You’ve spent all day at the dealership, you’ve picked out the perfect car, and now you are sitting in the finance office of the dealership getting ready to sign for the car of your dreams. Your finance manager will go through options that may or may not be required to carry on your new loan (generally if it is a lease or a high risk loan it is required); an extended warranty and gap. *gasp* Don’t worry, they really aren’t as scary as they sound and actually can be beneficial to your loan and vehicle purchase in the long run.
The first question you should ask yourself as a buyer is, “what is important if my car breaks down,” and “do I have cash readily available if my car does break down or need repairs?” Each dealership has their own programs and will offer different levels of coverage as far as an extended warranty is concerned.
Warranty prices depend on many different factors including but not limited to, the loan type and terms, the vehicle, and the miles on the vehicle. Here are some examples of the break downs on some warranties that can be offered (each may have a different name depending on dealership):
- Key replacement warranty. This gives a key replacement for up to a year at most dealerships. Dealership keys are very specific and can only be replaced by the dealer because of programming.
- Complete care can provide repairs for cosmetic damages such as dents, scratches, headlight reconditioning, etc. As with any plan, double check with the carrier and dealer on exactly what is covered because these vary depending on plan.
- Wheel and tire package is generally a no out of pocket expense for repair or replacement of tires from road hazard damages. Again, double check with carrier on what is covered, generally full tire replacement isn’t included unless it is completely unrepairable.
- Glass package covers windshield replacement/repair. Double check what coverage is and if there are stipulations as with any plan.
- Carefree maintenance is a plan that many dealerships offer that will cover a certain amount of oil changes, tire rotations, car washes, and multi-point inspections.
- Gap waiver. Drivers who have never had to use gap don’t always understand the purpose that it serves. Gap is generally an average of $12 a month during the term of your loan depending on the loan terms, etc. In the case that you total your car, it covers the difference between the current value of the car and the loan balance. Your car is constantly losing value (sorry) and the Gap insurance, is basically that, an insurance policy that will cover the amount between your vehicles value and what an insurance company will pay you if you total your car. Of course you don’t WANT to total your car but you can’t control other drivers either.
There are plenty of other options just depending on the dealer. Some of the other options a dealer may offer include Term care and Complete care which may also be referred to as Interior/Exterior protection. The term care may provide coverage for mechanical breakdown, brake pads, belts and hoses, fluids, diagnostics, and wheel alignment.
Most car buyers don’t understand the cost that each of these items may add up to. When considering these packages and adding them to your loan, ask yourself, if your car needed new belts and hoses right now would you have the $150-$200? What about brakes? That can be $200-$400 depending on how much needs to be replaced. If your actual headlights break? Did you know generally you have to replace the whole casing, that can be upwards of $300 minimum just to replace that. That extended warranty is looking pretty swell… Think of the warranty and GAP as peace of mind.
A little more on the purpose of GAP coverage. When customers are told they need to carry GAP they get concerned and sometimes frustrated. That it is generally because they are mis-informed along the way or there is a lack of communication about the benefit. Here at VW Southtowne, there are different types of GAP policies that are offered, some policies that other companies offer may only cover up to 150% of the wholesale book, where as the company that VW Southtowne uses will cover the whole amount. Besides totalling your car, if you do trade in your car and have GAP coverage on your loan, that amount is generally pro-ratable and you will receive a portion back. Many of our customer on a retail purchase, because like all installment loans you pay primarily interest, will keep an eye on the book value and will keep gap only during the first half of the loan. Although taking it off isn’t a big difference in your payment. Keep in mind, this is a protection for you as a driver. As mentioned above you may be a good driver, but there are still thousands on the road around you. This is just an extra insurance policy as your car is losing value, you are protected. Remember, peace of mind.
As with any paper work you sign, ask questions. It never hurts to take an extra couple of minutes to make sure as a consumer you fully understand the contract you are entering into. We cannot speak for every dealer, but the high majority are really not trying to pull wool over your eyes. They legitimately want to make sure you and your car protected properly for the life of ownership.