Todays market is radiacally different, but it's a bit of a sales tactic as well, but they used to do it most often with off brands. I remember looking at a used Nissan pickup decades ago that the dealer would not budge on the price which was $1000 MORE than a new Ranger, and the two were similarly equipped. They make a bunch off financing, warranties, and other upsells. Not knocking the decision. I did the same thing back then, and I would have done the same in your mom's place. Wait, no I wouldn't. I'd buy a CX-5 because it at least has an honest to god transmission and something besides a turbo charged model kit motor, but otherwise..
The money they make on the non manufacturer warranties they largely sell to people who have no cash and bad insurance is obscene.
Yeah I got [uck fay]ed by one of those warranties buying from a dealer the first time, never again. 4k for absolutely nothing.
I'm not in the business but am doing some consulting with one and it's a fascinating world that I honestly wasn't aware existed (I've never bought a new car). What's crazy is how little the warranty company (legally these are generally not warranties but that's what everyone calls them) actually makes a lot of the time relative to the dealer. It's essentially the pay day loan world within the auto industry.
I bought a wheel warranty on my last car because of pot holes around where I work. Sure enough a year later I hit one and bent the wheel. Took it to the dealer and made them replace it free of charge to me. Paid for itself. The service manager told me that's the first time he'd ever seen it used. So I'll probably buy that warranty again if I get a new car, but that's it.
Did the same with tire for my wife's car. We've used it four times. My wife can look at a house getting a new roof and end up with four nails in a tire.
I have worked on the finance side, and that's a rip off. Everyone buying a car needs to pre approve, and walk into the dealership with that pre approval. And not tell anyone what your rate is, ever. Make the finance office beat it blind. The way finance works is they send off your info, and the car, and banks put in a bid. The guy sitting behind the computer looks at you and decides how much he can up sale the bid. Suppose bank A comes in at 3.5. Finance guy thinks you'll take 4.3, since you've been sitting there all day haggling over your trade in. You take 4.3, the dealership gets back 0.8% over the life of the loan, or some max value, based on the lending organization. So they lie to you. Every time. About your rate.
It’s definitely true that these types of policies often go unused. Obviously it works for some folks, and I’ve heard a couple stories from folks who live in areas where potholes are terrible that it’s worth it. I’ve just seen plenty of these where the cost of the policy is more than a wheel costs.
when they were redoing my kitchen I found a nail or screw in the driveway daily. It’s amazing I didn’t blow a tire
when I bought my wife’s car they offered me a ridiculous rate. I have perfect credit. First he refused to tell me the rate and tried to tell me it’s complicated so I just did the math myself bd it came to like 4 percent or something ridiculous. I told the guy flat out if you don’t reduce the rate I’m just going to go to the local credit union and get half the rate and he’s like “you won’t be able to beat my rate.” Just went to the credit union and got half the interest rate. This is Toyota financial top who does huge volume. I don’t get it.
4k and they wouldn't cover an o2 sensor replacement. had to go elsewhere, as they were going to charge me around 1k to do it. got it done for like 200 elsewhere. If I had a lift I'd have done it myself.
I think there may be something going on vis a vis the market ramping up EV production and the chip shortage's relevance to the auto sector, and it's deeper than EV=more computer chips than ICE. Maybe something to do with battery tech revolution, maybe? I mean, I know they're owned by VWAG, but Lambo announcing 100 percent of their lineup being at least plug in hybrids by 2024 is a big shift. They were supposed to be one of the last hangers on to the old gods of V10 and V12 power.
Most people don't leave. They know it. People think dealers make money on the car. That's why they "haggle" the sticker price. And people should, because they'll come down on sticker, because they know exactly how much they need to up sale you on finance to get it back, and make money. But the dealership makes their money on two things: the dealer reserve (the up sale on the interest rate) and as coach Steele said, the warranties. Things like GAP. GAP might get sold for $899. The cost to the financial institution might be $300. The dealer pockets $599. And if it is canceled, sometimes it is refunded at a rule of 78s rate. Rule of 78s financing as you know is illegal. Rule of 78s refunds on warranties like GAP, etch, tire, oil change, whatever, is not.
So, it's been 16 months, and I don't know if the used car market has leveled off or not, but the new car market is absolutely ridiculous. If you had told me in December 2019 that a brand new mid tier crossover from a domestic would crest 30000 and that stealerships would be asking mid 30's and above for a Frontier, I would have marched down to the nearest Toyota or Honda stealership and absolutely destroyed my credit trying to get into a Civic Type R or Supra 2.0. I work for VW now and I genuinely do not understand how these companies are selling cars, much less not shutting down factories. Stealerships are buying less cars, both because they can't get them and because they've moved to a less is more approach to boost their bottom line. And what's crazy is that this happened in a period where the overengineered, over built cars of the late 80's and early 90s have started to give way to the more disposable, more complex cars of the 00's. So there is a sort of standoff to see who can hold long enough, the stealerships or the the consumer.