From Consumer Reports:
"The F&I representative will almost surely try to sell you an extended warranty or service plan.
Most of the time, these plans are a losing bet.
A survey conducted by the Consumer Reports National Research Center in late 2013 proves this point.
We polled 12,000 owners of vehicles built during model years 2006 to 2010 that had been covered by extended service plans.
Fifty-five percent of owners who purchased an extended warranty hadn’t used it for repairs during the lifetime of the policy, even though the average price paid for the coverage was just over $1,200."
"On average, those who did use it spent hundreds more for the coverage than they saved in repair costs.
Among survey participants who used their policy, the average out-of-pocket savings n repairs covered by extended warranties for all brands was $837.
Based on a $1,214 average initial cost, that works out to a net loss of more than $375."
"Factoring those who didn’t use their policy, total average savings was zero. And that may have something to do with why satisfaction with auto extended warranties is among the lowest of all products and services surveyed by Consumer Reports, and why less than a quarter of respondents said they would get it again.
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. Indeed, peace of mind was the most common reason given by our survey respondents for purchasing the coverage, and for many that may be a sufficient motive."
"Many types of plans are offered, both through dealerships and from other sources, such as auto clubs and insurance companies. And most extended warranty service purveyors offer more than one plan, with everything from comprehensive bumper-to-bumper coverage to more targeted protection for the powertrain only or specific components. Plans can also vary in duration, with most providing three to five years of coverage."
"Our survey results indicated that costs are similar regardless of from where the coverage is purchased; there was no more than about a $100 difference between factory and third-party programs.
Of those who purchased an extended warranty, 86 percent did so at the same time they bought their car.
One of the reasons to do this is for the convenience of rolling the cost into the car loan. It costs more money in the long run, however, because you have to pay interest on the warranty’s fee."
"Survey respondents who purchased automaker backed coverage through a dealership were substantially more satisfied with the policy than those who purchased coverage from a third party, with 53 percent and 41 percent, respectively, saying they were highly satisfied. But even those customers were not much more likely to buy such coverage again. In fact, less than 30 percent of all respondents who purchased an extended warranty said they would definitely do so."
So unobtinium's advice to go with a credit union makes no sense.
