Extended Service Plans: Compelling Reasons Aside, Don’t Forget to Negotiate The Price
When you are purchasing that used car, don’t forget that the price of that extended service plan is often just another profit center for the dealership. Sure, they are also trying to sell you on it to insure them another happy customer (nobody benefits when you drive the car down the road and it breaks down next week, or even next month. The negative word of mouth just isn’t worth it to the dealership) and often times a dealership concerned about their reputation in the marketplace will practically give the warranty away to insure IF the worst happens, it doesn’t turn into a PR nightmare for them.
With that in mind, don’t think for an instant that this isn’t another opportunity to add margin to the bottom line of your deal, just as you masterfully worked the deal with the F&I guy on the car itself, don’t be bashful when talk turns to the warranty. While warranty plans have fixed costs as well, that is usually going to be well below the first offer the F&I guy will lay out and he is paid to get you that warranty.
According to Stan Libowitz of Accelerated Auto, a car concierge company, your first offer should counter at half of the initial price offered. Of course the F&I guy will balk, “but this tactic will establish that you know there is some meat on this bone and somewhere between his offered price and yours, you will find a happy middle ground”. Libowitz also offers, “this should put you somewhere between $200-$500 above their cost which is a good deal for everyone.”