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By: Christine Davidson

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2016-04-26

The Bottom Line on Car Dealership Add-Ons

Auto Buying

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Don't Spend Your Money on Unnecessary Automobile Insurance, Warranties, or Other Extras

Car buying can be exhausting. You research all of your options, narrow your choices, and talk the automobile salesperson down on the price, all the while waiting for that blissful moment when you can plant yourself behind the wheel of your new car and drive home.

Settling on the price feels like a win, but only for a moment. It is around that time when the salesperson launches into all of the add-ons you have the option to include in the deal. Some of the add-ons are batched together in a larger protection plan while others are offered one by one. At your wits end with the car-buying process, you may find it difficult to determine which protections are worth it and which are a huge waste of money.

Following is a list of the most popular add-ons and some advice to help you separate the necessary from the unnecessary:

Corrosion-perforation warranty may have been helpful years ago but is no longer required, due to the excellent rust proofing of modern vehicles. Most dealers will not offer corrosion-perforation warranties, but some still do.  

Fabric protection is a spray that the dealership can charge a lot for but which does not offer a lot of additional value to your vehicle. Your seats will already be relatively spill-proof when you buy the car, so there is no need to apply more chemicals to your environment.

VIN etching is the process of etching your VIN into the window of your vehicle. VIN etching is a deterrent to thieves because they cannot sell windows that have a VIN etched into the glass. Though you may be able to save on insurance, and will be less likely to have your car stolen, a dealership may charge up to or more than $100 for this procedure, which you could do on your own or with the help of your local police for far less. VIN etching can make sense in a more urban environment, but it is not a necessary preventative step for Vermont residents.

Wheel and tire insurance is self-explanatory. It insures your tires and wheels, providing payment for wheel and tire repairs along with towing expenses. This type of insurance can be expensive, so examine the coverage offered to determine whether it is worth the money.

Credit life insurance covers your auto debt if you pass away during the loan term. It is wise to purchase credit life insurance if your family would be unable to pay off your debt in the case of your death. This type of insurance can be more expensive, so be sure to shop around for the best deal.

Credit disability insurance is similar to credit life insurance, except that it is used to cover your loan payments if you become disabled during the loan term. You will thank yourself for spending money on this insurance if you become injured in the future.

Extended warranties cover mechanical failures of the vehicle after the manufacturer’s warranty expires. With a new car, the warranty will be standard and may be completely sufficient for your vehicle (though you should read the warranty thoroughly and determine whether or not it meets your needs). If you are buying a used car, determine if additional coverage through extended warranty would benefit you. Consider the age of the vehicle, how long you hope to keep it, and what you intend to use it for to determine whether you should take an extended warranty to cover the vehicle for the time you hope to own it.


 At VSECU, we offer Mechanical Breakdown Protection (MBP) insurance as part of our extended warranty coverage. MBP protects you from vehicle breakdowns including towing, tire assistance, battery jump starting, lock-out service, and other minor fixes. Be sure to compare our protection with that offered by your dealership to determine whether it meets your needs.

LEARN MORE ABOUT MBP PROTECTION


 

Not all extended warranties offer the same coverage. Some only cover repairs at the dealership that is extending the warranty. Some cover a limited range of repairs and services. Dealer extended warranties often will limit you to repairs at the dealership, so it is often wise to compare their warranty with those offered by the manufacturer or with an external lender, who may offer coverage that better suits your needs.

Key replacement covers you when you’ve lost your key. If you tend to lose your keys a lot, this may be useful, but for most people it is a waste of money. Modern car keys are expensive, but you can avoid doling out a lot for key replacement by simply keeping track of your keys.

Security coding is the process of placing a coded sticker on the doors and panels of your vehicle. This is not worth the money you will pay for it.

Guaranteed Asset Protection (GAP) bridges the “gap,” between your vehicle’s value and the amount you owe on the loan, if your vehicle is stolen or totaled. GAP can also help cover costs toward the purchase of a new vehicle. It is true that you may never total your vehicle, but GAP is often a good idea, particularly when you are taking on a large loan.

A good rule of thumb is to purchase GAP insurance if your vehicle’s loan to value ratio is greater than 80%. To determine your vehicle’s loan to value ratio, divide your loan amount by the value of your vehicle. For example, if your vehicle is valued at $20,000 and your loan is for $19,000, your loan to value is (19,000 ÷ 20,000) 95%. This is greater than 80%, making GAP insurance advisable.


 STOP! Don't shop for your next car without our Car Buying 101 guide to car shopping.

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About Christine Davidson

Christine Davidson is the integrated lending administrator at VSECU. She has two children and lives with her husband in Northfield.