In my first two posts, I discussed the trick to stress-free car buying: avoiding the dealership. In this post, I’ll explain what you need to know about the “ancillary products” that dealers often try to sell with loans. Most extra products have a bad reputation because they’re sold by dealers at way-inflated prices. Some of them are a waste of money, but others can make car owning less stressful.
What Should I Buy?
At Outside Financial, we think there are four products worth the cost, as long as you can find them at a reasonable price and you know what you’re getting:
Vehicle Service Contracts (aka Extended Warranties)
Vehicle Service Contracts are like health insurance for your car. For a set fee, the VSC company covers all or most of the cost of necessary repairs. Some policies are exclusionary, meaning they cover everything except for certain listed items, while others cover only those on a specific list. VSCs typically do not cover routine maintenance or “consumables” like windshield wipers.
Just because you take out a loan for $30K doesn’t mean your car will be worth that much for the life of your loan. In fact, your car starts losing value as soon as you drive it off the lot. If it’s stolen or totaled, you’ll still owe the full loan amount, but your insurance company will likely only pay the current value of the car. That means you might owe your lender thousands of dollars for the “gap.” GAP Waivers cover that difference.
GAP isn’t necessary if you pay cash, but it can be worthwhile if:
- Your down payment was less than 20% of your loan.
- You drive more than 15K miles/year.
- Your loan amount is greater than the value of your car.
- You bought a vehicle that is likely to lose its value, or depreciate, more quickly than average.
- Your loan term is 60 months or longer.
Tire and Wheel
T&W policies pay for replacement or repair costs for tires and wheels due to damage from road hazards. They include the cost of tires, mounting, balancing and valve stems, but don’t cover normal wear and tear. A T&W policy is especially helpful if you drive in an area with a lot of potholes or road debris.
Dent and Ding Dents and dings are really common, but that doesn’t mean that they won’t stress you out. A dent & ding policy covers quick repairs so you get your car back the way it’s supposed to look.
What Products Should I Avoid?
These five products are on our bad list – we recommend you steer clear.
- Fabric Protection. Scotch-Gard is the same thing, minus a lot of extra cost.
- Rustproofing or Undercoating. Most cars today don’t have any rust issues because of factory-installed corrosion protection.
- Paint Sealant. You can wax your car yourself for a lot less money.
- Vehicle Identification Number (VIN) Etching. Amazon sells DIY etching kits for ~$30.
Security or Anti-Theft Systems. If security systems are important to you, you can save a lot by having one installed by an auto security specialty shop.
What Do You Think?
Over these three posts, I’ve shared my best tips for stress-less car buying. I want to hear from you: have you used any of these tips to get through the car buying process with your sanity (and your wallet) intact? What do you wish you had known before going to the dealer? You can contact me at any time through our website, or on any of our social channels: Facebook, Twitter, or LinkedIn.