Do You Need a Prepaid Car Maintenance Plan?

While buying a used car usually means big savings on the purchase price, the cost of repairing a car out of its manufacturer warranty period can be worrisome for some car shoppers. Prepaid car maintenance plans can be one way to alleviate that concern by putting a set dollar figure on the cost of repairs.

Many of these prepaid maintenance plans are administered by third parties, which have a history of being run by less-than-reputable companies and even scammers. But for car shoppers who are buying a manufacturer certified pre-owned car, one of the benefits with many automakers' brands is the ability to purchase a reputable prepaid car maintenance plan. But even with the assurance the plan will deliver what it promises, it still may not be a financially smart choice.

The key to deciding whether to purchase one of these plans is to compare the cost of the prepaid maintenance plan to the value of the services included in the plan before you are sitting in the dealership office with the sale paperwork.

Start by reading the fine print to understand what is included. Then, assess how much of it you will really use and contact the service department of the dealership, a trusted independent mechanic or both to determine the cost of those regularly scheduled maintenance services.

Many prepaid car maintenance plans are written with a time and a mileage limit, and the plan expires when you reach one of those limits. For example, a limit might be six years or 100,000 miles, with the clock starting when the car is first sold as new -- not when you buy it used. So, if you drive fewer miles than average, you may reach the time limit before you've used the maximum scheduled maintenances available under the plan. Look at your annual mileage, and determine if you are likely to get the maximum number of services out of the plan.

Other prepaid car maintenance plans are purchased in year increments, usually between one and five years, and cover factory scheduled services that happen within that time period, typically with a limit, such as a maximum of two scheduled maintenances annually. If your annual mileage meshes nicely with the services offered in this plan, it may prove to be a better deal than the other type. If you are someone who logs more miles than are covered under the plan, you may find yourself paying for regularly scheduled maintenance out of your pocket.

If you'll use the majority of the regularly scheduled maintenance services offered under the plan, then chances are buying a prepaid maintenance plan will provide a cost savings over paying for these services individually as needed, especially if you can negotiate a lower price for the plan. However, use caution if you are rolling the plan into your car loan because the interest rate of the loan will increase the overall cost of the plan.

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