Extended Warranty Dilemma

[iicriscoii]

I am a first time new car buyer who is happy with the vehicle pruchased. However, I recently purchased a brand new 2008 Tahoe with extended warranty (Major Gaurd 72k/72mo $100 deductible) from the dealer. What a big mistake! I didn't discover until after the purchase that I can get the same and even better coverage for much cheaper online. I feel like a sucker and was thinking of canceling. The warranty is part of my financing
and I am aware it will go back to my principal, but still have the same monthly payments. Although less interest to pay...

I went to the dealer and spoke with the financial manager to get more information about canceling. Of course, he gave me the counter-talk to disuade me from doing. During this time, I felt like he was trying to put me down and make me seem stupid for doing so. He finally gave me the cancellation form and told me to basically (not in the exact words).. "Get the F... out of my office and fill it outside in the lobby. Place it over there when you're done." Then he walked off. The form asked me for information I did not have on hand since I did not drive the Tahoe to the dealer so I decided to come back to drop it off.

I would like to buy another Major Gaurd GMPP coverage through another distributor. However I read on the contract that once I can cancel I can no longer purchase another coverage through GMPP. I also called the 800 number for more information and rep pretty much told me the same...so I am assuming I am screwed. I'm not too sure about going through another warranty provider.

- Has anyone experienced a similar situation or can give any insight on this?

- Should I just bite the bullet and keep the warranty?

- I don't want to go back to the dealer to cancel. Do I have to go through the dealer to cancel my coverage or I can I do it on my own?

On a final note, I do 2nd guess even getting extended warranty at all. I do plan to keep the vehicle for a long time. I consider my self very "mechanically inclined" and do my own maintenance, repairs, and modifications. But will still be worth having the extened warranty?

:yar:

 

[jonnyenglish]

I am sorry you had to deal with the bad attitude of the finance mgr. However be it right or wrong I like the back up of an aftermarket warranty. I bought mine like you did and rolled it into the financing, upped my payment by i think $30 a month. I have coverage for another 48 months and upto 100k miles.
Mine was through GM and ofcourse the dealer gets a kickback for selling it and will lose commission if you cancel but don't let that stop you...
Good luck with your decision
Jonathan

 

[02Lightning]

Warranty through the manufacturer is the best one to get (GMPP). Sometimes other dealers do not honor warranties, but if it is a GMPP they will honor it. Also what if the private warranty company goes out of business you’re screwed. Dealers will also haggle on prices with the GMPP warranty. I purchased a 7 year 70,000 for $1620 they wanted $2200 for it.

 

[BJC7JR]

Ditto with Lightning. My Famly business is a GM Dealership. We do not accept any warranty other than GMPP, most of the rest of them are a pain to get your money. I personally do not use one, but there is some room on the GMPP and can sometimes be negotiated similarly to how you did your car purchase. I have not looked into online vendors for GMPP, but if its like everything else, its prob cheaper online. however, you do loose the ability to roll it into financing.

 

[rsinsel]

Keep it. You never know. Around here the 60mo./100,000 mile goes for 1295.00.

 

[iicriscoii]

Thanks all for the feedback. All your points make sense and I've been leaning towards just keeping it. However, after seeing what everyone paid I now feel even more ripped off. I am embarrassed to say, but it was $2700.

I did all my research about the Tahoe before purchasing, but I miss the part about the warranty. I guess it's an experience I may just have to pay for.

Does anyone know if there is an alternative way to at least still get my money's worth without canceling. The service rep on the phone mentioned I may be able to negotiate a new term, but I'm not sure of this?

 

[jonnyenglish]

Just keep it, Its not going to take much to recoup that amount of money. Ive had my Suburban for right at two weeks and Ive already had the electric seat motor replaced, a plastic trim part replaced pull handle on the tailgate replaced so with part prices and labour charges its not going to take long. Its in the monthly payment, its factored into your budget just make sure you use it.
Jonathan

 

[02Lightning]

I guess the way I would try and go about it is to get your money back and then start fresh, it's hard to negotiate after they have your money. I wouldn't doubt that they wouldn't give you your full $2700 back plus tax. I'm sure it's pro rated.

 

[rsinsel]

Just keep it, Its not going to take much to recoup that amount of money. Ive had my Suburban for right at two weeks and Ive already had the electric seat motor replaced, a plastic trim part replaced pull handle on the tailgate replaced so with part prices and labour charges its not going to take long. Its in the monthly payment, its factored into your budget just make sure you use it.
Jonathan

If you have less than 12,000 miles or less than 12 months you can still buy. Now I do not know about re-buying. Who ever took you for that should be shot. You might call someone at GM assuming it is GM's warranty, and complain. I have never seen one that high under their new power train warranty guidelines. I am sorry. My dealer tried to gouge me. But I know a dealer in east Texas that sells them cheap and that is where I'll go.

