One of two scenarios may take place when you are in the process of purchasing a new or used car. A dealer may offer you a maintenance plan as an extra charge or they may offer a free plan as a way to entice you to purchase the car.
A car maintenance plan is not the same as a warranty. This plan takes care of all those routine services that you’re supposed to do as your car ages, like going to the doctor for your physicals, immunizations, and tests. A warranty covers actual repairs. If the alternator stopped working after only a few thousand miles, it would likely be replaced for free under your car’s warranty plan.
[See the Secret to Living Well on $20,000 a Year.]
Before you start negotiating the deal, it’s important to understand each of these so they don’t overlap. If you purchase an extended warranty, it probably won’t cover oil changes and fluids but an ongoing maintenance plan isn’t going to provide coverage for mechanical problems that happen after the initial manufacturer’s warranty runs out.
Here’s what to keep in mind for maintenance plans.
What do I get? Because it’s becoming increasingly popular to use car maintenance plans as a way to close a sale, the quality of these plans varies greatly. The Lexus plan may include only one free service where the GM plan includes two years or 30,000 miles of standard vehicle maintenance. (The next step is to find out what “standard” means.)
If you’re purchasing a car from an independent dealer and they offer you one of these plans, make sure to find out what’s included before closing the deal.
[See How to Handle Awkward Money Situations.]
What are they getting out of it? No car company is making money directly off of these maintenance plans. In fact, other than the indirect benefit of getting you to their lot to see all of the shiny, new cars, they would rather not pay out the time and money it takes to administer those plans. For this reason, expect some part of this plan to include some way where they’re making their money back. You just have to find it.
They might tell you that in order to be eligible, all of your repair work has to be done at their dealership or require you to purchase an extended warranty before the maintenance plan takes effect. Is two years of free oil changes worth the cost of an extended warranty program? Maybe it is but do the math before you make a decision.
The Bottom Line. The basic rules of contracts apply here. Read before you sign and ask a ton of questions. The only time they’re going to get annoyed is if they have something to hide. Remember that when something is labeled as “free” somebody has to pay the bill for it and often, in a sneaky indirect way, that person is you. As your mom or dad used to say, “nothin’ in this world is free” and that rule applies here when looking at car maintenance plans.
Bob Lotich helps people save money at his personal finance blog ChristianPF.com, and helps bloggers at BloggingYourPassion.com
Reader Comments Read all comments (3)
Emory Williams of NC 8:24AM May 16, 2012
BMW and Mercedes servicing of IN 4:06AM April 07, 2012
BMW and Mercedes servicing of IN 4:05AM April 07, 2012