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From the Financial Hotline


By: Financial Hotline
Spring 2021 (Vol. 39, No. 1)

Q: I am purchasing a reliable, low mileage used car at a bargain price. But the sales person is pressuring me to get the extended warranty and the price is equal to almost a third of what I’m paying for this vehicle. Is it worth the risk to turn it down?

A: First understand that commissions on warranties can easily be higher than the commission on the vehicle so it’s natural for sales people to want you to buy them. Vehicle service contracts, often referred to as extended warranties, are an investment in peace of mind that limits financial risk for a set period of time. However, consumers typically pay more for the coverage than they get back in direct benefits. If the car buyer adds the cost of the warranty to the amount financed, they end up paying even more.

For example, let’s say you are buying a gently used vehicle at $15,000. If you pay cash for the basic extended warranty it could set you back around $3500. If you add the cost in with the financing it can add up to over $6,000 over the term of the loan. It is also important to remember these warranties may not cover the same items the manufacturers warranty did and they don’t usually include maintenance items like tires, brakes and oil changes. And yes, even unlimited ones can have restrictions. Instead of purchasing an extended warranty, it may make more sense to set aside the money you’d spend on it — and use the funds instead for needed repairs.

Q: I am buying my granddaughter her first car. I don’t want her to worry about emergency repairs while she’s just starting out. Is the dealer my only option for buying a warranty?

A: You can eliminate the middle man and shop online through sites like Edurance.com, Carchex.com or or CarShield.com

Q: Now that Covid 19 restrictions are easing in my area, I am ready for a nice vacation. Do you have any tips for shopping hotel packages online?

A: Booking a package deal isn’t always your best bet. Be sure to check all parts of the bundle. For example, you may get a great price on your hotel but your flight has long layovers and high extra fees for baggage and seat choice. Get out a note pad and jot down prices in the bundle versus prices if you book each component separately. Then contact the hotel, airline and tour sites directly. Tell them what prices you found through the third party and ask if they have any special offers to beat that.

Watch out for sites that don’t disclose added fees. Hotels may add steep resort fees, parking fees and or special event fees. Most reputable sites will add them or at least disclose the potential extra fee but you may not get charged until you show up on vacation day. Many airlines charge for baggage and there may be an extra fee if you choose your seat. It’s not unusual for a $48 round trip to actually cost $200 if you take a bag and want to guarantee you sit by your family. The bag fee is just one for departure and one for return but if you have a layover and have to choose a seat on your connecting flight, that’s another seat charge.

Some top sites for hotels and packages are: Expedia and their sister sites, Travelocity, Orbitz and Cheaptickets. My personal favorite is Priceline and other members have recommended CheapCaribbean, Kayak and Funjet Vacations. Sites like Airbnb and Booking.com are also great sites to compare for lodging. I use the Hopper App or AirWatchDog for tracking flight prices, they notify when prices drop and give me ideas on which dates are cheaper to fly.

Many travelers enjoy the do it yourself planning but it doesn’t hurt to get a quote from a local travel agent. Once you decide your destination, make sure you take advantage of any planning resources they offer. For example, Disney World offers a free planning assistant and some packages are only available through their resource.