Extended Warranties

[Steve Carlton]

I'd say in principle that's sound advice. I don't think statistically one individual's lifetime has enough events in it to bring out the average outcome, though. So the odds are good that we can come out way ahead or way behind. Let's say Juan buys a 5 year/50,000 mile warranty for $5,000. Chances are good that he'll recoup a good chunk of that with some claims. Let's say he gets $3,000 work of stuff fixed- so the warranty really cost $2,000. If something catastrophic breaks, he's way ahead.

So one thing to consider is what are the chances a 2009 Mercedes S550 will take a big dump from from 50-100,000 total miles? Another is what is the increased value and sellability of the car if Juan sells it with a little warranty left on it, so the next buyer knows he's not buying some problem?

[Porsche-O-Phile]

One insurance to always get is on moving trucks / rentals. When I got rear-ended it saved my bacon. Handed the keys to the mangled box truck back to the rental co. and went on my merry way. Not my problem. I'd have been fighting with them, my ins. co. and the ins. co. of the guy who hit me forever otherwise. The headaches and BS spared alone was worth the few extra bucks!

[Tilikum Turbo]

Originally Posted by juan ruiz

Anyone of you have work with any reputable aftermarket car warranties? Looking around the net there's plenty of horror stories. Looks like the real good companies will only work direct with the car dealers.

Research shows these extended warranties are a bad-bet. Todays cars are so good from the get-go, you'll most likely never net that extra-padding. There will be those who swear by it because of some catastrophic event, but statistically(the group, not the individual), it does not come out ahead...except the writer of the policy.

Like playing 21...the House offers "Insurance"? Why so...is it in business to do us a favor...no, it offers this because it knows the odds favor it to win on that bet.

[Steve Carlton]

So by your logic don't buy insurance because they're making a profit. I guess that argument could be extended to don't buy anything unless it's for cost or a loss. Okay.

[enzo1]

The Coolest Unreliable Cars You Can Get With a CarMax Warranty

[Tilikum Turbo]

Originally Posted by Steve Carlton

So by your logic don't buy insurance because they're making a profit. I guess that argument could be extended to don't buy anything unless it's for cost or a loss. Okay.

The logic is don't buy SUCKERS insurance...especially when the manufacturer already provides a healthy dose of it... via the warranty when you buy it new.

[Cloggie]

Originally Posted by Steve Carlton

I'd say in principle that's sound advice. I don't think statistically one individual's lifetime has enough events in it to bring out the average outcome, though. So the odds are good that we can come out way ahead or way behind. Let's say Juan buys a 5 year/50,000 mile warranty for $5,000. Chances are good that he'll recoup a good chunk of that with some claims. Let's say he gets $3,000 work of stuff fixed- so the warranty really cost $2,000. If something catastrophic breaks, he's way ahead.

So one thing to consider is what are the chances a 2009 Mercedes S550 will take a big dump from from 50-100,000 total miles? Another is what is the increased value and sellability of the car if Juan sells it with a little warranty left on it, so the next buyer knows he's not buying some problem?

Yes, there are a number of factors and there is also the probability issue. For example, I have gone through 5 refrigerators in 20 years, not sure why they keep failing in spite of the brands, so I did in fact take a 10 yr warranty on my most recent Samsung (only cost 250 euros).

I also figure that the profit motive of the insurer and the fact that I may be able to source repairs cheaper will offset the fact that my failures over lifetime are not going to do anything more than tend towards the average experience.

D.

[Steve Carlton]

Originally Posted by Tilikum Turbo

The logic is don't buy SUCKERS insurance...especially when the manufacturer already provides a healthy dose of it... via the warranty when you buy it new.

How do you define SUCKERS insurance?

[juan ruiz]

Thank you guys, My issue is that all of those high end luxury cars suffer from electrical problems in one form of the other ,if is not transmission related is air suspension related, the BMW 750s are in that group too among others, but looking at the costs of those warranties is almost like buying a second small car LOL.

Steve Carlton has exceeded their stored private messages quota and cannot accept further messages until they clear some space.

[Chocaholic]

Originally Posted by Rick Lee

Mrs. Lee got one from BMW North Scottsdale for her E92. She had them throw it into the deal and it probably would have run $1800 on its own, five yrs. unlimited miles, includes everything. First summer she had it, a/c had a bad evaporator. $1800 repair bill and she didn't pay a dime. A month ago there was another $2500 in misc. repairs and she didn't pay anything. It's been back for a bunch of little stuff in between and she always gets a real nice loaner. She has a new X1 this week. It's really paid off for her.

This may represent a good warranty deal...but not a very good automobile ownership experience. Would think twice before buying another BMW.

[aigel]

Originally Posted by Steve Carlton

So by your logic don't buy insurance because they're making a profit. I guess that argument could be extended to don't buy anything unless it's for cost or a loss. Okay.

No, the logic is to self-insure on anything that isn't catastrophic. I only have insurance on cars that are worth more than $10k, liability, health, life, fire etc.

Self-insurance is taken for pets, cars out of warranty, consumer electronics, travel (in case of illness) etc. Yes, a $5k vet bill will sting, but by not buying all this crap all your life, you can make up for it. The insurance mathematicians have done their homework and on average they come out ahead. I would argue that a lifetime of self-insuring is enough statistics for an individual. I swear by it. And have savings for smaller stuff.

