Extended Warranty ??

[Montecfo]

Quote:

Originally Posted by ncbill Do you mean the gas struts used to hold open the hood? When I got ahold of my relative's old Camry the original ones were dead (no rod)...I quickly figured out why there was a board in the trunk. I bought the pair for ~$25 off eBay & I think my local mechanic charged $10 to install when I had the oil changed...they really torque those suckers down at the factory...I couldn't break them loose.

yeah can be fun to deal with. Have replaced a few of those.

[Darrenb5]

I read an article once that suggested you take all the money you would have used to buy extended warranties and put it in an account. When the day comes that something breaks down, just use that money to pay for it.

[imnontrad]

ONLY consider a warranty extension via the Lexus dealership. Third party companies usually have so many restrictions that they pay out very little, if at all - VERY lucrative for the company owners.

[EdL3]

We’ve owned Lexus for years and never purchased them before until now (LS & RX). Do they make financial sense, that depends? The extra coverage for scratches and dents have been used quite often, multiple times per year on 2 different vehicles. The $500 coverage for a lost or damaged key has also been used.

In the end it’s more of a piece of mind thing than anything else.

[foxfirev5]

Quote:

Originally Posted by Darrenb5 I read an article once that suggested you take all the money you would have used to buy extended warranties and put it in an account. When the day comes that something breaks down, just use that money to pay for it.

Simply yes.

[Oakster]

You also have to consider the percentage they will pay, the cost of the deductible and if you can meet all the specific terms of their warranty. I would not buy a warranty that controlled the quality of parts that I can use to fix my vehicle either, which some do. The upfront cost is $1125 but if that is spread over 3 repairs, how much is the deductible? is there an 80% / 20% match on the rest of the repair? With a reliable vehicle like the Lexus, I would pay myself the warranty money and keep it in the bank or invested.

[Oakster]

Quote:

Originally Posted by travelover If you were in the business of selling extended warranties, would you price them such that there would be a good chance that you'd pay more out than you took in from premiums? I don't think I would, and from what I've read, extended warranties are very profitable for those that sell them.

Sweet and simple! I like it

[isisdave]

Remember that any dealer can sell you the manufacturer's extended warranty, and some make quite a business of this. Find your car's fan website and look. I remember that the dealer I bought the Prius from wanted $1500 but one across the country regularly sold them for $795 (in 2012).

[Montecfo]

Quote:

Originally Posted by EdL3 We’ve owned Lexus for years and never purchased them before until now (LS & RX). Do they make financial sense, that depends? The extra coverage for scratches and dents have been used quite often, multiple times per year on 2 different vehicles. The $500 coverage for a lost or damaged key has also been used. In the end it’s more of a piece of mind thing than anything else.

Some of the items you mentioned are a bit different. I recall I bought a Toyota new many years ago. I was paying cash but they still insisted I meet with the finance girl, probably 25 years old, attractive, low cut top. Coincidence I am sure.

After failing to convince me that paying cash was costing me money (her computer program "proved" it) she tried to sell me extended warranty, undercoating, scotch guard, etc. I patiently said no to everything, which made her increasingly frustrated.

Finally she said "is there ANYTHING I have mentioned that you are even mildly interested in?"

I said none but when pressured I said the paint sealer wash and wax service twice a year for 5 years was somewhat interesting. List price $500.

She: "what would it be worth to you? Just make an offer".

Me: "My offer would be something that would just make you feel bad"

She: "Will you offer it anyway?"

Me: "ok. $50".

She: "Ok I will accept your offer. My cost on that is $25.50 and I will get a $7.50 commission."

So I easily got my money's worth and I could determine how much value I got by how many times I took the car in for wash/wax.

But not the same as a warranty really.

[DaveInMi]

Insurance companies on average will benefit more than you by selling extended warranties.
They don't sell these policies out of the goodness of their hearts.
Just like any insurance company, they use actuaries to determine the odds of being profitable.
It's like Vegas. On average, the house wins.

[Gearhead Jim]

We never buy extended warranties and that has worked well for us.
The one exception is that for the last 20 years we have had a series of Corvettes. They are great fun to drive but they continue to reinforce my decision to switch to Japanese for our family cars.

Our Corvettes were a 2001 (5 yrs/66k miles), a 2006 (3 yrs/44k miles, hit by an idiot), a 2009 (8 yrs/102k miles). We bought the GM extended warranty on every one of them, and "made money" on the extended warranty each time. Our current 2017 is now at 35k miles and just ran out of factory warranty, we have the GM extended but haven't used it yet. Time will tell.

I've had several people tell me, based on their personal experience, that they would not own a Corvette or any European car unless it was under a warranty.

[Hyper]

Never until now. Recently bought a 19' F550 4x4 diesel that I'm not familiar with yet. I've always done my own work, maintenance but this diesel has a cpl known issues, not high failure rate but dang expensive if a failure were to happen so I did buy a manufacturers extended warranty. It was not cheap and I had no leverage to neg ex warr price. They quit making these trucks through covid and they are barely available.

