Car Warranty – Honda – Make sense or rip-off (please explain.)?
3/31/09 buying a used certified 2006 Honda Odyssey EX-L 28,800 miles for $ 22,900. Mint Condition. Was put in service (new) back in 3/26/06. So the 3yr/36000mile original warranty was over. They suggest I finance (5.79%@60m) the car and the extended warranty using a new fangled bi-monthly payment system. car=$ 22,900 + tax=$ 2433 + After Market Accessory (aka 5 yr warranty) listed as $ 5300 (that’s right $ 5300.) As it was explained to me by Finance manager , if I financed JUST THE CAR and chose to be happy with my 1yr/12,000 used car bumper to bumper certified warranty I would pay $ 29,500 for the car over the life of loan. But if I roll the $ 5300 warranty into the bi monthly payment method I would pay about $ 30,100 for the car AND a 5 yr warranty together…only $ 600 more over the life of the loan. (i.e the 5 yr warranty essentially cost me only $ 600) This is because of the same concept when paying a mortgage bi-weekly to shorten the life of the loan) plus Honda invests the 1st payment of the month and gets interest on it which they in turn use the interest to pay down the financed $ 5300 warranty. It all sounds so crazy. I know I could get 3yr BtoB no gimmics warranty for about $ 1200 to $ 1500, but the bimonthly way I get 5 years BtoB for only $ 600 more. FinMngr must make at least $ 2500 in there pocket for front loading the warranty. I need to know …Is this creative financing by HONDA legit? Or am I being hosed?