Buyer be aware: Vehicle coverage that costs extra worth the price?


Extended warranty.

You may have heard this term if you’re shopping for a vehicle.

It’s easily the most recognizable finance-and-insurance (F&I) product generally available to new-car buyers at the dealership when they make their purchase – with 62 percent of shoppers telling Cox Automotive in a recent survey that they are familiar with the product.

Of course, that means that nearly four in 10 shoppers are not aware of extended warranties. And even more car buyers are unaware that there are other F&I products available.

“Available for both new and used vehicles, extended warranties are normally pitched as extra security for car buyers, reducing the risk of expensive repairs that might not be covered by the factory warranty,” said Consumer Reports (CR), the nonprofit product-testing company.

“Indeed, peace of mind was the most common reason given by [CR] survey respondents for purchasing the coverage, and for many that may be a sufficient motive.”

Key features of extended warranties, according to CR:

  • Many types of plans are available through dealerships, auto clubs, insurance companies, etc.
  • Most sellers offer more than one plan from bumper-to-bumper to less comprehensive.
  • Plans generally provide three to five years of vehicle coverage.

Other F&I products are a lot less familiar to the vehicle shoppers who likely will be offered the opportunity to purchase them, reports Cox Automotive in its Car Buyer Journey 2018 study.

These products, followed by the percentage of shoppers who are NOT familiar with them, are maintenance plans, 60 percent; GAP insurance, 64 percent; service contracts, 65 percent; tire and wheel protection, 76 percent; theft protection, 81 percent, and lost or stolen key replacement, 84 percent.

Here’s what they are:

  • Maintenance plans are pre-paid contracts available for new cars without a factory-backed plan or used cars sold by a dealership, J.D. Power says. They cover scheduled maintenance spelled out in the vehicle owner’s manual for a specific time period or mileage.
  • GAP coverage or guaranteed asset protection – often referred to as “GAP insurance” – is intended to make up part or all the difference between collision insurance coverage if a damaged vehicle no longer can be driven and the amount the buyer still owes on it. For more on this subject, see What GAP coverage is and why you may want it when you buy a car.
  • Vehicle service contracts provide for certain repairs or services and cost extra, unlike a warranty that comes with a car and is included in the price, says the Federal Trade Commission. Sometimes called an “extended warranty,” it is different as defined by federal law.
  • Tire and wheel protection provides coverage in the event of damage to your tires or wheels as a result of road hazards such as metal, nails, glass, debris, potholes, etc., says AutoNation.
  • Theft protection plans are pretty much what they sound like – deterrent and recovery systems that may include financial benefit if they fail to prevent theft and your vehicle is a total loss.
  • Lost or stolen key replacement covers you for hundreds of dollars for a new key and programming, and possibly to replace locks, which can cost even more, says insurance.com.

Other ancillary products may be available, including paintless dent repair and windshield chip repair.

“It’s always helpful to know what types of products may be available to you at the time you purchase your vehicle,” says Auto Consumer Information (ACI) on its website. “It’s also a good idea to be aware of the different options available for each type [of product].”

Whether to buy any of these products when you purchase a vehicle is up to you. But, says ACI, “You should be armed with as much knowledge as possible about all of your options.”