[davidfin]

IMHO, Extended warranties are not a good value for the consumer. I base this on two observations. 1, the level of marketing that companies who sell extended warranties is crazy. It’s become a national joke about how many calls consumers receive regarding extended warranties. 2, more importantly, warranties are priced to make money. A lot of money. These are basically unregulated insurance products. These companies have a huge data base of cars and the types of failures cars experience and the timeframe. Statistically these companies have a very good idea of the payout. What to cover and what to exclude. It’s the rare consumer who may eventually break even.

Final thoughts. The shear level of high pressure sales is a clear indication of great margins on these products. That means the pay out is low or the price is high. With extended warranties, its likely both.
You’d be better of investing the money in short duration triple B bonds and pay for major repairs from the bonds. Less risk and you get to keep what ever is leftover.

[ERhoosier]

EWs are always a crap shoot. Not sure there is a single 'right' answer. I've never bought any from a 3rd party (too many bad stories out there, including from some close relatives/friends). I have bought car maker EWs in the past. Some paid off for me and some were wasted $$ (never needed anything fixed).

But the cost of repairs these days is higher than ever. Mechanic time billed at more than many doctors make per hour and parts costs can be bizarrely high.....especially the unique parts/electronics with no aftermarket alternatives.

[OldShooter]

Quote:

Originally Posted by ERhoosier EWs are always a crap shoot. ...

I'm not a gambler so I don't know what the odds in craps are, but I know for sure that the odds are significantly against the buyer of any extended warranty. I am actually quite surprised to see this thread's longevity considering that almost anyone on this board would view car repair costs to be a relatively trivial risk in the context of their financial lives.

Quote:

Originally Posted by ERhoosier ... the cost of repairs these days is higher than ever. Mechanic time billed at more than many doctors make per hour and parts costs can be bizarrely high.....especially the unique parts/electronics with no aftermarket alternatives.

You don't think the insurors know this and price accordingly? Trust me: They know.

[Music Lover]

No one sells a product that they expect to lose money on.

[Koolau]

Quote:

Originally Posted by OldShooter I'm not a gambler so I don't know what the odds in craps are, but I know for sure that the odds are significantly against the buyer of any extended warranty. I am actually quite surprised to see this thread's longevity considering that almost anyone on this board would view car repair costs to be a relatively trivial risk in the context of their financial lives. You don't think the insurors know this and price accordingly? Trust me: They know.

Without intending thread drift, I even apply this approach to repair insurance to regular car insurance. On any car worth less than $10K, I drop collision. I DO go pretty much max on liability and umbrella. In the first case, I know my max loss. In the second case, the sky can be the limit. Now returning you to our regularly scheduled thread because YMMV.

[REWahoo]

Quote:

Originally Posted by Koolau On any car worth less than $10K, I drop collision.

With today's used car prices you might have to own it for a very long time before you could drop it.

[Koolau]

Quote:

Originally Posted by REWahoo With today's used car prices you might have to own it for a very long time before you could drop it.

Heh, heh, good point. I do think my '99 CRV and '00 Buick fit the profile. My '12 Rav 4 is right on the line - if I call it "clean" which I do NOT. YMMV

[Time2]

Quote:

Originally Posted by Car-Guy I see a few here say they "never insure against a loss they can easily sustain"... But to me it makes a lot more sense to do a risk/cost/benefit analysis on a case by case basis rather than make such a blanket statement, even when you can afford the loss.

While I agree about the risk/cost/benefit analysis, the warranty seller has already done that, so unless you have a problem that will outwit their analysis, warranty is not the way to go.


[quote]
Example:

I buy health insurance each year since I know with ~100% probability that we are going to get "a lot more" out of the insurance company in claims payments than I'm going to pay in premiums. I pay about 6k a year in premiums and they pay out "at least" 15 to 20k a year in claims payments, sometime more. And that's at the insurance companies discounted rates.

Quote:

Now I know where all that premium I pay but don't use goes! If I had to pay full rates (w.o. Ins) it would easily be 3 to 4 times that. It would be pretty stupid (IMO) to pay full freight when I can get such a huge savings even though I can afford to pay all the bills at full rates. In my case, I look at the the risk of loss, cost of insurance, and potential claim benefits. Of course, other variables/details can come into play depending on what you are insuring. (Car's, homes, life, collectables, etc) In some cases I buy it, in many cases I don't, even though I can afford any covered loss.

Back in the early 90s, VCRs were having great sales increases, the sellers sold service contracts with them. The contracts were as profitable as the sale if not more so. I was in service, we did repairs for 3 big box companies that were experiencing big growth. The big boxes paid decent but not full repair price. But those VCR profits pushed a lot of growth.

A sad thing I saw were rent to own contracts. I recall one VCR that could be bought for $230 at the time. In order to get manufacturers warranty service you needed proof of purchase. So I had the rent to own receipt, the final cost was $1,100 for the $230 VCR.
I did a rent to own on a freezer one time. I had a coupon for one week free, I rented it, we drove to Florida with the freezer in the back of the truck, bought a bunch of shrimp and a few other seafood goodies. Brought them home, returned the freezer and paid for the second week. For me, it was a great deal. You ever run a cord out the door of a motel to your truck, I have!