When I got my '05 Escape many of you laughed when I got the extended warranty, even when the entire AC system blew and was completely covered by the warranty -- breaking even at $2500. Well, today I took the car to the dealer and the noise I was hearing was the swaybar, and while they were under there they found a leaky seal. Everything is covered, and I'm driving around in a free rental car included in the warranty. If I have a lemon, this warranty is certainly making lemonade out of it.
Actually, this type of insurance is not needed for any car. People are almost always better off not taking the insurance. There are very few people who benefit from taking the insurance. THe car companies make a ton of money off the this insurance.
Well, there is something to be said for peace of mind. I would agree that most people lose money when they buy an extended warranty, and that often the work can be done for less when you take the car to an independent technician. But, in this case I was able to buy a used car with no warranty, add a warranty and drive the car away without a care. When the AC went out I broke even, and at $2500 I probably would have driving the car with the windows down for the rest of the summer. This time I got new tie rod ends, new sway bar bushings and a 4 wheel alignment for free. The car now tracks like it's on rails. And, while this was being done I got a free rental car. I would say this is abnormal for most people who get an extended warranty, but even if nothing had happened to the car I would still have peace of mind driving it around. Also, if I decide to sell it the warranty is transferable, which would have to add to the value. For me this has been a win win. I was lucky enough to have an extra $2500 for the warranty when I got the car. Not everybody has that luxury. Also, I was lucky enough to get a legit warranty that my dealer is honoring. I've heard horror stories about these warranties where whatever goes wrong is either not covered or your fault.
Well said. When I got my first NEW car ('89 Cavalier), I was a salesman's dream and opted for everything - undercoating, paint protection, fabric protection and yes... an extended warranty. When word of my naivete got back to my buddies, I was regaled with a chorus of "You did what?!!!!". The various dealer-supplied spray protections were like so much money out the window, however the warranty came in damn handy a couple years later when my engine developed a serious piston slap. That said, I haven't opted for an extended warranty since, probably never will and advise those who will listen (now that I'm older and wiser in the ways of automobile purchase voodoo) to opt out.
It is my opinion that much of the controversy that surrounds extended warranties and whether or not they are worth purchasing centre around the name - warranty. If is was called "insurance", I think that we would see it for what it really is - peace of mind, like you said. I have fire insurance on my house and I've never had a fire. I'm not pissed off that it has not "paid for itself", I simply enjoy the confort that comes from the protection it offers. Insurance companies, like warranty companies, make money because they collect more than they give out. What they are selling is not car repairs (or settlement cheques), they are selling that same peace of mind.
My standard advise is that if you are sure that the warranty comes from a reputable company, are willing and able to pay the cost, and tend to worry about such things, then go for it. However, personally I prefer to roll the dice. On a new car, the factory warranty covers off the first years and after that... well, I'll take it as it comes. Moderately used cars often have left-over factory warranties and if purchased at reputable dealers, are almost as worry free as new anyway. Bargain beaters and driveway specials... you get what you pay for and any kind of warranty you could buy for these things would likely be so restrictive as to be useless anyway.
So there's my 2 cents - I don't buy extended warranties and I don't recommend them. However, nor do I look down on anyone who does buys them (as long as they've done their homework and know what they really are).
The only time it makes sense to buy an aftermarket warranty is if you are buying a car that is known to be a high-repair car like an Audi etc, or if you are buying a car at the low end of market value from a "Shyster" dealer who does not properly recondition or inspect his used cars. I know a lot of car lots that do not fix anything that they can allow the car off the lot with, and count on the warranty to pay for repairs to bring the vehicle up to standard. After they get cut off from one warranty company, they move on to the next, and when nobody will provide them with warranty coverage any more they close their doors and re-open under a different name in a different town.
And they WILL be cut off, because when they sell the warrantee they are attestingto the fact the car is in good mechanical condition with no known or obvious mechanical defects or issues. And they know VERY WELL that this is not the case.
I hear ya, but this car was bought from a reputable dealer who's been around for a long time. And, as I'm sure you are aware, unless you are buying a very late model "certified" used car, the car is usually sold "AS IS" with a big sign on the window telling you that. I'm sure my car was never thoroughly inspected, as you would think bad tie rods ends would have been caught in an inspection.
Here in Ontario, VERY FEW cars are sold "as is". We have safety checks at title change, as well as bi-annual emmission tests, which are only good for one year for title change - Lots of little "junk lots" do sell basically scrap cars "as is" to those with credit problems - and they usually end up as expensive, or more expensive, than buying a decent car from a good car lot. If you buy "AS IS" it is not inspected at all.
I have bought some of my cars AS IS (provately) from people who do not want to spend the money to inspect and do any required repairs - but I'm a licenced mechanic with a lot of experience behind me (even though I no longer work as a mechanic) - and I've gotten some real good deals, and a couple of "lemons".
And I ALWAYS make it a condition that I can have the car e-tested and passed. Costs me $35.00 or something like that to know if it can be made to pass relatively easily, or if it will be a money-pit emissions-wize. (can also tell you a few other things)
I also get it on a hoist and do a quick "pre-safety" inspection .
I don't waste my money on warrantees.
Having been in the business since the sixties I know only the seller comes out ahead in the VAST majority of cases.
The only "extendedWarranty" remotely worth buying is an extension of a factory warranty, completely handled by the manufacturer, not an "aftermarket" deal.
That's true of all insurance. But I bet you carry homeowners, auto medical, possibly life, possibly disability. You don't buy insurance with the expectation of coming out ahead, insurance companies would go out of business if things worked that way, you buy insurance to manage risk. Each persons situation is different and each person has different acceptable risk levels.
The only reason to buy insurance is to share the risk of things that are too big to handle yourself, like caring for loved ones financially after you can't (life insurance), if you're disabled, catastrohpic health problems, car crashes and theft, house fires, some types of liability and Apple Extended Care for my MacBookPro.
Yeah and some people can more easily afford to throw the warranty into their monthly payment for an extra $15 a month than potentially having to find $2500 for a transmission rebuild. That's called managing risk.
The funny thing is that they don't benefit from that extra $15 per month for the first $540 (36 months) or more (my car has a 5 year, 60,000 mi power train warranty in addition to the 3 year/36k warranty). Plus, a lot of problems that occur in cars and trucks are covered by TSBs. And, if they took that $15 per month and put it in their bank account, they would be even better off.
What you're calling "managing risk" is called "profit" for the dealer and insurance companies, sloppy financial management for the consumer.
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