Hi all:

I recently bought a 2012 Fit. I love it. The dealer offered me a 4.9% rate through Honda, or a 2.9% rate (also through Honda) if I bought a HondaCare extended service contract for $1800. So I bought the HondaCare because the interest rate reduction basically paid for the warranty.

I'm having second thoughts about the HondaCare. Does anyone know if I can cancel the HondaCare (I know I have 60 days) and keep the lower interest rate? I guess I need to read the fine print in my contract, but I was wondering if others had experience with this.

Thanks in advance.

 

Finance guy: "I'll lower your APR if you buy Lo-jack, Paint protection, extended warranty for a low price of $$$$$"

 

I am probably echoing the previous post. Your situation sounds like a con-game to me. If you can cancel the extended warranty and keep the lower interest rate on the contract (doubtful), do it. You are most likely not to need the extended warranty. Most mechanical (design) problems will occur during the time/mileage period of the basic factory warranty.

 

nope.

the extended warranty is a condition to having that lower apr.

if you cancel the warranty, they'll raise the apr back up.

I had the same thing. I cancelled mine. but the difference for me was... I paid $173.31 in TOTAL interest because I overpaid the loan until I finished it in 5 months.

basically, higher apr is meaningless if you plan on finishing the payments early.

edit: fyi, my warranty was $1100 for an apr change from 12.4% to 9.8%.

 

So you got screwed by the wrong decision too. Dealerships are real good at that, unless you pay cash to buy the car. I paid cash- didn't get screwed.

 

I wouldn't say that.

it was a decision of mine to get the warranty.

it was, after many days, my decision to cancel it. (just in time to get full refund)

nothing more.

 

cancelling depends on your dealer but i dont see why not

 

If the APR is a fixed rate, cancelling the service contract won't change your rate. You won't end up paying much more as long as the proceeds from the cancellation are applied to the loan balance.

It's a distasteful practice that dealers are allowed to assign contract rates based on which add on(s) are purchased.

We're currently forced by necessity to buy new vehicles from dealerships. However, dealerships don't sell anything, except Honda Care, that couldn't be purchased from another source.

Honda Care is a good option if you want an extended service contract. However, you can purchase the coverage if your Honda has fewer than 36,000 miles and is less than 36 months old. That's the same coverage period as the original factory warranty. Why not wait to buy extended service coverage until you reach those limits?

You should never finance a depreciating asset, so always pay cash if it's possible. If financing is needed, apply with your bank or credit union.

 

Its a dealership game, they CAN give you the lower interest without the extended warranty, that's their way of pushing you into a warranty and extra bullsh!t they will make huge commission on (yea shameless but i worked at a dealer who did that daily). If you bought into that without trying to walk out on the deal (they will cave in if you decide to walk) youre a dumbass. Luckily in my case Norm Reeves didnt pull that on me, plus i had back up outside Chase auto financing ready in case they tried pulling that on me. Most dealers seem to try to pull that on people with less then favorable credit like in the 600-685 range because they feel they have a leverage in getting you the financing with absurd rates because its not perfect and they try to scam you into getting you a normal rate like 8-9% range if you buy extra warranty blah blah even though if you simply walked into a bank and applied they'd give you that rate without the warranty bull crap.

 

From what i recall working at a dealer who did that you cannot cancel that extended contract until the car is paid in full. In this case refinance is the only way out.

 

I usually deal with a local credit union that has rates lower then the dealer unless the manufacturer is offering rates between 0 to 2%. Currently my credit union is offering 2.55% for 72 months on new vehicles. I found when the dealer is trying to sell at warranty with the incentive of a reduce interest rate I just tell them I am going through the credit union and they usually will match the rate without trying to sell anything else. Then again I try to find another dealer.

 

Old forum posts are so exciting

As you note, you can buy just about anything from outside the dealer, and that includes the loan. I can't imagine that the loan company cares about the extended warranty, that's just the dealer doing some basic arbitrage on the offered interest rate. Best way around that is to have a competitive process for the loan as well as the price of the car (i.e., ask your bank, CU, etc for loan rates).

As to if you should finance vs pay cash, I can totally see arguments either way. In the current environment of low interest rates, a 0.9% loan lets me hold onto cash, sink that into other assets (house, retirement savings, student loan debt, etc) that are at higher interest rates, plus for those who look around, you can find some higher paying checking/savings accounts (1-3%). That makes my loan effectively cheaper over time.

General caveats: Even with an advantageous interest rate, you should always put down enough money such that you are never underwater on the loan. If the car will lose 30% of its value when you drive it off the lot, then you should put down at least 30%. Being underwater limits your options.

Similarly, it means you only finance items that are resale-able (or are income generating like student loans). TVs, computers, vacations, etc are not going to have much if any value on the used market, so those get paid in full.

 

I am less than 24 hours from possibly closing a deal on a 2010 fit with a warranty for $1950 plus sales tax. It was only after I spoke to the dealership manager that I understood that a 100,000 mile /7 year warranty meant TIME and MILEAGE from the ORIGINAL rollout date of the vehicle in 2010. Is this a good price for this warranty or is it a waste of money and dealer bs. At this point they won't negotiate the price of the warranty but if I tell them I don't want it we'll see what they do.

 

At half that amount it would be a waste of money. You're highly unlikely to have $1000 in repairs before it it's 100K 7years.

The only major items that could justify that are a catastrophic engine or transmission failure. The drive train is warranted for 5 years 60K miles, and there are no abnormal reports of these failing on the Fit (unless your name is Lyon). Depending on the miles you still have a couple years to go on the factory drive-train warranty.

Edit: If it's still under the 3yr 36K mile honda factory warranty, you can purchase the Honda extended warranty. I forget how long but I think it's about $800 online from some Honda dealers. Here's Saccucci's page.