It’s Your Vehicle – Protect Your Investment
Posted on June 20, 2019
Topic Categories: Consumer Help
By Michael Mason, Vice President - Lending
When you buy a car, it’s a big deal. You search for the make and model you want, you work out the financing, and then experience the excitement of driving it off the lot. You put a lot of time, effort and emotion into this vehicle – so you should protect your investment.
In addition to GAP, which was detailed in an earlier post, you have the option of buying Mechanical Breakdown Protection as well as Depreciation Protection. Each can easily be incorporated into your monthly loan payment and can give you peace of mind with the knowledge that your needs are covered.
Mechanical Breakdown Protection (MBP)
Mechanical Breakdown Protection (also known as MBP or Extended Warranty) protects you from the unexpected cost of mechanical repairs. Consider these reasons for MBP:
- Car technology is increasingly complicated. Every year, cars add more technology – which means they can do some remarkable things – but systems become more integrated and complex. A problem that seems small can turn out to be expensive – and put a real strain on your budget.
- Protection for your budget. Breakdowns happen and costs can add up. Factory warranties typically cover no more than three years, but MBP ensures similar levels of protection – helping you handle a major expense that could put a significant dent in your budget.
- Convenience and peace-of-mind. It’s stressful to deal with car repairs, or to worry that you may need them. MBP assures you that support is already in place, and comprehensive extended warranties will provide towing services, money for lodging and meals if you’re traveling, and even a rental vehicle.
- A one-stop shop. For service, you can take your car to any ASE (Automobile Service Excellence) certified provider across the country. Many extended warranties limit you to the dealers that sell the brand you purchased. MBP can also be customized to your needs, with different options for the number of years or miles covered, plus the specific items to be covered.
- Increased value in your car. The hidden benefit of an extended warranty is that it helps preserve the value of your car as it gets older. Vehicles with extended warranties are more likely to be well maintained and offer more value to the owner at trade-in time.
Depreciation Protection Waiver (DPW)
Total loss occurrences are at a record high. New or used, depreciation impacts nearly every vehicle on the road today. Depreciation Protection Waiver (DPW) provides total loss protection and covers the “equity” in your auto loan, in contrast with the “negative equity” coverage offered by GAP.
DPW helps protect your invested equity and hedge against the negative impact of depreciation upon total loss. Vehicle depreciation is often considered the number one expense to vehicle purchasers. Before the first oil change, a new car could lose thousands of dollars in value, potentially eliminating the down payment and equity in the event of total loss.
DPW protects the initial down payment as well as the equity built as the loan balance decreases. If a vehicle is totaled or stolen and not recovered during the life of the loan, Depreciation Protection provides a waiver benefit equal to the difference between MSRP or National Automobile Dealers Association (NADA) retail value at time of waiver purchase, less the amount of the loan balance at time of total loss.
Consider DPW if you:
- Finance 90% loan-to-value (LTV) or less
- Put money down
- Trade in a vehicle
- Receive manufacturer or dealer rebates
- Negotiate a purchase price below MSRP
- Make accelerated loan payments
MBP and DPW are designed to help protect and provide confidence in your investment in your vehicle. Cinfed partners with established national providers to offer comprehensive coverage options for members who are purchasing vehicles. Before you close on your vehicle, ask plenty of questions to be sure you understand the details so you can determine the program that’s best for you.