U. S. Fidelis.
It’s pretty damning.
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Posted: December 23rd, 2008 | Author: Joe | Filed under: Scam, spending | Tags: auto warranty, Extended Warranty, Scam, U. S. Fidelis | 135 Comments »
One of my vices, when I’m up late and my wife and kids have all gone to bed, is watching bad science fiction, or bad science programs on late night T.V.. Yes, I know I’m a tremendous geek, but thank you for the compliment anyway.
About a week or two ago I saw a commercial for U.S. Fidelis, an auto warranty program. I thought it was hokey, and scammy and didn’t think anything of it. But I must have seen it 5 times in the space of 2 hours last night. To be fair, it was a very long 2 hours, since I was watching something about the edge of the Universe narrated by Alec Baldwin who was apparently attempting to deliver his poorly written lines like William Shatner doing a parody of himself as Capt. Kirk! But I digress…
The U.S. Fidelis auto warranty program.
The commercial goes something like this:
“An alternator can be a $825 repair… throw in a new transmission and you’re out almost $2500…”
Then the words:
“Repair bill paid!”
Flash on to the screen, followed by:
“Customized warranties – you choose deductable “
It goes on to show some couple and a young woman who look about ready to slit their wrists (It’s never that bad people!) because of the outrageous repair bills. But if they got an auto warranty through U. S. Fidelis, they wouldn’t pay a dime. Sounds great. An auto safety net.
It got me wondering how many people think this auto warranty program is a good idea. Is U.S. Fidelis a scam, or just a bad deal?
It seems that there are few sites out there that question these companies and their ads. So, I went down the rabbit hole, and this is what I found…
According to the Better Business Bureau (BBB) website, U.S. Fidelis is really a company called “Dealer Services”, and they have 809 complaints against them over the past 3 years alone.
U.S. Fidelis obviously has some unhappy customers, but that doesn’t make them a scam. But what about the concept? Are extended auto warranties a good deal?
Playing the odds.
The basic idea behind any warranty is the same as insurance: it’s a gamble. It’s a mathematical function of the odds that you’ll need the service vs. what the service costs.
These companies offer extended warranties to make a profit. The cost of the warranty that you pay minus the cost of repairs they pay out, is profit for the company. Ask yourself, if that many transmissions go belly up on cars today, why would the warranty company charge you much less than the cost of replacing the transmission? They’d go out of business, unless the quality of cars today is such that most don’t need the kind of staggering repairs profiled in the commercial.
I’m pretty sure companies like these also limit their coverage to cars less than 10 years old, or they cover less on older cars to limit their loss.
A better deal.
It’s a shame, because the likelihood of a major repair is so low on newer cars that people would be better off setting up an emergency fund as their own “safety net”.
If people took the money they pay companies like U. S. Fidelis, or “Dealer Services”, for the warranty, and put it in a high yield savings account from ING, they would have the money when they needed a costly repair AND they’d earn interest while they didn’t need the money.
UPDATE:
NBC had a story on U. S. Fidelis earlier this week. I’ve posted a link to it at the post: MSNBC Thinks U.S. Fidelis Auto Warranty is a Scam! (Video).
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