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Rip-off room revisited
Extended warranties, rust-proofing, Scotchgard: Is this stuff ever worth it?
December 16, 2003: 7:28 AM EST
By Peter Valdes-Dapena, CNN/Money Staff Writer

NEW YORK (CNN/Money) - We got a lot of e-mails in response to a September story that focused on the hazards that await new-car buyers in a dealership's "business office."

That's where you go to sign all the final paperwork -- and where products like extended warranties and paint protectants are sold.

Most of the e-mails were from auto dealership finance and insurance (so-called 'F and I') managers who thought the story unfairly suggested the business was uniformly crooked (the title of the story was, after all, 'The rip-off room').

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The rip-off room

Vince Peckens, who works at DeMaagd GMC, Nissan, Oldsmobile in Battle Creek, Mich., for example, said he uses a low-pressure, menu-based approach to presenting products and is careful to avoid selling inappropriate items.

Angela Barrett, a finance manager with Prestige Ford in Sanford, Fla., said she takes a more active approach to selling these extra items, but that she tries to make sure her recommendations fit the customer's needs.

"They know I'm trying to sell them something," she said. "It's costing them money."

Not surprisingly, none of them agreed with a statement by Phil Reed of that "there's nothing you want to buy in the F and I room."

We contacted a few of the F and I managers who wrote in and asked them to tell us what products they felt were worth it.

Here are their opinions on seven commonly sold items. We've thrown in our advice, and Reed's, as well. At no additional cost.

Credit life insurance

The offer: Take out a credit life-insurance policy, and if you die, the policy covers your car payments.

"If you're talking to a 22-year-old kid out of college, what does he care if he dies and his car's not paid for?" said Peckens. On the other hand, a 62-year-old with no other life insurance might care, because his wife might be left with car payments.

But life insurance from a car dealer is no bargain, Peckens admitted. "It's almost like going to a convenience store to buy a gallon of milk, rather than a supermarket," he said.

Car dealers are probably not the folks to be talking to about life insurance, said Reed. "If you're shopping for insurance, you should shop for insurance," he said, noting that there are several Web sites available that allow people to quickly comparison-shop for term life insurance.

Even F and I manager Barrett agreed. "Credit life and disability insurance is something I'm not a big believer in," she said.

Our advice: There seems to be a rare consensus on this one. Buying life or disability insurance from an auto dealer just doesn't make a lot of sense.

Gap insurance

If your car gets stolen or totaled in an accident, your auto insurance will pay you the value of the car. But if you've just recently bought the car, you may owe more than that on your auto loan. That leaves you making car payments with no car to show for it.

Gap insurance covers the difference. On leases, gap insurance is often included in the contract.

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Peckens said he recommends it only to customers who've made low down-payments and are, therefore, financing a larger portion of their car's value.

Some lending institutions won't allow the sale of gap insurance to customers who have financed less than 85 percent of their car's total cost, Peckens said. As far as he's concerned, he said, that number should be even higher.

Our advice: If you're really up to your eyeballs in auto debt (for example, if you're using part of the loan to pay off a remaining balance on your trade-in) you might want to opt for this. If you do decide to get it, you may be able to save money by buying it from someone other than the dealership. Also, make sure you won't be paying for coverage after you no longer need it.

Extended warranties

All the F and I managers said that the extra cost of an extended warranty is probably most worth it to those who are already struggling to meet their car payments. They may find it saves them from financial disaster.

Reed conceded that customers in a cash-tight situation may find the warranty worthwhile, even as a source of psychological comfort if for no other reason. A warranty can also help avoid agonizing decisions over whether repairs need to be done, he said. If the mechanic says it needs it, and it's covered, just do it.

Still, care should be taken.

"I'm always a little leery of warranties," said Reed. He said he's heard too many stories of dealerships not following though on their promises. Poor performance on warranty claims has been a top subject of complaints about auto dealerships. At any rate, it's hard to gauge the real value of any warranty without reading all the terms.

Our advice: Do your homework and buy a reliable car. In particular, check 5-year cost-of-ownership figures and make sure you can afford the whole enchilada, including likely repairs. If you still want to buy the extended warranty, read the terms carefully.


Ben Dickison, F and I manager at Kent Brown Toyota in Elmira, N.Y., said he looks at a customer's trade-in vehicle when deciding whether to recommend additional rust protection. If the old car rusted, there's probably something about where or how the car is driven that might make extra rust protection a good idea.

Sherry Antoni of Connecticut, who has worked as a sales manager in various dealerships for about 10 years, said she never recommends rustproofing. These days, cars are rust-proof enough, right out of the factory, to last longer than anyone is likely to keep a car.

If you're thinking of getting this, check your car's warranty first, suggested Reed. Aftermarket rustproofing may invalidate the manufacturer's rust warranty.

Our advice: Is your current car rusty? Probably not. Rust problems are rare these days. Unless you have some extreme reason to expect a rust problem -- and you know you're going to drive this car to its death -- pass on this.

Maintenance plans

Maintenance plans -- in which you pay for fluid changes or other regular maintenance as part of your monthly car payment -- should be a matter of personal choice based on how you like to manage your cash, said Reed.

If you'd rather not have to budget for maintenance, he said, go ahead and get the plan.

Barrett points out that the plans she sells costs much less than paying full price for all of the included items at the dealership.

Our advice: It's up to you. Before you sign on, though, check out the shop and talk to the manager. Are you really going to want to come here regularly for service? Ask how long they typically need to keep a car for a quick oil and filter change. Think about the dealership's location and whether it's convenient for you.

Fabric protection

Among the most commonly derided products F and I managers sell is fabric protection. Dickison said his dealership charges $189 to add a stain-resisting chemical to a car's upholstery.

A can of fabric protector costs a few dollars at your local drugstore and you can spray it on yourself in minutes. All the F & I managers agreed: There is absolutely no difference between what they sell you and what you can buy in the store.

But does that can come with a warranty? That's what makes the dealership product worth it, said Dickison. If you get a ketchup stain on your seat, just bring your car to the dealership and they'll make sure that spot goes away.

On the other hand, it would probably cost much less than $189 to have the entire interior of your car steam-cleaned, Reed pointed out. Also, as far as that warranty is concerned, read it carefully and feel assured that its terms will be honored.

Our advice: You're paying a lot of money for a promise. And it's a promise to get a stain out of your seat. Is that really worth 10 times the cost of a spray you could put on yourself?

Paint sealant

There was little agreement on the value of protecting your new car's paint job.

"I think the paint sealant's crap," said Barrett.

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Car paint is protected with coatings right in the factory, she said, making additional sealants redundant.

"I get it on my vehicle and I pay for it on my vehicle," Dickison said about paint protection. Again, he points to the warranty that comes with the coating.

Again, Reed's advice is: if you're buying a product primarily for extra warranty protection, check the warranty carefully to see what types of damage are covered and how and where repairs will be done. Also, check the factory warranty to make sure there are no conflicts.

Our advice: The effectiveness of paint coatings is, obviously, debatable. Again, the value lies largely in the warranty. Has paint fading been a problem for you in the past? These days, if you take reasonably good care of your car, it shouldn't be.  Top of page

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