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Brent Blanchard
Brent Blanchard, Attorney
Category: Business Law
Satisfied Customers: 1975
Experience:  Thirteen years of business law experience, from business formation to litigation
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I just bought a used car with a local dealer last Saturday.

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I just bought a used car with a local dealer last Saturday. We also bought an extended warranty to go with it. We signed the contract with the dealer listed as the Creditor-Seller. Today, they leave a message saying that we need to call them, because "we need to go over a couple of things" with us. When my wife stops by the dealer on her way home, they inform her that the party that is financing the car didn't approve the extended warranty. So, they give us the option to take another vehicle that is the same, but is four years newer, with higher milage and payments, or take the vehicle we have minus the extended warranty. Something dosen't feel right about this. Do we have to take the deal, even though we already signed the contract?
Submitted: 6 years ago.
Category: Business Law
Expert:  Brent Blanchard replied 6 years ago.
The problem here is that you are financing the extended warranty as well as the purchaser of the car.

Pay for the warranty with other funds and you're fine.

One thing to beware of is that IF the original warranty from the maker is transferrable to you, the "extended" warranty does not kick in until the other warranty runs out. Count the years of coverage vs. the years of paying for it to get the true "per year" cost.

You also learn more about most extended warranties by reading what the don't cover, than you do by seeing what they will admit to covering. The worst ones are those that cover ONLY the engine and drivetrain parts that are "internal" and covered with oil, or language similar to that. The alternator, for example, is not covered by such restrictive language.

Some consumer advocates say extended warranties are a rip-off, but that is usually in the context of buying a new car, which these days has a pretty good warranty already built into the purchase price. For used cars, and for people who don't mess around with their own tools on the weekends, a *decent* warranty can make sense.

To take the current vehicle without the warranty, I would expect that the total $$$ financed would be a bit lower. If not, this is a ploy to get the same thing as a price more than what they bargained for. Rare but not unheard of.

No one is forcing you to buy THIS car. If it stinks too much, take your ball and play somewhere else...IF the contract for sale is contingent on you getting the financing approved. A shark-type car dealer will have a contract that keeps you on the hook to pay for the car even if the financing falls through. For you, the extended warranty for a used car is enough of an "essential" part of the deal, that being unable to get financing for it *could* be a way to get out of the contract.

However, it all depends on the fine print for your strict legal rights, and the dealer's commitment to customer satisfaction even to the point of losing today's sale with the hope of getting more business from you AND your referrals later by letting you out of the deal.

IME, the hazard of cars breaking down increases more with mileage, than it does with number of years old.

Thank you.

Customer: replied 6 years ago.
The car has already been bought. This has transpired after the fact. They are telling us that a "third party" financer is rejecting the extended warranty that we already agreed to, but on the contract, the dealer is the only Creditor-Seller indicated. They NOW want to sell us the car (2000 model), without the warranty, or buy another vehicle four years newer with more milage and more money. We signed a contract already with an extended warranty, that they are now saying thay the "third party financer" will not agree to, even though THEY are listed as the financer on the contract.
Expert:  Brent Blanchard replied 6 years ago.
Normally, the car has NOT been bought completely if the financing to pay for the car has not transferred the funds to the seller. This is often marked by there being a *separate* financing contract--sometimes blank with regard to exactly who the lender is, with the dealer being responsible to go out and find a lender who will approve the deal. As far as I'm concerned, those deals should be made contingent on financing, and the car should stay on the lot until financing is approved.

An over-anxious dealer who lets a buyer drive the car off the lot still has a right to demand all payment under the signed contract, unless the deal is "contingent" on the buyer's financing being approved.

As you describe the situation, the dealer would still be obligated to honor the contract as written. Third-party financing is NOT what you signed up for. Challenge them to show you where you agreed to having any "third party" financer involved.

Thank you.


Edited by Brent Blanchard on 1/7/2010 at 3:14 PM EST
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