After-market car warranties

[Scuba]

DH and I bought a 2018 Mini Cooper S convertible with 24k miles on it today. The dealership offered us a Penske warranty - 4 years or 60k miles for $3,500. The list of covered repairs looks awesome but it wasn’t clear until I started questioning exactly how the warranty worked that I realized we would still pay the repair shop of our choice when we need anything and then Penske reimburses the “covered” amount.

Chances are in 4 years, we will put only 15-20k miles on the car. Given that, as well as the risk that actual costs may not be fully covered anyway, we are leaning strongly towards self-insuring. Just wondering if anyone has purchased a Penske or other after market auto warranty. If so, please share your opinion.

 

[Bamaman]

My brother in law owned a small percentage of a good size ESP company. When it was sold, he got a small fortune for his small share. It's a highly profitable business.

$3500 for an ESP on a Mini is ridiculous. Maybe that tells you something about #1 Penske and #2 Mini. They're perhaps one of the more troublesome vehicles on the retail market--especially the CVT trannys.

I was in the car business 24 years, and I would never by an ESP. But if I did, it would be from the manufacturer. Outside ESP companies are only good if they're backed by insurance companies, and few are fully insured against going out of business.

 

[DrRoy]

If the insurance is highly profitable to the issuer, it's a bad deal for you.

 

[Jerry1]

Okay, but if the car has a known issue (the CVT trans mentioned above), doesn’t that make insurance more of an option? Read the contract and confirm what will happen if the trans goes bad. It might not be a bad purchase.

Personally, only because the OP said they would be driving it very little, I’d probably take my chances and self insure. The main thing is understanding that there is an issue common to the car and think it through. I’m not sure about Penske, but living in S.E. Michigan, that name has been around all my life. I don’t think their ability to pay will be an issue. Of course ability is not the same as willingness. Read the contract and make your best choice.

 

[Aerides]

In 4 years you'll have a car with still less than 50k miles on it. The odds it needs a warranty repair in that time are super slim.

I'd self-insure. I'd also be asking the dealer about what sort of inspections they performed between acquiring the car and offering it to you, and then sleep easy.

 

[ShokWaveRider]

Clark Howard Say "No".

Computer Says "No".

Only Manufacturer's Extended Warranties should be considered.

Carshield has to pay Ice T, all those very expensive TV Adds and other stars for their endorsements, kinda like Medicare Part C "Dis"advantage..

 

[DuluthGA]

To me extended warranties are only reasonable if you can’t self insure and rarely then. Put the $3500 and any other money you’d spend on warranties in an account and let it grow until / if you need it. Raise your other insurance deductibles as high as possible and add the savings to that account.

 

[Car-Guy]

$3500 for an ESP on a Mini is ridiculous. Maybe that tells you something about #1 Penske and #2 Mini. They're perhaps one of the more troublesome vehicles on the retail market--especially the CVT trannys.

I've never owned a Mini but the DW had a car with a CVT and never had any issues with it in the ~60k miles she drove it. But I'd agree, $3500 for such a warranty is far too high, especially since the OP only plans to drive the vehicle ~5k miles a year for the next 4 years.

And the OP has the $3500 in the bank for any issues that may pop up. If not, they are way ahead.

 

[REWahoo]

...we are leaning strongly towards self-insuring.

Stop leaning and make the leap. You will almost certainly end up thousands of dollars ahead.

 

[euro]

I agree with the others that overall this business model is tilted far toward the insurance provider. If it weren’t then those companies wouldn’t exist. The only folks who should consider such warranties are those who would get wiped out by a major repair (engine, transmission, etc). Given that more than half of our population doesn’t have several thousand dollar as of liquid savings available, that’s still a fairly large market. However, I would guess that there are VERY few people on this board who are in that situation, so self- insuring is definitely the way to go.

 

[Scuba]

Thank you, everyone. Sounds like our instincts to self-insure are good, especially with the limited mileage we typically drive. And we can definitely cover any repairs needed should a big ticket problem occur.

