Question about service contract (should I keep it?)

[mazdabuff]

Hi,

I just bought a used 2011 mazda cx-9 sport awd with only 7,000 miles and financed through the dealer. The finance guy gave me 3.99% interest for 60 months but he added a service contract for $1500, good for 7 years or 100,000 miles. I and my wife and son will put mileage on the car for around 6,000 miles or less per year, since I work in the city and I take the train, plus I also have my '04 mazda 3 hatchback to do errands. I went back to the guy and told him to take it out but he said the interest would go up to 5%, so he advised me to refinance thru another bank and the $1500 contract would be removed. The car was bought in 2010, so it still has 1 year left on the 3yr/36,000 mile bumper to bumper warranty. Based on my experience with my mazda 3 hatch, the only problem I had was the a/c condenser replaced for $650 after 7yrs of use. Should I keep the contract or get rid of it, thanks for your suggestions.

By the way, the CX-9 drives great, feels like a luxury SUV, handling is nice, its very quiet inside, although its kinda heavy accelerating from a stop. It was cheaper than a CX-5 Touring, which the dealer wont give any discount on.

 

[ceric]

CX9 is fairly reliable, but not the champion at that.
According to ConsumersReport's reliability survey, it is on par with Pilot, but slightly worse than Highlander.
You got a later model. Chances are it will be more reliable than earlier ones.
Considering the powertrain warranty of 5yr/60K and possibly 7-8yr/100K coverage on the emission-related parts (not sure about Long Island),
7yr/100K warranty does not provides much more coverage. However, these are financial decisions
each has to make on your own according to your perspective on budgeting.

As for CX5, it is selling very well. No doubt, your dealer will not budge on price.
Mazda claimed that Skyactiv vehicles (CX5 and some Mazda3) account for 65% of its sales last month.

Welcome to the forum.

 

[mazdabuff]

Thanks for the info ceric, highly appreciate it. Mazda is indeed a reliable car, I guess it is a personal decision if I keep the coverage or not, will be thinking about it for the next few days until I forget about it, lol.

 

[table5511]

If that 1500 dollar 7 year / 100k mile warranty is bumper to bumper, it is worth it in my opinion, but if that is powertrain only, if it were me, I would not take that deal. Like Ceric says, depends on your financials. If you are spreading yourself thin with car payments, perhaps it is worth it to you if something happened to the car and you had no money in the future. Good luck!

 

[Evan78]

What rate can you get on another loan? If your loan is $30k (just an assumption), the difference in interest is about $800 over 5 years between a 4% rate and 5% rate.

 

[mazdabuff]

If that 1500 dollar 7 year / 100k mile warranty is bumper to bumper, it is worth it in my opinion, but if that is powertrain only, if it were me, I would not take that deal. Like Ceric says, depends on your financials. If you are spreading yourself thin with car payments, perhaps it is worth it to you if something happened to the car and you had no money in the future. Good luck!

Thanks hellbigtw, it is bumper to bumper (except for struts, shocks), the brochure (don't have it with me right now) says it covers the engine, transmission, electricals, drivetrain, etc, and it list the parts what are covered under each item, covered under electricals like seat motors, power windows, etc., plus emergency roadside assistance and free car rental, I have to review the brochure again. But you have a good point, if something did happen in the future and the car needs to be repaired and I still have car payments on top of repairs, then that contract is a good thing. Most probably I would not keep it since I would put low mileage on the car plus its a Mazda (good reliability), but then again it gives me a peace of mind knowing I'm covered for the next 7 yrs., I'll decide maybe a month later, thanks.

 

[mazdabuff]

What rate can you get on another loan? If your loan is $30k (just an assumption), the difference in interest is about $800 over 5 years between a 4% rate and 5% rate.

Hi Evan78,

I can probably get a 2.99% rate (rate for used car) from my credit union and have the service contract removed, so that's $800 less plus the $1500 extended service contract for a total savings of $2300. I'm still thinking about it though.

 

[Evan78]

Assuming the $1500 is rolled into your loan amount, that's another $150 in interest at 4% over 5 years, so the cost is actually around $1650.

 

[mazdabuff]

Yes, that is right Evan78, all these interest cost jack up the price of the car, which made me think twice about my decision to buy used (hope I don't regret it), maybe should have bougth new with 0% for 60 months. But I already took the car home.

 

[jk240sx]

I don't understand the finance guy's statement that the service contract effects the APR. Sounds like BS to me. Explain what he told you. I used to do finance at a dealership and that sounds like he loaded you up.

 

[Evan78]

$1500 sounds like full price for an extended warranty, so I assume that they'd sell it to you at that price regardless of what financing you use. If that is true, you could refinance at the lower rate AND keep the warranty if you wanted, saving $800 along the way.

 

[mazdabuff]

I don't understand the finance guy's statement that the service contract effects the APR. Sounds like BS to me. Explain what he told you. I used to do finance at a dealership and that sounds like he loaded you up.

The finance guy said exactly that if I remove the extended warranty the interest would go up to 5%, if I keep it the interest would be 3.99%. Looks like he tied it to the warranty. He told me I can refinance thru my credit union and get a better rate and get rid of the warranty.

 

[kornholio]

Is it a mazda warranty or a third party warranty? I have had factory warranties where the struts were covered minus the deductible of course. What is the deductible on your extended warranty. I would factor those things in before making a decision.

 

[mazdabuff]

I don't understand the finance guy's statement that the service contract effects the APR. Sounds like BS to me. Explain what he told you. I used to do finance at a dealership and that sounds like he loaded you up.

He also included Gap insurance.

 

[mazdabuff]

Is it a mazda warranty or a third party warranty? I have had factory warranties where the struts were covered minus the deductible of course. What is the deductible on your extended warranty. I would factor those things in before making a decision.

Its a third party warranty, I didn't see struts or shocks in the list, I'm gonna check how much is my deductible.

 

[mazdabuff]

$1500 sounds like full price for an extended warranty, so I assume that they'd sell it to you at that price regardless of what financing you use. If that is true, you could refinance at the lower rate AND keep the warranty if you wanted, saving $800 along the way.

I'll be considering this option.

 

[jk240sx]

He also included Gap insurance.

If you need GAP, contact your insurance agent. It's usually less expensive, can be added to your policy and can be removed when it's no longer required.

 

[tex2670]

Assuming the $1500 is rolled into your loan amount, that's another $150 in interest at 4% over 5 years, so the cost is actually around $1650.

And that's why these shady F&I guys try and pressure you into just accepting these add ons.

 

[jk240sx]

That's why my stint at F&I was short. I am and have been an insurance agent for 20+ years and took the position due to the salary and my love of cars. In reality a $1500. Service agreement is about $1000. commission to the dealer and the same goes for GAP, plus they can add points to the APR if they can slide it past you. Getting one or two add ons is called the load up, getting you to buy them all plus points on the APR is called taking your head off. In dealerships, as in Vegas, you are a walking dollar bill and both will pick you clean if you allow them.

 

[ceric]

That is why I always do this:
"I will say No to anything extra you will try to sell me.
Let us don't waste time here. I know cars."
Simple and clean. Chit chat with him if you want while
he does the paper work. No extra bucks for him though.
He will do paper works as fast as he can to get rid of you.