Buying a new car is a major investment. Once you’ve decided on the car you want, the dealership will offer to sell you an extended warranty. But is this something you really need?
A new car extended warranty isn’t cheap, but it could save you a lot of headaches down the road. These contracts are often complicated, so you need to ask plenty of questions in order to understand exactly what you’re signing up for.
Let’s a look at some important questions to ask the salesperson before you sign on the dotted line.
15 Questions to Ask Before Taking Out a New Car Extended Warranty
Not all car warranties are created equal. And there’s no reason why you need to take the one that the dealer is offering. Learn more about what to do by reading these 15 questions you should ask before taking out an extended warranty.
1. What is the Length of the Contract?
It’s very important to understand the basics of the extended car warranty you are interested in purchasing. Pay close attention to details like the time and mileage limits. The last thing you want is to discover that a claim has been denied due to the coverage having expired because you’ve reached your mileage limit.
The best way to prevent confusion is to read the contract carefully so that you clearly understand the terms of the plan.
2. What is Covered?
Keep in mind that not even the best contract is going to cover everything under the sun. So you’ll want to look closely to make sure things like roadside assistance, rentals, towing, and lockout service are included.
Many policies have limits on rental fees and towing, and thus some of those expenses might have to be paid out-of-pocket. Also be aware that the coverage in some policies depreciates based on amounts paid for repairs or depending on the age and mileage of the vehicle.
3. How Much Does it Cost?
Remember that there are different plans offered at different costs. So don’t be fooled by the low cost of the most basic package because it will likely be missing important features that you’ll want to be included. These added features might cost a little more upfront, but will be worth every penny when an emergency arises.
4. What Company Backs the Plan?
Before purchasing the extended warranty, take a look at the company backing the contract. Make sure they have a high rating with the Better Business Bureau so that you know you can trust them.
There are government regulations in place to protect consumers, and a good rating tells you that you can expect prompt payouts, reasonable rates, and won’t be overcharged for services.
5. Who Will Pay for Repairs?
Make sure that the contract specifies how payment for repairs is handled. Are you expected to pay the repair shop yourself and then get reimbursed? Or does the company offering the warranty pay the repair shop directly?
If you are expected to pay, how long should you expect to have to wait to receive the reimbursement check in the mail?
6. Is the Price of the Contract Negotiable?
Negotiating the price of your new car is exhausting enough without having to haggle over the price of an extended car warranty. Nonetheless, you should never be afraid to negotiate for a better deal.
It’s definitely worth the time and effort. After all, you can typically save at least $300 by not accepting the first offer they show you.
7. Will New or Reconditioned Parts be Used for Repairs?
Don’t let this detail scare you. Everyone typically prefers to have new parts used for the repair of their car, but most reputable companies allow the use of reconditioned parts.
Many times it’s up to what the mechanic recommends. Just make sure that your policy covers OEM or remanufactured parts if you are paying for a higher level of coverage.
8. Where Will the Repairs be Completed?
Every warranty is different when it comes to choosing a repair shop. Some plans allow the consumer to pick a preferred shop for repairs, while other plans offer a list of approved repair shops.
This can be an important detail if the approved shops are not located in your area. It can be a huge inconvenience for you to have to take your car to another town anytime a repair is needed.
9. How Will Claims be Handled?
We suggest taking a close look at the company’s process for handling claims. This can have a huge impact on how quickly you are able to receive services like towing or repairs.
Can the company be contacted outside of business hours? Do you have to get authorization before calling for a tow? There’s nothing worse than being stranded on the side of the road, unable to reach anyone by phone or to get the answers you need. Another way to get insight into the company’s handling of claims is to review their customer ratification rating online.
10. Is There Any Cancellation or Transfer Fees?
In the event that you are unhappy with the extended warranty you’ve purchased, want to end it early, or perhaps you’ve decided to sell your car, you’ll need to be familiar with the cancellation or transfer policy.
An extended warranty adds to the resale value of your vehicle, but you’ll need to make sure it is transferable to the new owner. Some plans are non-transferable, while some allow it for a fee.
11. How Does the Deductible Work?
The amount of your deductible will likely depend on the price of the warranty you purchase. Though you might wish to save money at the time of purchase by choosing a less expensive plan, it will cost you more in the long run due to a larger deductible.
It’s also important to find out how the deductible is applied. Some are applied per visit, while some are applied per repair. Deductibles that pay per repair are far more expensive.
12. What Will You Personally be Responsible For?
Another important factor to consider is what things will be required of you to keep the warranty valid. Some contracts require regular maintenance. Find out if you can perform preventative maintenance and minor repairs yourself, or if these services must be completed at a licensed shop.
Keep in mind that you won’t want to discover that your warranty has been voided because you failed to do something as simple as getting the oil changed every so many miles. These are simple details to keep up with and can save you a ton of money.
13. Have You Shopped Around For the Best Price?
Not everyone is aware that you don’t have to purchase an extended warranty from the dealership where you got your car. This means that you are free to shop around for a plan that offers the most coverage at the lowest price.
A smart consumer will call around to other dealerships to find out if they offer lower prices for the same product. Believe it not, you can save a lot of money by doing just a few minutes of research. The internet is loaded with resources to help you find exactly the product you’re looking for.
14. Will You Actually Use It?
Some people might think this is a silly question, but it’s definitely something to consider. Keep in mind that many extended car warranties never get used. In fact, Consumer Reports states that 55% of car owners who buy an extended warranty neglect to use it.
This is why you should take the time to ask yourself whether or not it’s worth the expense. For most consumers, every dollar counts. Perhaps you plan to trade the car in on a newer model before the manufacturer’s warranty expires. Or perhaps you simply wish to save a few dollars. Either way, the choice is yours.
15. Will the Warranty Provide Peace of Mind?
For most people who choose to invest in a new car extended warranty, the decision ultimately comes down to whether or not it will give them peace of mind. An extended warranty for cars is expensive, and though there is no guarantee you’ll ever need it, at least you’ll know you have it in the event of a car problem.
Sometimes that nagging feeling in the back of your mind about something going wrong is worse than the expense of the extended warranty. As a new car owner, you will need to decide for yourself what is more important for you, saving money, or not having to worry about something going wrong when you least expect it.
The Bottom Line
Owning a new car is a major responsibility. Purchasing a new car extended warranty is an expense most people dread, yet they are able to rest easy knowing they are taken care of in case of an emergency.
Remember, saving money now could end up costing you a small fortune in the long run. Do some research, decide the type of warranty product that you believe would best serve your specific needs, then relax and enjoy driving your new car!
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