Buying a car is more difficult than buying a house, and if you are not careful the accountant of any car company will sell you something that you may never be able to use it. One of such products is Extended Warranty. Another one that I heard for the first time last year was Gap Insurance. This Gap insurance is from a third party and will pay off any balance after the company with whom you have your Auto Insurance has paid the maximum amount allowed in the policy after your car is completely damaged and had to be replaced. Suppose the Auto Insurance policy has a cap on the amount it will replace for such an accident is 30,000 dollars, and the depreciated value at the time of the accident is 45,000 dollars, then this Gap policy will pay off 15,000 dollars.
This Gap policy was billed to me as 1,000 dollars in the total sale price, and Extended Warranty was 3,000 dollars. The accountants in any car company use the scare-fear scenario and will sell such products by making you believe that even if the probability is less than .01 percent, it will happen to you positively or has a 100% probability. The Account of this company whose name starts with H told me that by buying thus warranty will only increase my monthly loan by a few dollars. So, I agreed for both these extra “features”. Reading the details of the loan document is not very easy, as now a days the companies use the small screen laptop and do not give you a printed contract to read. After a few days I printed the document and was surprised to see that total amount of the Extended Warranty was added to the loan amount and his statement that it will only add a few dollars to the monthly payment was false, because if I would have paid off the loan amount in six-nine months I would have paid the company the extra few dollars for six-nine months but the entire 3,000 dollars.
After reading the Extended Warranty that is supposed to cover any repairs for 100,000 miles will only cover any manufacturing defects and no other mechanical problems after the warranty of 30,000 miles or five years has been used. I do not drive more than 800 miles per month; hence it will take more than seven years, and by that time the initial warranty will become null and void. In case I sold the car, the policy was not transferrable to the new buyer, and I would lose the whole amount, if I did not cancel this policy.
The first thing that I did was to call the company who was managing the Gap policy, saying that I do not want to continue with this policy. They refunded the policy amount after deducting 50 dollars as cancellation fee.
Then I sent my complaint to the corporate office of the dealership explaining the way they tempted me to buy this Extended Warranty. After a few calls and follow up, the dealership reduced the loan amount, and I paid off the loan within a year.
So, my advice to you is that read the fine prints for any loan amount before you buy the car and buying Gap Insurance or Extended Warranty is not a vise investment, as except in very rare circumstances you will be able to use these policies.
Rambler's Corner 