Don’t Buy Dealer Products and Services You Don’t Need

credit life insurance from car dealersOnce you’ve made a deal on a new car, dealers have more products to try to sell you once you get into the F&I (Finance and Insurance) manager’s office to sign papers.

Backend products offered by car dealers

You may be offered security systems, corrosion protection, paint sealant, window etchings, fabric guard, extended warranties, and credit life insurance.

These are called “backend” products and are designed to make dealers extra profit on car deals. In fact, some dealers make as much or more money on backend sales as on vehicle sales.

The products are all high-priced and are generally poor values for customers. In most cases, the products are not needed or can be acquired elsewhere for much less cost. For example, fabric guard is nothing more than Scotchguard™ in a spray can. And VIN (Vehicle Identification Number) etchings on windows provide no more security protection than the VIN plates that are already in several locations on your vehicle, including on the dash and on the engine block.

Most new cars have adequate anti-theft systems but if you feel you need addtional protection, such as a LoJack™ theft recovery system, you can get it cheaper on your own than if you buy through a dealer. Same with extended warranties.

Extended warranties may be a waste of money if you are buying a vehicle that has high reliability or if you know you won’t be keeping the vehicle past its manufacturer’s warranty. Don’t buy an extended warranty if you lease.

How about credit life insurance?

Credit life insurance may be one of the backend products offered to you by the dealer’s F&I manager. He’ll explain how it will protect your loved ones in case of your death. Should you die, the insurance will pay off your remaining car loan balance and the family can keep the car. He’ll also explain the cost in terms of monthly payment, not total cost, and that the payment can be combined with your loan payment such that you’ll hardly notice it’s there.

Having this type of insurance is a good idea if your death would put a financial hardship on your family or if your own finances are such that your estate would be unable to pay off the loan — or if you don’t have other life insurance that could be used to settle the loan.

If your family does not need your car, they could simply sell it upon your death and pay off the loan with the proceeds.

Purchasing this type of protection through a car dealer is always going to cost more than if you bought simple term life insurance through an insurance provider. If you feel you need it, get quotes from a number of providers. Ask the companies if they offer policies with a declining payoff, considering that your car loan balance will decrease over time.

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