GAP and Extended Warranty

[Ryos]

Hello,

I recently finished signing the paper for my new civic sedan. The salesman offered me GAP insurance and an extended warranty. I decided to get it since it's the first time I am buying a car, but not really sure if it is worth. I am putting $0 down on the car.

GAP price: $800
Extended Warranty: 7yrs/100k miles $2000

Have a couple of questions to ask:
1) Did I get overcharged?
2) Is there cheaper options?
3) Can I cancel GAP? (Signed papers yesterday)
4) What is honda's standard warranty? Does it cover the same services as extended?
5) Can I cancel extended warranty? (Signed papers yesterday)

Thanks for the help/advice.

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[Design]

GAP is rarely worth the cost as Civics are low margin and don't depreciate too heavily. I'm also not a fan of extended warranties (especially third party providers). If offered through Honda Care, you can get for almost half that:
http://www.civicx.com/threads/honda-care-extended-warranty.879/

 

[airgas1998]

you bent over real good on those offers...

 

[WNC_Civic]

I know you can cancel the GAP,not sure on the extended warranty.

I passed on both when i bought mine and they offered much less than what you paid.

Sorry to tell you they overcharged you big time.

 

[Ryos]

Damn..

I read somewhere in the forums that I can cancel the warranty within 30 days. Can anyone vouch for this? It's a dealership warranty.

 

[inv4zn]

Either read the actual contract, or call the dealership.

Please don't make decisions on "something you read somewhere."

 

[Notmighty]

Damn..

I read somewhere in the forums that I can cancel the warranty within 30 days. Can anyone vouch for this? It's a dealership warranty.

Go directly to the dealership ask for the general manage or finance manager and tell him you want to cancel the GAP and warranty. its a simple process

 

[Hiryuu]

You should be able to cancel both GAP and extended warranty.

I would recommend GAP since you put $0 down, but you can get it cheaper from your auto insurance and it's less of a headache if something happens. Going through a dealer for gap insurance claim is a pain.

Extended warranty you should be able to get cheaper ~1-1.2k from Saccucchi or Bernardi Honda - doesn't have to be through your local dealer. That said, Hondas are typically pretty reliable and I would not anticipate having major issues with items covered under warranty. Probably not worth keeping

 

[Ryos]

Thank you all for the advice. I will ask for a cancellation on the insurances, once my car arrives. They told me 2-4 days from when I signed the paper.

Off topic: What type of common issues should I be looking out for on the car? I purchased the touring trim for the civic sedan.

 

[Notmighty]

If the car hasn't arrived you shouldn't have signed any paper work! A deposit may have been required to "hold" the car.

 

[Ryos]

If the car hasn't arrived you shouldn't have signed any paper work! A deposit may have been required to "hold" the car.

Thanks, Will keep this in mind when buying cars in the future. What can happen if I signed when car isn't here yet?

 

[Ryos]

I went to the dealership this weekend to try to cancel my Gap and extended warranty, but wasn't successful. They said they couldn't cancel it because they filed the papers and that I can cancel both for a full refund after my first payment on my car (Getting the mail beginning of next month I believe?). Is this true?

 

[Sman]

I went to the dealership this weekend to try to cancel my Gap and extended warranty, but wasn't successful. They said they couldn't cancel it because they filed the papers and that I can cancel both for a full refund after my first payment on my car (Getting the mail beginning of next month I believe?). Is this true?

I would get that in writing......I would hate for them to be able to say that since you started paying that you cannot back out anymore. Then have a battle of you saying that they said competition......

 

[syncro87]

A very basic explanation of how extended warranties work:

1. An underwriting company has a staff of actuaries who analyze a massive pool of data to determine what usually breaks on a certain model of car, when it breaks, and what it costs to fix.

2. For the sake of discussion, let's assume they come up with a net cost of $500. That means for car "x", and time period/miles "y", the average unit in the entire population of car "x" on the road will cost them $500 in claim payouts to cover for "y" time period.

3. So, their net cost is $500 per car on average. They sell the warranty plan on a wholesale basis to their customer, the dealership, for $750. On average, the underwriter will make a profit of $250 per contract.

4. Dealer marks up the warranty to you the end customer. Probably something to the tune of $1250 in our little theoretical example here. They make $500 profit.

KEY to realize here is that a lot of really smart people with access to a huge volume of reliability data have determined that the average car like yours will cost $500 to fix over the period of the extended warranty. You are paying $1250 in our little scenario for $500 in repairs, in advance basically.

Now sure, there will be exceptions. If they sell 100 warranty contracts on 100 cars, 10 or 15 of those cars will be lemons that will cost the warranty company far more than $500 in repairs. 60 or 70 of those cars will end up costing right around the $500 average. The remainder will cost something less than $500. But in the end, the average will be $500.

You are statistically almost always ahead to stick the money you would have spent on an extended service contract in the bank. Odds are greater than not that you'll have money left at the end of the time period of the warranty you would have purchased.


This is simplistic, and uses made up numbers, but it is an accurate basic explanation of how extended warranties work. The odds of you coming out ahead on the warranty are considerably less than 50%. The whole system is structured that way.

If warranty companies were paying out more in claims than they were taking in via premiums, they wouldn't be selling the product.

 

[crimson-civic]

I went to the dealership this weekend to try to cancel my Gap and extended warranty, but wasn't successful. They said they couldn't cancel it because they filed the papers and that I can cancel both for a full refund after my first payment on my car (Getting the mail beginning of next month I believe?). Is this true?

Review the cancellation clauses of the contracts you signed. In my case, GAP and service contracts can be cancelled within 30 days of purchase for a full refund. Beyond 30 days, it's a pro-rated refund. Even if you don't have the car, you've technically "purchased" it already by signing the docs, so the clock may already be ticking. By telling you to wait, they could be screwing you out of a full refund. I answered a similar question at length in another post a few days ago: What did you pay?

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