Continuing with Abner Auto's query from last week and regarding certified preowned cars and those with a factory warranty, let's first discuss the former (CPO) vehicles.
Pro: Backed by the automaker that built the car, we don't need to worry about dealer promises or those from a third-party warranty company. In fact, even if something were to occur on a road trip, all the owner needs to do is limp into any of the brand's franchised new car dealers.
Thoroughly inspected before any used car can be labeled a CPO, the vehicles will be painstakingly reconditioned along the way, according to the specifications in the dealer's checklist.
Extra perks come with most certified preowned cars, such as roadside assistance, travel interruption insurance, travel concierge service, and dealer loaner cars for when your vehicle is being serviced. A few programs include periodic maintenance, such as brake pads and oil changes, though these aren't common.
CPO warranties are usually comprehensive with the original bumper-to-bumper and powertrain coverage.
Con: CPO cars are more expensive than buying a non-CPO vehicle. What consumers pay for the additional warranty and other extras is built into the price of the used car; always attempt negotiation.
The length of coverage is limited to specific terms that are outlined by the automaker. However, if purchasing a service contract, rest assured you can stipulate different lengths and coverage levels for separate prices.
The dealership must be your first help option for service. While this may be well and good, what if the driver/owner develops issues on a back-country road and the nearest dealer is 50 miles away?
Pros of Extended Warranties: The owner can add one for any used car, plus it matters not about age, condition, or mileage. (You may have to pay extra for the warranty if any of the preceding issues exist.)
A non-CPO vehicle is less expensive. CPO vehicles must be inspected, reconditioned, warrantied, and paid for by dealers/automakers who then pass the price onto the customer. Since non-CPOs don't have these costs, we can purchase for less and then buy an extended warranty when we please.
Private sellers still equal service contracts/warranties, which is great news for consumers looking for a bargain. It goes without saying, it's crucial to obtain a thorough pre-buy inspection from a trusted independent mechanic. (Again, my advice — as always — is to seek recommendations from friends.)
We're not limited to a dealer as mandated by a CPO car. If the vehicle requires covered repairs, you can take it, if covered by warranty, to independent shops, which more than likely saves big bucks.
Con: Extended warranties can be expensive if we don't negotiate for the best price. Dealerships can have huge markups on extended warranties, so reach a deal for the best price you can get. Never fall for the pressure to buy one at the same time you buy the car and never finance an extended warranty unless you wish to pay interest for years on the purchase.
They're not all backed by the automaker so it's important to research.
Many of the service contracts available from dealerships are from third-party companies. Check with your state's Attorney General's office or your local Better Business Bureau. Be sure to use the specific corporate name of the company you're considering, as many have similar names.
Because coverage varies significantly, buyers need to read the contracts' fine print to understand what truly is and is not covered. Some items to look for include specifically what is covered, what deductibles are required, where it is covered, whether you need pre-approval before you get repairs completed, and how reimbursement for covered repairs is taken care of. The best programs will directly reimburse the shop for any repairs they've performed; otherwise, we're in for a rude shock if we must pay first and wait for reimbursement.
Tax Tip: Mortgage interest deductions continue to be the pot of gold at the end of the rainbow. According to Forbes.com, under the TCJA tax reform, if homeowners purchased or improved their homes after December 14, 2017, they can deduct mortgage debt up to $750K. If on the 14th or earlier, can still deduct this debt up to $1 million.
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