Are extended warranties like auto shield worth it

[ShokWaveRider]

No!

 

[CaptTom]

Interesting to see this old thread resurrected. The answer is still "no."

Let's see if I can explain it another way. For each item you buy an extended warranty for, you are betting the insurance company that it will fail, and cost more to fix than the premium.

The insurance company, of course, knows the failure rate and always wins, even if you happen to be the "lucky" one who has an expensive failure.

Now look at all the things you buy. You should take the same bet the insurance company does; that even if some fail, most will not. You will come out ahead if you never buy any warranty.

What about buying insurance just for those things you expect to fail? Still no. The repair costs should be priced into the cost of ownership. I replaced the transmission in my truck. Not cheap, but it was a LOT cheaper than if I'd bought extended warranties for every used vehicle I've ever owned. If you can't afford to fix it when it breaks, you shouldn't buy it. Or at least factor that into the price you're willing to pay for it.

 

[JoeWras]

Let's see if I can explain it another way. For each item you buy an extended warranty for, you are betting the insurance company that it will fail, and cost more to fix than the premium.

The insurance company, of course, knows the failure rate and always wins, even if you happen to be the "lucky" one who has an expensive failure.

Now look at all the things you buy. You should take the same bet the insurance company does; that even if some fail, most will not. You will come out ahead if you never buy any warranty.

What about buying insurance just for those things you expect to fail? Still no. The repair costs should be priced into the cost of ownership. I replaced the transmission in my truck. Not cheap, but it was a LOT cheaper than if I'd bought extended warranties for every used vehicle I've ever owned. If you can't afford to fix it when it breaks, you shouldn't buy it. Or at least factor that into the price you're willing to pay for it.

Yes. I think the discipline here is to realize that every now and then you will lose. Something big will break, and you'll pay. But most of the time you will win. You will be ahead.

Hey, even with car problems, those warranties are expensive. Even a fairly major repair (let's say, power steering pump) might only be the cost of the warranty. You are even. And don't forget, the warranties expire, and are really somewhat bogus since the "7 year warranty" overlaps the manufacturer warranty.

I think the reason car warranties are so frequently purchased is because people can roll them into a loan, or monthly payment. This is attractive to those that live paycheck to paycheck and don't have discipline to set aside a rainy day repair fund.

 

[nobody]

I don't believe in them but if you feel you need one make sure it is from the manufacturer not a 3rd party. It would be interesting to know the peeps that like them and have had good luck whom the coverage was thru.

 

[Montecfo]

Extended warranties are products offered for profit. As a philosophy I self insure for affordable risks, as I wish to keep that profit for myself.

Then I further skew the result in my favor by buying products that are reliable, maintaining them well, and doing my own work where possible.

For these reasons I have never purchased an extended warranty and have no plans to.

 

[Sunset]

I think you bring up a good point. If the payment results in priority service, fast turn around work, with them handling all the details, then it may be a useful service. There are a few service-plan kind of warranties that actually work well this way. Yours sounds like one of them.

However, if it results in no priority, and if they put you through the wringer to justify the service, then what's the value?

The best example I have of this peace of mind, is when the furnace stopped working, the tenant called the emergency phone number and ended up with the thermostat replaced.
Then the tenant emailed me to report everything that had happened.

Totally hands off for that problem

 

[OldShooter]

... As a philosophy I self insure for affordable risks, as I wish to keep that profit for myself. ...

Exactly.

Actually, I do insure our cars for collisions, though those are affordable risks for us. Illogical, I guess. I just don't want to lose a $20K or $30K car and have to write a check for the replacement.

But the odds against the buyer of an extended warranty verge on rapacious. That is why they are pushed so hard by sellers.

 

[CRLLS]

Like many, I usually choose not to purchase an Ext Warranty. In 1987 I bought a new car and after all deals were made the closer pushed for the Mfgr's Ext warranty. He ended up making my monthly payment the same by finding a local bank to make the loan at a lower rate(and giving them a finder's fee). That warranty was well used by the time I sold the car with 130k miles.

I never bought another car warranty until recently. I purchased a 3 year old, off-lease car with 17k miles. I bought a mfgr's warranty from a dealer online at a good discount. Modern systems are complicated and expensive to repair. While I can afford to pay for virtually any repair, I chose to purchase the warranty anyway. I don't want the bother if sometime I need a covered repair. Like any other insurance policy, it doesn't make good financial sense, unless you actually make a claim.