Car loan add-ons Are they worth it? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive financial calculators and tools that provide objective and unique content, by enabling you to conduct research and compare information for free and help you make sound financial decisions. Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are advertised on this website are provided by companies who pay us. This compensation can affect the way and where products appear on this website, for example, for example, the order in which they may appear within the listing categories, except where prohibited by law. This applies to our mortgage, home equity and other products for home loans. But this compensation does not influence the content we publish or the reviews you read on this site. We do not contain the universe of companies or financial deals that might be available to you. Share: Maskot/Getty Images
5 min read published September 27, 2022
Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in helping readers to navigate the ways and pitfalls of borrowing money to purchase cars. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are dedicated to helping readers gain confidence to manage their finances through providing concise, well-researched and precise facts that break down complex topics into manageable bites. The Bankrate guarantee
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Therefore, this compensation may impact how, where and when products appear in listing categories, except where prohibited by law. This is the case for our mortgage, home equity and other home lending products. Other factors, like our own rules for our website and whether the product is available within the area you reside in or is within your personal credit score could also affect how and when products are featured on this website. While we strive to provide a wide range offers, Bankrate does not include specific information on each credit or financial products or services. Dealer add-ons are often used to convince buyers to spend more than intended. And you'll pay interest on any add-ons included in your loan. Remember that even though you may be presented with various options of packages, you can decline them all. You can also choose these services separately if you prefer only one. Then, you are able to stop any service at any time if decide to not need them. 1. Gap insurance Gap insurance is a way to cover what you owe and what the value of your vehicle is. If your car is destroyed or stolen, gap insurance could help you break even on the cost. It is a smart buy when you're -- if it's not already included within the leasing agreement. The gap insurance may be worth the expense if you are getting a car loan for more than the car is worth, which could happen when the remaining of your car loan is added to the payment on your new car. It is advisable to study the costs of gap insurance through other sources first so you are aware of whether the dealer will offer you the best price. Is gap insurance worth it? The purchase of gap insurance is worth it , if you can get it at a quick rate. The insurance will safeguard you from having to pay for the difference between your vehicle's worth and the amount you'll be liable for if the vehicle is declared as a total loss. However, you must examine gap insurance prior to making a decision to buy it. Credit unions, banks and third party sellers offer gap insurance. There is no need to buy gap insurance from a broker, and if you find a better deal elsewhere you'll be able to get the insurance without the dealer markup. 2. VIN etching VIN etching is the process of engraving your vehicle's identification number onto your car's windshield and windows. It makes your car easily identifiable and thus less valuable to thieves and potentially easier to recover in the event of theft. While some companies offer discounts for drivers who are equipped with this feature, you can do it yourself and save a few dollars. What is the best option? VIN Etching worthwhile? This add-on is not worth it. It is possible to get this done at a detail shop later or DIY it by using an online toolkit for as cheaply as $20. 3. Extended warranties kick in when the manufacturer's warranty has expired, but typically will cover less. They are often more expensive than the most common repairs, especially when combined with your auto loan. These are typically bundled with extended warranties and require the purchase of scheduled maintenance checks. The price of a service plan is generally included in your monthly car payment. What are the benefits of extended warranty it? Extended warranties are only beneficial when you anticipate owning the car for longer than the manufacturer's warranty - and even then , it's not always the right choice. Check Kelley Blue Book and Edmunds for estimated repair costs and compare them to the extended warranty provided from the dealership. If you could reasonably save for repairs while you own the vehicle an extended warranty will just be an unnecessary expense. A service plan is only beneficial if you intend to use a service center for maintenance and are okay with maintenance being performed on a less frequent basis than the manufacturer recommends. If you decide to purchase one of these plans, be sure to investigate them from different sources. You are able to look around for the best price, and there is no requirement to sign up for a dealer's extended warranty to buy a car. 4. Protection for wheel and tire The cost of tires can be quite high. Dealers provide tire and wheel protection to cover the cost of replacing the tires and rims in the event that potholes, nails or curbs harm them. But most tires carry their own guarantee. If there are any issues it is likely that you'll be able to get by without tire and wheel protection. Do you think tire and wheel protection is worth the cost? The value of this add-on is contingent on your driving experience. If you live in a region that has notoriously rough roads, looking into the additional protection might be beneficial. You can most likely find cheaper options for similar coverage at a different location than the dealer. 5. Paint and fabric protection This add-on is exactly what it says it is a coating dealers can add to the exterior and interior of your vehicle to shield it from harm. Certain manufacturers offer this in new cars So make sure you double dip on this option. What is the value of fabric and paint protection? worth it? Fabric protection and paint are usually not worth the cost. While keeping your brand new car in top condition is crucial but you can achieve the same results with the neighborhood hardware shop. Think about saving money and doing this yourself. 6. Key protection Depending on the key you use and fob models, changing one or both of them can be costly. But the additional cost of key protection provided by a manufacturer may be higher than replacing the key yourself. If you opt for key protection, evaluate the dealer's offer against alternatives offered through your insurer. Also, you can consider investing in technology like Tile to assist you in finding your key if misplaced. Is key protection worth it? It's not worth the extra cost. You are able to easily replace your key if it gets lost. Don't be influenced by dealers who focus on the advanced technology that keys are now equipped with. 7. Credit insurance This option is designed to help you make monthly payments on your car loan in the event that you are unable to. It only works when certain circumstances occur -- like unemployment, death, disability, or disability. As with other insurances, there's no payment for you, but solely for lender. There is no requirement to purchase credit insurance in order to finance or purchase a car Don't let salespersons insist on selling you to buy. Is credit insurance worth the price? Credit insurance may be useful in an emergencysituation, however it can cost more than creating the rainy day fund. Additionally, you might be able find credit insurance through a third-party at a lower rate. In certain cases, the insurance you already have might be sufficient to cover your expenses without the cost. Be aware that no dealer will often provide add-ons as part of a package, rather than stand-alone items. This strategy -- designed to increase sales of itemsis usually advertised as a "protection bundle." It's typically offered in levels like gold, silver, or bronze. Known by the term "menu selling" such a strategy makes it easier for the dealer to make sure that the salesperson is able to present all the . This strategy can create a feeling for the customer like these products are not optional regardless of whether they are. Remember that any add-on you decide to include to your loan will cost interest. Keeping the added cost in mind can help you remain firm in the event of a dispute . How to cancel dealer add-ons Since each added-on service mentioned above is optional, you will be capable of cancelling them in all circumstances. Examine the contract you signed. Check the time limitations or cancellation procedure. You may have to mail or fax documents to get the refund or rebate. Skip the dealership if you have the option to. Instead, visit the service provider and make an appointment to cancel with them directly. This is the most efficient method for if it's longer than a couple of days since purchasing the car. Keep notes and documents regarding the process. Canceling add-ons can be difficult and frustrating So, make sure to record everything when you finish each step. Keep track of your money. It could take a few weeks for your refund or rebate check to come in. If it does not, follow up and ask when you can expect your contract to be canceled and then refunded. If you financed any add-ons via your loan however, you may not be able to receive a refund on the interest you already paid. However, you may be able to get the added-on removed from your loan and receive a refund on the amount that you didn't pay yet. The bottom line: Vehicle purchases come with a adding up to a higher number than the one displayed on the vehicle window. A smart buyer will save money by refusing pricey, optional add-ons. Only purchase add-ons that are truly worth your while and don't spend more than you intend. Related Articles
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Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers with the details of borrowing money to purchase cars. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are dedicated to helping readers gain the confidence to control their finances by providing concise, well-researched and well-researched content that breaks down complicated topics into digestible chunks.
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