 

[ivinsfan]

Are any of you guys speaking from actual experience? In 2013 we bought a new Nissan Altima...with the CVT trans. We loved everything about the car including the huge buying incentives. My husband was a little leery of the CVT so we used some of the incentive money to buy a 3rd party warranty directly from the dealer. It was 10/100K. With our mileage we figured we'd get at least 8 years out of it. Cost around 2K after some haggling. It was our understanding it was transferable so might help at resale.


In year 6 out of original warranty we had a repair.... about 1500 dollars that cost us a 100 dollar deductible. Traded the car for one with more modern safety features in Dec of 20. Due to Covid and DH's 2 heart surgeries it had around 80K. at closing we found out no it didn't transfer it was prorated and we would get a refund for our unused time/mileage. Within a week we had a check for around 600 bucks. I'm using round numbers since I don't want to dig up paperwork. So 2k original cost one repair 100 OOP 600 dollar refund in cash. We literally broke even ..not sure how that's a ripoff or a bad deal.



I don't know what you payed for that mini but I might suggest before you say no you haggle with the dealer and get and last and best price on the warranty. Or course having said that repairs costs parts and labor have gone up tremendously in 10 years.

 

[euro]

Are any of you guys speaking from actual experience? In 2013 we bought a new Nissan Altima...with the CVT trans. We loved everything about the car including the huge buying incentives. My husband was a little leery of the CVT so we used some of the incentive money to buy a 3rd party warranty directly from the dealer. It was 10/100K. With our mileage we figured we'd get at least 8 years out of it. Cost around 2K after some haggling. It was our understanding it was transferable so might help at resale.


In year 6 out of original warranty we had a repair.... about 1500 dollars that cost us a 100 dollar deductible. Traded the car for one with more modern safety features in Dec of 20. Due to Covid and DH's 2 heart surgeries it had around 80K. at closing we found out no it didn't transfer it was prorated and we would get a refund for our unused time/mileage. Within a week we had a check for around 600 bucks. I'm using round numbers since I don't want to dig up paperwork. So 2k original cost one repair 100 OOP 600 dollar refund in cash. We literally broke even ..not sure how that's a ripoff or a bad deal.

I don't think personal experiences and single buyer testimonies are of much value in this situation. In fact, they are exactly how these companies pray on potential buyers. Of course, there will be individuals who break even (like you did) or even come out ahead. But the mathematical fact is that more people will end up loosing money than will end up breaking even or coming out ahead. This HAS to be the case because otherwise the industry would not exist. So, on average it is a bad idea to buy these warranties unless you are likely to be wiped out financially or suffer serious health consequences if you do face a major repair.

 

[brett]

I turned down an extended warranty on our 1997 Camry. 220K miles later I had not incurred any repairs that would have been covered by warranty.

My friend, in the business, tells me that there are very large margins on warranties, especially third party warranty products. On some new vehicles he makes more commission by selling financing and warranties, diamond coat, etc than he does on the car sale. There is is reason why those commissions are so attractive. Huge profit.

I would pass.

 

[ivinsfan]

I don't think personal experiences and single buyer testimonies are of much value in this situation. In fact, they are exactly how these companies pray on potential buyers. Of course, there will be individuals who brake even (like you did) or even come out ahead. But the mathematical fact is that more people will end up loosing money than will end up breaking even or coming out ahead. This HAS to be the case because otherwise the industry would not exist. So, on average it is a bad idea to buy these warranties unless you are likely to be wiped out financially or suffer serious health consequences if you do face a major repair.

Maybe, maybe not...I'm not talking about random cold calls from people pitching vague warranties. I'm talking about buying a reputable warranty from a reputable dealer. These are not the same thing. Generally speaking you always hope to lose money when you buy insurance...one might argue if you can get a negotiated price one that goes out 5 to 7 years you are somewhat protecting yourself against inflating labor and parts costs. Just saying...

 

[ivinsfan]

I turned down an extended warranty on our 1997 Camry. 220K miles later I had not incurred any repairs that would have been covered by warranty.

My friend, in the business, tells me that there are very large margins on warranties, especially third party warranty products. On some new vehicles he makes more commission by selling financing and warranties, diamond coat, etc than he does on the car sale. There is is reason why those commissions are so attractive. Huge profit.

I would pass.

