Extended Warranty...INFO? Pro and con?

Answer 1

The key question is....."Who is providing that warranty?"

If you are buying a Honda for instance, and the warranty is a Honda Factory Warranty, where you can take the car in to a Honda Dealership and they will fix it because it's under warranty, those are OK, if you are OK with the cost.

If on the other hand you are buying a warranty offered by some 3rd party, where they are in essence insuring the repair bills, usually with some sort of deductibles, run away. Run away fast. There are 3 reasons to avoid those:

1. The dealer makes a crap load of money. He may sell you the warranty for $700 and only pay $100 to the company doing the warranteeing. Last time I bought a used car, we turned it down, and they immediately dropped the price by $200, because they were still making plenty of profit.

2. Often many of these 3rd party warranty companies fold up after just one or two years, leaving you with warranty not worth anything.

3. Often the terms of the warranty make it difficult to actually use it, or the deductibles really lower it's value to you.

Answer 2

I'm not in favor of the extended warranty. The money that it will cost you is usually enough to pay for a repair, if it's needed. If it's not, then you threw the money away.

So it's a gamble, who knows you may get in a wreck and the car is totaled, you may want to sell it or trade it in after 2 or 3 years and you won't need the warranty.

It is a profit maker for the dealership, that is why they push it. If they lost money on it, would they push so hard to sell it to you?

Answer 3

It's like handing them $2000 and letting them keep it even when nothing goes wrong with your car.

Just keep the money in a savings account and if nothing goes wrong you keep the money and any interest.