If you can't afford a $10k repair, I would not buy an S anything after 1990.

I hope this helps.

G

[Steve Carlton]

I was talking about a lifetime of extended warranties on cars, not your dog or cat, TV, or $8,000 Honda Civic. It's pretty well known that warranties on cats and TVs have a big margin in them, so odds are that self-insuring is the way to go.

Like I said, you can figure on recouping a good part of what you spend on an extended warranty during its term, so you're not out the entire cost of the warranty. You're basically pre-paying the repairs plus a profit margin to the warranty company at a cost that is statistically averaged out. And don't forgot the cost is lower than actual because of all the people that buy an extended warranty and either forget they have it or forget to cancel it when the car gets sold or totalled. Sort of what manufacturers count on when they issue mail-in rebates. They never pay on a huge percentage of the ones they issue.

[911_Dude]

I never had an extended warranty pay for its self. A couple of times of that and I never use them any more. I do my own repairs, buy what ever tools I need, and Im sure it comes out cheaper in the end.

[aigel]

Originally Posted by Steve Carlton

I was talking about a lifetime of extended warranties on cars, not your dog or cat, TV, or $8,000 Honda Civic. It's pretty well known that warranties on cats and TVs have a big margin in them, so odds are that self-insuring is the way to go.

What is the difference? Your pet can run $8k in vet bills in one sitting, just like your S class can throw a rod. It is also "pretty well known" that 3rd party warranties on cars have a big margin in them. What's the difference?

Originally Posted by Steve Carlton

Like I said, you can figure on recouping a good part of what you spend on an extended warranty during its term, so you're not out the entire cost of the warranty. You're basically pre-paying the repairs plus a profit margin to the warranty company at a cost that is statistically averaged out. And don't forgot the cost is lower than actual because of all the people that buy an extended warranty and either forget they have it or forget to cancel it when the car gets sold or totalled. Sort of what manufacturers count on when they issue mail-in rebates. They never pay on a huge percentage of the ones they issue.

IMHO you lose immediately and guaranteed shelling out $4k for a warranty. The money is gone. And following your argument above, if you wreck it before you need to claim insurance, the money is gone too. Good luck getting $4k more for it when totaled because it was under warranty. Or when you sell, are you going to recover any of it?

Last but not least, let's talk about the hassle of getting a claim go through. Many of these companies will be like any other insurance and go tell you "no" by default and they will have three pages of fine print. "Yes, you have a driveline warranty, but sorry, it does not include xxx, see, here in the fine print ..."

These type of warranties and insurances are for people who can't save $50 a week for emergencies.

G

[Steve Carlton]

Originally Posted by aigel

What is the difference? Your pet can run $8k in vet bills in one sitting, just like your S class can throw a rod. It is also "pretty well known" that 3rd party warranties on cars have a big margin in them. What's the difference?

The difference is we're talking about extended warranties on cars, not pet insurance or extended warranties on TV sets. Let's not cloud the issue. I don't know this for a fact, but I'm sure the margins are greater on pet or electronic insurance. I know my vet said not to get it, that they pay out like crap.

Originally Posted by aigel

IMHO you lose immediately and guaranteed shelling out $4k for a warranty. The money is gone. And following your argument above, if you wreck it before you need to claim insurance, the money is gone too. Good luck getting $4k more for it when totaled because it was under warranty. Or when you sell, are you going to recover any of it?

Since when is paying up-front for a warranty or insurance an issue? What do you want to do- pay them after you need them? If you cancel the warranty for any reason- sell the car, wreck the car, want your money back, you can do it at any time for a pro-rated refund. You get the lesser of time remaining or miles remaining percentage-wise, minus a $25-50 cancellation fee. Extended warranties are regulated by the insurance industry.

It sounds like you're assuming no claims will be paid and the "$4K" is gone up front. I suggest this isn't the case. I think the true cost is what you pay minus what you get back in claims paid and refunds. I think it's rare to make zero claims. Some companies even offer a 100% refund if you never make a claim after the full term of the warranty. Shows you how confident they are that something will get paid.

Originally Posted by aigel

Last but not least, let's talk about the hassle of getting a claim go through. Many of these companies will be like any other insurance and go tell you "no" by default and they will have three pages of fine print. "Yes, you have a driveline warranty, but sorry, it does not include xxx, see, here in the fine print ..."

You're generalizing across all providers and your argument is not always true. The first thing I said in this thread was "There can be some reputable companies. My suggestion would be to talk to a few dealers for the make of car that you have." The best extended warranties IMO are those offered or sponsored by the manufacturer of the car. The better quality aftermarket companies are good, too. The "weasel clauses" you speak of are the domain of the lower quality providers, usually the ones with the lowest cost.

[juan ruiz]

This subject remains me of what Turbo to choose for my 911 I have around 15 quotes so far and the cheapest is 4K for 4 years 50k miles.

[Steve Carlton]

Be careful. Check out the reputation of the one you get (if you get one).

[juan ruiz]

Originally Posted by Steve Carlton

Be careful. Check out the reputation of the one you get (if you get one).

with those prices I think an extended warranty is out of the question. Time to look for a cheap mechanic lol