I wish he would have mentioned which of the 3 had the biggest margins and how large they actually were. I suppose that's a trade secret.

 

[aja8888]

I would never pre-pay for repairs I may never need.

 

[Freedom56]

I get calls every other day stating that my car warranty is about to expire and they are offering me an extended warranty. When I press 8 to speak to an operator and tell them I have a 72 Ford Pinto they get mad and hang up.

 

[aja8888]

I get calls every other day stating that my car warranty is about to expire and they are offering me an extended warranty. When I press 8 to speak to an operator and tell them I have a 72 Ford Pinto they get mad and hang up.

Tell them you have an EV and they will hang up too!

 

[Bamaman]

I've never owned a Mini but the DW had a car with a CVT and never had any issues with it in the ~60k miles she drove it. But I'd agree, $3500 for such a warranty is far too high, especially since the OP only plans to drive the vehicle ~5k miles a year for the next 4 years.

And the OP has the $3500 in the bank for any issues that may pop up. If not, they are way ahead.

There's a mechanic in Buford, GA that got rich rebuilding Mini CVT's for only $3,500. The dealers were charging $5,000 for new transmissions. They're not really that difficult to rebuild once they're out of the car, but the Kevlar belt in them is quite expensive for what it is. The incidences of blown transmissions at one time was just too much. I don't know if they ever got the problems solved.

The other CVT that's very problematic is the Jatco CVT--commonly used in Nissan products. The cars are fine, but many of the trannys go out at 50-60,000 miles. The reputation of that tranny has actually depressed the used car prices of the models that use the Jatco's. They sell too many Nissans not to have better transmissions in them.

I have a CVT in my last two Toyota hybrids, but they're a completely different design and nothing like the above. Honda also uses CVT's in most of their newer vehicles.

 

[Romer]

I turned down an extended warranty on our 1997 Camry. 220K miles later I had not incurred any repairs that would have been covered by warranty.

.

That is because Toyota builds reliable vehicles. I have bought several Toyotas with over 100K miles on them and one is still going strong 11 years later

 

[Freedom56]

Tell them you have an EV and they will hang up too!

I should try that next time. I also tell the Microsoft tech support scammers that they called me at my tree house and the IRS scammers that they called the FBI fraud hotline.

 

[Chuckanut]

I would not buy a vehicle extended warranty. Instead put that money aside just in case yhou need a repair. But, if I did buy one (to satisfy my spouse or help me sleep better at night) I would only buy one from the car's manufacturer so I could take it to any dealer anywhere and get it fixed.

What a really want is an extended warranty that starts at 125,000 miles and goes to 250,000 miles.

 

[Midpack]

We've never had an extended warranty on anything we've ever bought, not on cars or anything else. By definition they're (highly) profitable for the seller, not the buyer - no matter what product or service. If it does pay off for a buyer, it's just plain luck, and it's not likely for repeat customers. Self-insuring is the best choice if you can handle it.

Most extended warranty companies make money by charging a monthly premium worth at least two times the amount of likely mechanical problems or repairs. While this might seem unfair to drivers, it comes through careful calculation of the risks of coverage. Some cars may need few repairs, but extended auto warranty companies also end up paying repair bills for some troubled vehicles.

https://www.msn.com/en-us/autos/new...mers. How Does An Extended Car Warranty Work?

When it comes to the economics of extended car warranties from car dealers, the dealers usually have profit margins of up to $1,000 from each sale. Extended warranties can be huge profit makers for dealerships because up to half the cost of the warranty usually goes straight into their pockets. That’s why nearly every automaker, from Ford and Honda to Toyota and BMW, seems to offer extended car warranties.

https://www.motor1.com/reviews/544765/what-are-the-economics-of-extended-car-warranties/

 

[youbet]

I don't think personal experiences and single buyer testimonies are of much value in this situation.............. the mathematical fact is that more people will end up loosing money than will end up breaking even or coming out ahead. This HAS to be the case because otherwise the industry would not exist.

There ya go....... It's just like any other insurance. Customers will pay more in than the insurance company will pay out for claims and expenses or they go out of business. That doesn't make all insurance a bad idea, but depending on what you are insuring and the cost, in many cases the odds are on your side if you self-insure.