 

[Yukon Joe XL]

I'm with jonnyenglish:its factored into your budget just make sure you use it.
Again: make sure you use it Take it as a lesson for your next new car purchase. It's probably not worth the hassle to try and get it cancelled and getting another one now. I would study up that warranty and know exactly what is covered and bring it back for every little repair needed. Make 'em pay for there heavy handedness : )My dealer tried selling it to me for $2400 but I have bought a few new cars in my time and knew the deal.
Live and learn. Good luck

 

[convoyduel]

Guys and girls, I wanted to throw a little different perspective on all of this. First, in the interest of full disclosure, my family has made a good living off of selling credit life insurance to dealers. I have family members who have been in the business for over 30 years. That being said, please consider the following, and I certainly mean no disrespect to anyone.

Despite what you may think, dealers make very very little on the sale of a new car. The difference between what they paid for the car (including floor plan interest and after holdback rebates) and what they got from the buyer is usually only around $500 for a good sale. Factor in the costs for their building, utilities, sales commission, employee costs, etc. and there's not much there. Dealers make their money on service (especially non-warranty service) and "ups" in the F&I booth.

When you are completing your sale, the F&I guy is the person who is really trying to work in a dealer profit. The things they try and sell like extended warranties, fabric protections, window etching, undercoating and credit life are the profit centers for dealer sales. The factory warranty you bought probably cost the dealer around $1000 give or take. The rest is the dealer's take. Same for credit life. Whatever they are selling it to you for, they are getting it for around 30% to 40% of the price they quote you. There's nothing wrong with that, this is America and that's the way it works.

By law, if you cancel a warranty or trade the vehicle in before the warranty expires, you are owed a refund of the pro-rated balance. When that refund is called, the dealer has to come up with their portion of the cash themselves or they have to sell some other poor sap a warranty to offset the refund. That F&I guy is paid commission on his net sales, so you were also taking money out of his next commission check. That's why the F&I guy was not your best friend.

In the case of GM, Chrysler (and Ford Certified Pre Owned), extended warranties are not as cost beneficial as they were a few years ago. The primary liability to the consumer has always been the potential for powertrain problems after the 3/36 is up. With the long factory powertrain warranties now, extended warranties do not typically have a positive cost/benefit ratio for the consumer. Also, most of the extended warranties don't cover EVERYTHING (trim for example) and they also typically have a copay of $100 or more per visit. In addition to this, when you are buying a $2000 warranty on credit (rolled into your loan), you are also paying a lot of interest on that $2000. For a 5% loan, you are paying $2264 (13.3% as a percent of principal) and for an 8% loan you are paying $2433 (21.65% as a percent of principal). The other problem is that most of the time, people use up their warranty mileage long before they are done paying off the car and loan balance. That leaves you paying for something you no longer can use. One more important detail to remember is that you are only paying for differential coverage between the end of the factory bumper to bumper warranty and the limits you choose. So, in the case of say a 60k mile extended warranty, all you are buying is 24K miles worth of non-powertrain coverage. I don't think you will get a lot of benefit with something like that.

Let's say I buy a $2000 warranty and roll it into a 5% loan for 60 months. Assume I drive such that my warranty lasts as long as the loan. Also, let's say I use the extended warranty five times for broken items (very unlikely by extended warranty industry average). I have a $100 deductable per visit. In this case, I have wound up paying $2764 out of pocket by the end of 60 months. Because of the GM factory warranty, that $2764 in expenses would have to be non-powertrain related and occur after the 3/36 ends. I'm not sure that I would have incurred that kind of out-of-pocket expense on the repairs otherwise.

If you take that same $2000 warranty example at 5%, it costs you an extra $37.50 per month for 60 months. If we don't buy the warranty, but instead put that $37.50 per month in a savings account earning 2% interest (bank rate savings interest mind you), after 60 months, our balance is $2364. So, instead of spending $2264 on a differential warranty with nothing left to show, I now have an account with a balance of $2364 that I can use to offset any non-warranty repairs I made on the vehicle or use as a down payment for a new vehicle.

Keep in mind, I'm talking about average experiences here and there will ALWAYS be a case of somewhat with extrodinarily bad luck with a vehicle's quality or reliability. And, it's your money and you can do what you want with it. As for me, I'd rather have the $37.50 per month and the power of interest working for me rather than against me. Good luck in your decision, whatever it may be.