If you’ve ever purchased a new or used car at a dealership, you were likely escorted into the Finance and Insurance (F&I) office. Prior to concluding the sale, a friendly person attempted to sell you dealer add-ons like gap insurance, fabric protector, paint protection, antitheft window etching, nitrogen fill for tires, extended warranties, and maintenance agreements, among others. In automotive industry speak, those dealer extras are called voluntary protection products (VPPs).
Some consumer advocates and government enforcement officials, however, call them booty for dealers. Indeed, a National Consumer Law Center analysis of almost 3 million VPP sales records found that the markup for window etching averaged more than 300 percent over the dealer’s cost and that the average markup for extended service contracts (a.k.a. extended warranties) was 83 percent.
Last year, the Federal Trade Commission (FTC) issued a report, Buckle Up: Navigating Automotive Sales and Financing, after a deep study of car buyers’ experiences at dealerships. The FTC found that buyers exhibited considerable naïveté about the car-buying process in general, but the agency flagged VPPs as “the single greatest area of confusion.”
To be sure, certain VPPs can be of benefit—an extended warranty if you’re buying a car with high repair costs, or gap insurance if you’re leasing a car. (Fabric or paint protection, not so much.) But the report detailed unfair, deceptive ways that some dealers sell VPPs. The report was a shot across their bow, a warning to dealers to be more transparent or face the ire of the feds.
Although aimed at dealers, the FTC report can inform you, a car buyer, about how to handle a dealer’s sales pitches for VPPs. Some of its tips:
- As their name indicates, VPPs are voluntary. A dealer should not require you to purchase these products as a prerequisite to buying or leasing a car or to obtaining warranty coverage or financing.
- The dealer should explain the benefits, as well as any caveats or limitations, of a VPP before you agree to purchase it.
- If a VPP interests you, the dealer should clearly disclose up front both the price of the product and how much it adds to the monthly payment if you decide to roll the cost into the car loan.
- Don’t be afraid to negotiate the price of a VPP—they’re often priced at the dealer’s discretion. And if a product you don’t want has already been installed on the car you intend to buy (antitheft devices, for example), tell the dealer to remove it or not charge you for it.
- Keep in mind that you can often purchase most VPPs later, after the car sale, perhaps at lower cost. For instance, an automaker-backed extended warranty may be purchased at another one of the automaker’s franchised dealerships as long as the car’s original bumper-to-bumper warranty is in effect. And you can always buy a can of fabric protector for a few bucks at an auto parts store and apply it yourself.
The FTC noted that the sales pitches for VPPs typically come after a lengthy process of selecting a car and negotiating prices for the car and possibly a trade-in. If you should find your judgment clouded by buyer’s fatigue once you’re inside an F&I office, heed a former first lady’s advice: Just say no.
Veteran automotive journalist Peter Bohr has been writing about cars for more than four decades.