Buying a warranty at the time of sale: Rip-off or Bargain?

Guest Blogger

Amber Watson Tardiff

We’ve all been there.  You just made the decision to purchase a new car.  You’ve finally come to terms with having car payment for the next four to six years.  You may even be feeling sick at this point as you get ready to sign the paperwork. 

And no sooner than you sit down, you’re hit with the infamous sales pitch that goes a little something like this: “Will you be purchasing an extended service plan —because if you don’t take advantage of our offer TODAY, the price will double or even triple when you go to buy it later….”

Then you panic.

As a former finance and insurance manager, I can spot that panic from a mile away.   But I also know what it’s like to be in your shoes as a consumer.

So is there any truth to the manager’s insistence that you have to buy a warranty at the time of sale?

Honestly, it depends.

In most cases, the warranty cost will not significantly jump within the first 12 months/12,000 miles that you own the car.  Therefore, if you are unable to buy a warranty at the time of sale, you can generally come back with a credit card down the road and still find a significant savings than if you wait until the expiration of your factory warranty.

However, there are a few situations where buying the warranty at the time of sale makes good financial sense for you, the consumer.

The number one reason to purchase your warranty at the time of sale is to include it in your monthly car payment.  Comprehensive warranties can cost anywhere between $800- $2500.  Therefore, it’s much easier to tack on an additional $25 a month to your payment than come up with one lump sum down the road.

You should also consider buying a warranty at the time of sale if you plan to keep the car for more than 3 years.  Your business manager isn’t lying when he/she tells you the price can double or triple right before your factory warranty expires.  If you have any doubts, ask the manager to quote the price for a car that already has 3 years/36,000 miles on it.  You’d be amazed at the increase.

Finally, I’d highly recommend buying a warranty at the time of sale if your car is pre-owned.  In most cases, dealerships sell “wrap” coverage that extends the remaining factory warranty or provides better coverage to match an existing powertrain warranty.  Either way, these plans are discounted and you usually can’t come close to the price of a “wrap” after you decline the initial offer.


So based on the information above, it’s clear that buying an extended warranty at the time of sale isn’t for everyone- but it’s certainly not a gimmick either. 

It’s up to you to evaluate your circumstances and plans for the vehicle.  If you’re the type of person that keeps their cars and doesn’t have spare change laying around for a $2500 car repair, than budgeting an additional $25 in a payment is the way to go.  Then again, if you buy cars like a woman buys shoes, forget it.  Educate yourself on GAP insurance instead (because that’s definitely something you’ll need!)

The bottom line is, don’t be put off by the sales pitch.   Yes, the dealer wants to make money, but some of the things they offer are for your good.   To come to a site like means you’re on the right track, so take the time to learn what products they are offering and what kind of savings you will get for immediately signing on the dotted line.

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