The New York Times has published an article which suggests, For Extended Car Warranties, Resist the Showroom Pitch. I’ll take that a little further and go so far as to say that the extended warranty you will be offered when purchasing a new car is nothing short of a scam to inflate the dealer’s profit on the sale of the car.
I wrote about our experience buying a new Honda Fit, and the absurd attempts the dealer made to sell us on an extended warranty, among other expensive upgrades. We declined all of these offers, and feel that we not only made the right choice, but avoided being the victims of an expensive scam.
As the NY Times article points out, pricing on these warranties is highly variable. No kidding. The price on the one we were offered started at $2200. After we declined it, the price dropped a full $1000, but we had to act immediately, or the offer would expire. We declined again. Weeks later, the dealer was still calling, and the price of that $2200 warranty had dropped to $820. We didn’t even return the call.
While some people might have seen the reduced price as a great deal, we merely took it as proof that the dealer was just a big fat liar. The wildly varying pricing and desperate pitching revealed the dealer to be no more trustworthy than a vendor at a Mexican street bazaar.
Here’s the other reason I refer to the extended warranty sales tactics as a scam. The dealer lied to us about the validity of our warranty in Canada. Knowing that we were Canadian and would be traveling in Canada extensively, he told us that only the extended warranty would cover us in Canada. If our vehicle was to break down while we were on vacation, we would “have to have it towed all the way back to a U.S. dealer” in order to get regular warranty service. The extended warranty, he said, would cover us in Canada too. This gave us pause, but somehow didn’t ring true.
Honda Canada’s website states the following with regard to U.S. purchased Hondas owned by U.S. residents traveling in Canada.
The reciprocal warranty agreement between Honda Canada and American Honda only covers owners who relocate from one country to the other, or owners from one country who are travelling on business or vacation in the other country [emphasis mine]. If a vehicle that was originally sold new in the United States is brought into Canada, its warranty only applies to the owner that purchased the vehicle while living in the U.S. and who imports the vehicle into Canada for their own personal or family use.
So, not only is our warranty valid while traveling in Canada, but if we relocate back to Canada, it will continue to be valid as long as we remain the owners of the vehicle. Can you say, “Liar, liar, pants on fire?”
I’m not sure how car dealers continually manage to get away with such underhanded sales practices. I suppose most of us have become so accustomed to car dealers being sleazy, that we just shrug it off when we catch them in the act. I doubt that lodging a complaint would have any impact either because they can always just say they made a mistake, apologize profusely, blather on about what a valued customer you are, and send you away with a coupon for a free oil change.
Whatever you do, if you’re buying a new car, don’t buy the extended warranty on the spot. Wait. Ask for a full copy of the terms of the warranty. Strangely, this wasn’t even readily available when we asked for it. They wanted us to buy $2200 worth of warranty coverage based solely on a verbal explanation of what was covered. More BS!
Also, check with other dealerships of the same manufacturer. As the article points out, dealers are now competing on the extended warranties.
I think the best advice offered in the article is to take the cost of the extended warranty, in our case $2200, and put that in an interest bearing account. If you need it at some point in the future, it’s there to cover repairs. If you don’t, it’s still your money.