Extended Warranties Revisited

[The Critic]

With C300's repair history, I think Quattro Pete can be the poster child for an extended warranty.

http://www.truedelta.com/reliability-by-vehicle.php?vehicle=85541

 

[diver1972]

Originally Posted By: doitmyself
...I would like to start a serious discussion about the feasibility of them on today's more complicated cars.

Originally Posted By: JHZR2
The "peace of mind" that the warranty offers is only such for those who cannot manage money properly.
Game. Set. Match.

It's been several years since I debated this topic with anyone.

 

[diver1972]

Originally Posted By: DBMaster
Consumer Reports has stated over the years that the average payout for extended warranty claims (ALL warranties, not just for cars) is about ten cents per dollar of revenue.
That's incredible.

Not many other industries with those kind of margins.

Originally Posted By: otis24
Some warranties offer a refund if you do not use it during the course of the term.
I'd be scared to see the price tag on one of those!

Originally Posted By: jimbrewer
I don't understand the argument that since the seller makes money on the warranty then it must be a bad deal.
I think that argument is lots of money; more specifically, very high margins.

Originally Posted By: supton
Waste of money. But at the time it was comforting.
Thanks for sharing that. A few people I know have expressed the same sentiment over the years.

Originally Posted By: KitaCam
One consideration...some dealers will refund your entire cost for the service contract if it is not used...so if the car requires some minor repairs and you are not required to invoke the "warranty" you can get your money back.

Isn't this type very expensive, relative to another plan with the same coverage, but without this option?

 

[The Critic]

Originally Posted By: diver1972
Originally Posted By: DBMaster
Consumer Reports has stated over the years that the average payout for extended warranty claims (ALL warranties, not just for cars) is about ten cents per dollar of revenue.
That's incredible.

Not many other industries with those kind of margins.


So they have a loss ratio of about 10%. That's pretty darn good! No wonder the company that just bought the insurance carrier I work for, sells a ton of these policies.

In our business, a loss ratio of about 50% (or less) is what you aim for.

Originally Posted By: otis24
Some warranties offer a refund if you do not use it during the course of the term.
I'd be scared to see the price tag on one of those!

[/quote]

It's a separate policy in itself. I think I posted a link on here to a company that offers this type of program, but I can't find it at the moment.

 

[diver1972]

Originally Posted By: Miller88
The million modules and computers that are in a car are expensive when they fail. Sensors, etc.
I can't help but wonder: Within a given defined warranty period, approximately how often does this occur?

Originally Posted By: KitaCam
When I got kitacamry with 97k miles the credit union "offered" an EW for $2000 for 4yrs/48k miles...I passed.
...out? From shock?

Originally Posted By: doitmyself
My son called and said he has his '10 Mustang in the shop for brake problems. He bought this used, and, unknown to me, told me tonight he was grateful to have spent about $800 for an extended warranty.

I don't remember exactly what the problem is (some kind of "module"), but he said total repair cost was going to be $1,400 dollars ($100 deductible for him).
Whoa! A brake module issue at what appears to be just beyond the B2B/basic/factory warranty period of 3/36? Could it be poor quality control going on with Ford's suppliers these days? Or is that dealer just looking to cash in on some extra service revenue by finding "repairs"? Something just sounds a bit odd here.

 

[XtraRevsSurely]

We bought a CPO Chrysler Pacifica in 2010 an bought an EW with it for two reasons:

-We didn't plan on having it paid off by time the CPO 6/85 was up

-The Pacifica doesn't have the best reputation for reliability

So are we haven't had to use it, but you never know!

 

[EType]

Originally Posted By: JHZR2
You have to look at it mathematically. They would NOT be selling them if they were losing money. They pull enough in premiums to profit off of this.

Sure, insurance is pooling risk... SO if a $7500 long block fails, you will come out ahead, but practically speaking, how many of them do you see.

Again, if the amount of repairs, dollars-wise was sufficiently high that the average buyer makes out, the premium would be higher or the vendor would not be selling them.

So in reality, maintaining the value of the warranty in dollars in a savings acount is a superior approach for the average buyer. The "peace of mind" that the warranty offers is only such for those who cannot manage money properly.


I understand the concept but I presume you have good coverage on your car, home and health insurance because if something serious happened, it would be better not to be self insured.

So for some with lower income, the warranty works the same way. It protects something that for them is too expensive to self insure.

Sure some people don't manage money well but others just don't have much money.