Guide to Used and New Cars: The Pros and Cons on Extended Warranties

You want to research your warranty, ask questions like does it cover electrical, or just basic power train? What about rental car bills, seals and gaskets, cracked or broken parts. I see warranty policies that cover cracked heads but not leaking head gaskets. I see warranties that won't cover alternators.

I also see warranties that don't cover normal wear and tear. If your transmission fails at 99k miles it can be deemed that it was normal wear and tear or they want to put a used transmission in that is going to fail any day.

Do not always believe that a warranty that says bumper to bumper means everything is covered. You need to research the company that you are buying the warranty through. Another thing if you buy an extended warrantee and cancel it or never use it for any reason you may be entitled to some or even most of the money back when you cancel it or it expires. This is only on some and they won't tell you about it.

Do Your Homework

If you are buying a brand new car, the extended warranty is usually not worth it. It's a way for the dealership to make some extra profit. I know someone who used to work for a car dealership; this is how I know.

As you have already found out, you have a factory warranty that covers to 36,000 miles, so if you were to purchase the 50,000 mile extended warranty, basically you would be paying all that money for only the 14,000 miles after your factory warranty runs out. In this case, you would be better off putting some aside in savings for car repairs.

I'd suggest you ask the dealer what other warranty options are available. Also, dealers figure in a huge markup in these warranties. I didn't find this out until months after I bought the warranty from the dealer. Go online and check out the GM warranties direct from General Motors. If GM doesn't cover your car, find out who provides the dealership with the warranties and go research the prices directly from them.

Warranties can be of significant benefit, but don't buy it from the dealer, he will make major money on it even if you never use it. Go shopping from the folks who provide the warranty to the dealer in the first place.

Though it sounds horribly sexist, it works so if you feel uncomfortable dealing with the dealer recruit a male friend or family member to go in with you. You do the talking; they look impressive and make noise if needed.

Pros

1. The Warranty
Ask owners of certified vehicles why they made their purchase and the number-one reason is usually the factory-backed warranty. For many people, paying an extra $1000, $2000, or more for a used vehicle with an extended factory warranty is well worth the expense.

2. Vehicle Inspection and Certification
CPO buyers are also willing to pay extra to ensure that the vehicle they are purchasing isn't going to break down any time soon. That's the point of the certification process, and every certified pre-owned vehicle, regardless of who made it, undergoes an inspection and certification.

3. A Buy-Back or Exchange Program
Building on customer trust, the buy-back or exchange policy on many certified used cars is the deal closer. It's a pressure-free way the consumer can try out the vehicle, and even exchange it if a buyer changes his mind. This is often the final straw that offsets the additional cost of a certified vehicle.

4. Factory Financing or Incentives
Because certified cars are usually among the most expensive on the lot, many buyers need a little financing help or cash incentives to step up to the plate. Because the manufacturer backs a CPO vehicle, the automaker often throws incentives or cut-rate financing into the mix to help close the deal.

5. Roadside Assistance
In many cases, CPO buyers get the added security of roadside assistance, just like many new-car buyers. This further reduces the hassle of ownership, because buyers can rely on the manufacturer to come through in a roadside emergency.

The Cons

1. Cost
A CPO vehicle can cost several thousand dollars more than a similar used car. In many cases the only difference is the factory warranty, which can be purchased elsewhere, and often for less money.

2. What Does "Certified" Mean?
Each manufacturer defines "certified" differently. It's up to the consumer to get the certification details on paper. So far, only the state of California has enacted a law protecting consumer rights. The law states that vehicles with structural damage, mechanical damage, or are lemon-law buy backs, salvaged vehicles, vehicles with tampered odometers, and those that have been damaged in a flood are disqualified for CPO programs.

3. No Guarantee
Just because a vehicle is certified doesn't mean that it will be trouble free. Like any new or used vehicle, you run the risk of a major repair right around every corner. The warranty programs of many CPO vehicles will cover these repairs, but sometimes they are excluded, so it pays to read the fine print.

4. Availability
Because the manufacturers back the certified programs, you have to go to a participating dealer to get the vehicle you might be considering. In many cases, that isn't as convenient as the used-car lot down the block or the classified ads. Also, you may have to look far and wide for a certified version of the car you want.

Factors like warranty, certification, and cost will always differ from car to car. Educated consumers who know the difference between certified used cars and traditional used cars will be able to make the wisest choice when it comes to purchasing a new vehicle, and deciding whether or not the markup is worth it.

I hope these are helpful tips that may help you in your search for a car. I got stuck with my warrantee and I want to make sure the same doesn't happen to you.