How it works

Extended Warranties are one of the largest profit centers for car dealers. This is a very basic breakdown of how they work, and how we change the game for you! Before we get started, it is important to know the four parties typically involved in the selling of extended warranties through car dealerships: the warranty company, the agency, the car dealership and you, the customer. Warranty Direct eliminates the car dealership from the equation, however, unlike other online warranty companies who scoop that profit, we pass that savings on to you! Let's get started...

TYPICAL DEALER WARRANTY*

WARRANTY DIRECT WARRANTY*

Cost of Insurance $ 1080 Administrative Fee $ 200 Agency Fee $ 400 Dealer Pack $ 300 Net Cost $ 1,980 Dealer Profit $ 2,000 Retail Cost to You: $ 3,980*

Cost of Insurance $ 1080Administrative Fee $ 150Agency Fee $ 600Dealer Pack $ 300 Net Cost $ 1,830Dealer Profit $ 2,000
Retail Cost to You: $ 1,830*

Explanation of the above costs

Cost of Insurance - This is the cost of the insurance, carried by the warranty company, to pay for warranty claims, made by the customer, while the warranty is in effect.

CLIP Fee - This is a "Contractual Liability Insurance Policy" carried through a different insurance company to pay claims, while the warranty is in effect, in the event the warranty company becomes insolvent or goes out of business.

Administrative Fee - This is the fee from the warranty company to administer all aspects of the warranty while it is in effect. This is their revenue.

Agency Fee - This is the fee charged by the agency that brings the warranty company and car dealership together to do business.

Dealer Pack - This is an arbitrary dollar amount chosen by the dealership owner(s) to create a pool of money for them to use as they see fit, whether for personal or business use. This number can differ greatly from dealership to dealership, and there is no limit to the number of packs that can be added, nor to the dollar amount of any given pack.

Net Cost - The sum of the: Cost of Insurance, CLIP Fee, Administrative Fee, Agency Fee and Dealer Pack. Up to this point the dealership has made no retail profit to count towards their backend sales revenue.

Dealer Profit - This is the backend retail profit made by the dealership, from you the customer, on the sale of the warranty. This amount counts towards the dealership's backend sales revenue, and is the amount used to calculate the finance manager's commission.

Retail Cost - This is the sum of the Net Cost and Dealer Profit. It is the final price paid by you, the customer (excluding sales tax if applicable.) This number is arbitrary and can differ greatly between dealerships across the country.

The "Explanations of Costs" listed above are not considered exhaustive educational explanations, nor advice, and are not to be considered as such. They are designed to be very brief overviews only.

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* For illustrational purposes only. Does not reflect actual costs, nor any specific make or model of vehicle, nor any specific auto dealership. Actual costs may vary. View the Sample Contract page for full contract details.