Extended Warranty ??

[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]

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.

... 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]

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]

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]

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]

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.

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.

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!

 

[Koolau]

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.

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.

Health Insurance is one of those items you MUST purchase in order to secure good (okay, better) diagnostic/treatment/doc prices - negotiated by the insurer(s). Without that YOU have to pay the full ride ($2K for a MRI vs maybe $100 negotiated.) The $20 you pay of the $100 is the "gravy" for having HE IMHO. Mostly, it's the "purchasing power" of the insurance co. you are paying for though YMMV.

 

[FIREarly]

I don't buy them. I buy reliable cars.

Tesla

If memory serves correct, they are rated the safest cars on the road and have the fewest parts. Think about not ever getting an oil change, transmission issues, or many other maintenance. They are by no means perfect but they are pretty nice. There was a YouTube video of a guy driving a Tesla that was used to transport employees from 2 cities in California and had... 400,000+ miles on it... WOW!

Lexus will most likely join the EV game. No knowledge of what they are or will do in the future. GM, Cadillac, Ford, VW, Hyundai, and many more will join the EV market (if not already there). Cadillac wants 100% of their cars EV by 2030? GM by 2040? VW is possibly the largest car company in the world (revenue or profit?) and will be making a big push for EV. Sorry, I'm rambling. Lexus make very well built cars but not sure about their future, which, IMO, is going EV.

My apologies for putting a work related statement above but, to my knowledge, Carvana does sell Tesla too. Just watched a video about how Cornell is working to create EV that charge while driving. Switch into a charging lane to charge and leave it to "drive": https://news.cornell.edu/stories/2021/04/research-paves-way-wireless-charging-electric-vehicles

 

[OldShooter]

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.

Of course.

 

[Music Lover]

Tesla

If memory serves correct, they are rated the safest cars on the road and have the fewest parts. Think about not ever getting an oil change, transmission issues, or many other maintenance. They are by no means perfect but they are pretty nice.

There are lots of nice cars out there. My basic Acura gets an oil change twice a year (2 hours of my time) and has never had a transmission issue or any other maintenance problems and it's 6 years old.

Tesla has a below average reliability rating, and that's with the added benefit of fewer parts. Tesla isn't horrible but there's also nothing wrong with dozens of other vehicles.

 

[Ready]

I might consider getting an extended warranty on my Tesla. I’m not concerned about the motor failing. But the car has a lot of electronic equipment which is very expensive to replace, mainly because you have to use Tesla to do the repair work.