Potential Pitfalls When Buying a Car - Shop Around for Warranty Programs

When shopping for your next vehicle, the dealer may encourage you to take out an extended warranty to help defray the cost of repairs. Most vehicles, even used ones, come with a warranty when you drive it off the lot. But the coverage that the dealer is proposing goes beyond that. The question to ask is whether this additional coverage is truly needed. If you're purchasing a reliable brand, it may not be necessary.

According to a recent article in Consumer Reports, "extended warranties are an investment in peace of mind that limits financial risk for a set period of time." But, keep in mind, that the price you pay for protection is negotiable, just like the vehicle purchase price.

And, if you obtain a vehicle history report from either CARFAX or AutoCheck on the used vehicle that you're buying, it may provide some assurance that you're purchasing a well-maintained vehicle. If you can't be sure that the car has a "clean" service history, an extended warranty may be worthwhile.

However, there is another option to consider, which does require some discipline. You could set aside a certain dollar amount every month for car repairs. As these funds accumulate in a savings account, you'll then have them available when your car breaks down unexpectedly or requires scheduled maintenance. And, if you end up not spending these funds for this purpose, you'll have a ready-made down payment for your next vehicle!

Resources:

Consumer Reports

Nerd Wallet

 

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