Extended Warranty - Consider it!

I can’t believe this is the first F&I (Finance & Insurance for your newbs) story I’ve written since Broley’s has started. Before I begin let me just say I should be seen as completely biased as F&I products are how I make a living. Not only do I distribute them but I train staff and set-up dealerships to sell them like crazy. There, disclaimer over.

Next time you purchase a new vehicle, which you should never do, consider the extended warranty. If you are buying used see how much the warranty is going to cost, more than likely the cost will be too high (there is a reason for that however!). When you are at the dealership and you are dealing with the F&I specialist they will at some point pitch you on an extended warranty program. They will give you a bunch or reasons why you should invest in the extended warranty (although they will never call it that): piece of mind, guards against inflation, resale, etc etc etc. All good reasons.

The reason you should buy an extended warranty is to protect yourself from the service department! How does a dealership make money? A properly run service department will cover all costs related to running the dealership. The sales department can be broken into two parts a) New and b) Used. The new car department will break even at best and the used car department will make a small to reasonable profit. That leaves the F& I department – this is the most profitable part of the dealership in terms of square footage, but in square footage only. Long story short all the moola is generated in the service department. The service manager and all their service advisors are paid on sales.

So here is the scenario. You buy a vehicle. You take it in for an oil change. When you pick it up they tell you your bearing are gone in the front and your #7 injector is jammed. They quote you $544 bucks. You are of course pissed. The average repair bill however is about $850 including parts and labor so consider yourself lucky. Anyway you have no warranty, you are a sucker so you pay.

Scenario number two is exactly the same except the customer has an extended warranty. What is the number one rule we extended warranty companies abide by? Any repair must come as a direct result of a customer complaint. This one simple rule ensures that when you come in for an oil change that is all you get. Conversely if you come in and think there is something wrong that problem will be fixed as well anything relating to it (as long as the policy you have covers it).

If you are buying an import you should definitely buy a warranty because they are so cheap and of you are buying a domestic you should buy one because I guarantee you will use it! Also remember that everything is negotiable. Good luck!