Extended Warranties: Explained

By Joshua Levinstone

Yesterday, we talked about some of the misconceptions about actual value of Certified Pre-Owned vehicles.  So today I want to talk about optional extended warranties, how they work, and what value they provide. I realize this is far from the most exciting topic, but I want to arm you with as much information as possible, so I’ll try to keep things lively.

The Basics

Before we can talk about pricing, the most important thing to understand is how warranty providers work.  Warranty companies do not have a flat-rate price. The same warranty for the same car at three different dealerships will yield completely different prices.  This is because there is a relationship between the warranty provider and the dealership.

If a dealership sells a high volume of policies, their warranty provider is going to offer more competitive pricing to keep their business.  But, if that same dealership is selling cars that consistently require large claims early in to their policy, the warranty provider is going to raise those prices up, so they aren’t losing money.

The dealer/warranty provider relationship goes even deeper.  If a dealership with a strong track record of selling quality vehicles sells one that ends up having an expensive claim, they may choose to cover the claim themselves in order to keep the cost of their warranties down for future vehicles.

What you want is a dealership that has a great relationship with their warranty providers.  But, that’s easy information to acquire. This is where a little due diligence can go a long way.  Read reviews about the dealership you are working with. Look at the bad reviews–we all have them–and see how they were handled.  Read the good ones too. It’s the best way to gauge the business ethics of who you’re potentially going to be spending thousands of dollars with.

How We Do Business

Now that we’ve covered the basics of how warranties work, I want to do a little self-promotion and explain what makes us special.  First, we only work with warranty providers we know are going to fully cover our customers regardless of whether they bring the car to us or not.  

To keep the cost of the policies we offer as low as possible without sacrificing coverage, we are meticulous about the vehicles we source and sell.  On top of that, all of our vehicles less than ten years old and have less than 90K miles, with the exception of a few high performance cars (we don’t want to pay for your track day), come with a 3 month/3,000 mile warranty.

We provide this warranty not just as a guarantee of the quality of our vehicles, but to also keep our cost for extended coverage low, because the companies we work with know that if there was an immediate problem, we are going to take care of it, rather than passing the buck on to them.

What all of this amounts to is better and longer coverage, at a better value than a typical CPO vehicle; because as it turns out, doing the right thing actually pays off.