Auto dealers aren't necessarily pushing you to sign an extended warranty because they care about whether you pay for repairs. These costs include financing, insurance and extended warranties. Often, they'll give a little on the purchase price in order to entice you with these higher-profit charges. On top of the initial profit, dealers can also make money when you go in for repairs because many extended warranties require you to go either to the dealer's repair center or an auto shop specified by the dealer. Even if the salesperson doesn't offer you up a wealth of information about the available extended warranties, don't let them off the hook, advised Michael Morrissey, spokesman for the National Automobile Dealers Association.
New cars come with an initial warranty.
This is usually known as a manufacturer's warranty, or a limited warranty. Typically, the manufacturer's warranty lasts 3 years or 36,000 miles, whichever comes first. They often guarantee your car's engine and drive train are free from defects and cover the costs of repair or replacements. One of the reasons automobile dealers can sell extended warranties is under most circumstances, your car's drive train won't give out during the first three years. Even a trend toward more competitive limited warranties hasn't helped the car buyer much.