Vehicle extended warranties are often a financial incentive to the new car purchase but, even more so, can be a financial incentive to the dealer making the offer. As a vehicle consumer, understanding the financial terms when purchasing an auto extended warranty, will assist in determining if the option is the right choice as part of your vehicle financing program.
Simply put, the vehicle extended warranty is an agreement between the vehicle consumer and the warranty company. Contrary to popular belief, the vehicle extended warranty is not an agreement between the vehicle consumer and the car dealership nor the vehicle manufacturer.
While most car dealerships push the sale of the auto extended warranty at the time of the vehicle purchase, many consumers opt to decline the purchase of the extended warranty until later in the car ownership period. In either case, whether purchased at the time of car sale or later in the terms of your auto financing, the end result is the same, the auto extended warranty program will pick up the terms of the original manufacturer’s warranty at the expiration of the original manufacturer warranty’s terms. The advantage to purchasing the extended auto warranty at the time of sale lies in the significant savings in the cost of coverage.
What is commonly misunderstood is the terms of the extended warranty coverage and the monies financed upon the decision to sell the vehicle on which the auto extended warranty was purchased. In other words, when purchasing the auto extended warranty on a vehicle with a standard five year manufacturers warranty, some vehicle owners believe the auto extended warranty monies paid are lost forever if the vehicle is sold before the manufacturers warranty even expires. This is not the case.
As a vehicle owner, with auto extended warranty coverage, should the vehicle be sold or traded-in prior to the expiration of the manufacturers warranty, the dealership which originally made the vehicle sale, including the auto extended warranty, will be required to refund all of the monies paid for the extended warranty which will not be used due to premature sale.
Unfortunately, many vehicle consumers fail to realize the extended warranty reimbursement provision and, therefore, fail to recoup the excess monies from the selling dealership. When selling the vehicle, it is the selling vehicle owner who must contact the original dealership and begin the process for obtain a refund of the auto extended warranty monies. Should the selling individual never make this call, the original dealership will never know the car was sold, that the auto extended warranty was not used, and, therefore, never issue a refund.
So, when making the next new vehicle purchase, and unsure of the length of time the vehicle will be owned, consider purchasing the auto extended warranty as an added assurance in the care and protection of the vehicle. If the car is sold before the expiration of the vehicle manufacturer’s warranty, be sure to recoup the extended warranty monies from the original car dealership.