Warranties & Dealer Add-Ons

1. The Basics

A major profit source for dealers are the add-ons they sell while you complete the vehicle paperwork. In marketing, it's a well known fact that consumers are easier to upsell after they've already agreed to buy something.

A $1,000 add-on will increase your monthly payment by less than $20 on a 60 month loan, so it doesn't seem like much - but it is.

There are all kinds of add-ons dealers will try to sell including pre-paid maintenance plans, paint/fabric protection, rust-proofing, window etching, and the list goes on. Most of them are useless and should be avoided.

The only add-ons worth considering are extended warranties and GAP insurance, both of which you should comparison shop before purchasing.

2. Extended Warranties

If you plan on keeping your vehicle for many years and don't want to worry about repair bills, it's usually a good idea to buy an extended warranty.

Extended warranties take over after your manufacturer warranty expires (usually after 3 years or 36,000 miles). They cover pretty much everything except normal "wear and tear" items such as oil changes, brake pads, etc.

You can usually buy an extended warranty on a new vehicle within 1 month or 1,000 miles before the expiration of the manufacturer warranty. If you miss this deadline, you can still buy an extended warranty, but you will be charged based off of used car prices which are a little more expensive.

To give you an idea of cost, extended warranties usually sell for between $400 and $2,500 for up 3 years (or 36,000 miles) of additional coverage. There is usually a lot of negotiating room with extended warranties so it pays to comparison shop before buying.

The best extended warranties are manufacturer backed, but they're more expensive. There are only two online warranty providers that I recommend (listed below).

3. Other Add-Ons

When buying a new car, you'll be presented with several add-ons that can be purchased for an additional price. Are any of them worth buying?

The answer is generally no. The only ones you should seriously consider are extended warranties and GAP insurance. If you get in an accident and total your vehicle, GAP insurance will pay off the difference of what you owe and what the vehicle is worth. It can save you several thousand dollars.

You should get GAP insurance quotes from an independent insurance agent before getting pricing from dealerships. You can usually buy them cheaper that way.

Other add-ons such as paint/fabric protection, window etching, and rustproofing are completely worthless. Don't even bother with those.