Based on these examples, it's safe to say that, on strictly a dollars and cents basis, the prepaid maintenance plan is not worth it. But let's look at two related factors that might make the prepaid maintenance plan more attractive:
- You can negotiate the cost of the plan down to a more reasonable fee.
- The prepaid maintenance plan holds other non-tangible convenience factors.
What's convenient about prepaid maintenance plans? A woman we spoke to, who worked in the automotive business, bought GM's two-year prepaid maintenance plan for $375 that covered her vehicle for 30,000 miles.
"I enjoyed the convenience of the plan," she said. "Especially at the end of the day, with eight people waiting to pay at the cashier's window. With the prepaid maintenance plan, it was all taken care of. I was in and out of the dealership while other people were still waiting in line."
Additionally, she knew many other people who bought GM's prepaid maintenance plan and liked them. "People would spend $400 all day (for the prepaid maintenance plan) and they just loved them."
One source we contacted, who used to sell the prepaid maintenance plan in the finance and insurance office of a dealership, said there is also a psychological advantage to buying such plans.
"By pre-paying for all the required maintenance you never have to worry about paying for an oil change or budgeting for any other maintenance item for the duration of the maintenance plan. I believe that the convenience factor is the main reason why people buy the maintenance plans."
However, this expert also said there was substantial profit for dealerships in these prepaid maintenance plans and advised buyers to try to purchase them at a lower negotiated price. Here is his advice on that subject:
"I would suggest asking the service manager of the dealership to give you a list of all the required maintenance with their prices (they have this list readily available at most dealerships). Add them all up (the scheduled maintenance), and this will give you a very good idea about the total cost of maintenance for the car if you paid for it on your own. Dealer's cost for the maintenance plan usually runs around 50 percent of this total. So, offer them about half of this total to begin with." While the dealership will probably make a counter offer, you are still likely to save anywhere from $50 to $300, he said.
In the final analysis, whether or not to buy a prepaid maintenance plan isn't strictly a dollars and cents decision. It has to do with your negotiating skill and your need for financial security and personal convenience. After you weigh these three factors together, the right answer for you and your lifestyle should be revealed.