Glad I bought the extended warranty for my car

[dennis thompson]

I bought a new car last year and, given what appeared to me, to be an extraordinarily complex car, I bought the only extended warranty I’ve ever bought in my life.
Today I was reading the car column in the Wall Street Journal and he mentions that car repair costs rose 20% last year!
Glad I bought that extended warranty.

[George Bokros]

I bought the extended warranty for the truck I bought in 2021, also the first extended warranty I ever bought. I did so for the for the same reason, the extreme complexity of the electronics of the new cars.

[Rich Engelhardt]

We bought the extended warranty from Lowes on our LG refrigerator back in 2018.
According to Lowes, we could get filrers for half price with the extended warranty.
It died - the compressor went out - in 2019 right as everything was shutting down.
They tried for over four months to fix it. Finally they gave up and refunded our purchase price.

We learned our lesson.

We get the extended warranty now on all major purchases - including automotive.

Matter of fact, my 2019 Hunyadi Kona's warranty is up come August. I'm looking into the cost and advantage of getting an extended warranty on it so I can keep it a couple more years.

[Chris Schoenthal]

Long gone are the days when you could fix something yourself cheaply and easily. With so many electronics and control boards, there isn't much you can do anymore.
I too, bought the extended warranty on a 2023 hybrid, primarily for all of the electronics and batteries.

[Bill Howatt]

Is my old brain remembering correctly? This thread (so far) is giving a positive spin on extended warranties - didn't the one a few months ago have the overall opposite tone?

[Dave Fritz]

This makes me think of my dad. He was a mechanic and came home one day in about 1965 and said he quit. He was tired of going to transmission school. I can't imagine what he'd think today.

[Mark Wedel]

Extended warranties are something of a gamble. Some people will come out ahead by buying one (an expensive repair covered by it which would otherwise be an out of pocket expense), most people will end up behind (no benefit seen, as no failure within that time frame, or the cost of the repair would have been less than is being paid for the warranty). The company selling them comes out ahead, as they are big money makers for them, and they know how to price them so that they will make money.

I've never bought one. I've had maybe 1 or 2 appliances (not really expensive ones) that might have been covered by one had I bought it, but no way knowing that those 2 specific appliances are the ones I would need to have bought a warranty for, so the only way to cover that case is buy a warranty for every appliance I've bought, and in that case, I would have ended up behind financially.

[Jim Koepke]

This makes me think of my dad. He was a mechanic and came home one day in about 1965 and said he quit. He was tired of going to transmission school. I can't imagine what he'd think today.

Sometimes, the times change rapidly.

I used to own a 1957 VW Transporter (aka VW Bus). During my ownership that vehicle never went to a professional mechanic for any kind of service. Many people told me how the engine was going to blow up and other woes of how a 40 horse engine was going to fail. The original engine was a 36 hp and replaced by a previous owner. I had that thing for many years and always drove it in a conservative manner. I rebuilt the engine, replaced the brakes and drums as needed and changed the oil regularly. After about 75,000 miles the speedometer cable broke. I drove it a lot after that before selling it to someone who didn't pay attention to maintenance and froze up the engine for lack of oil.

One funny thing about it was the rear lights were not original but the person who changed them didn't know how to wire them properly. There was a single brake light in the center which was legal in California for cars made before 1958. There was a loose wire that would occasionally short out and blow a fuse. I was pulled over a few times for no brake lights. I would explain the situation to the officer about why my 1957 vehicle was legal with only one brake light and as they walked to the back of the bus to look I would replace the fuse and be allowed to go on with a comment about how it might be a good idea for me to do something to get more brake lights back there.

After about the fourth time this happened I fixed the wiring.

After that I worked on my cars as much as I could. Some things were work in which I didn't want to be bothered doing.

I purchased an extended warrantee on my 2021 truck due to having no knowledge of diesel engines or all the electronics controlling it and everything else.

One note though, we purchased a freezer at one of the Borgs with an extended warrantee. We have received offers from the maker for an extended warrantee. Apparently the maker doesn't honor the one sold when we purchased the freezer, it is covered by the Borg, hmmm.

Also, the "fulfillment crew" that delivered the freezer didn't inspire confidence when they kind of balked at switching the door from right hand to left hand to work in our kitchen. I ended up having to help them.

In my youth, my folks owned a furniture & appliance store. My older brothers actually had manufacturer training on appliance repair. If someone needed a door switched, it was often done before we took it to the customer. Often refrigerators and freezers would be plugged in well before delivery so they would be cold inside when they were installed.

Sometimes the changing of the times isn't better for the person at the end of the line.

jtk

[Jim Becker]

Extended Service Contracts (which is what they are legally) are a form of insurance. (Some states, like Florida, even regulate them that way) Some folks buy insurance to protect themselves from certain kinds of financial risk and some folks don't. Given the level of tech in my Subaru, I have zero regret at spending the equivalent of about $235 a year to have a zero deductible contract from the vehicle manufacturer for ten years or 100K miles, whichever comes first, especially since it covers everything other than wear items and cosmetics.

[Jerome Stanek]

Extended Service Contracts (which is what they are legally) are a form of insurance. (Some states, like Florida, even regulate them that way) Some folks buy insurance to protect themselves from certain kinds of financial risk and some folks don't. Given the level of tech in my Subaru, I have zero regret at spending the equivalent of about $235 a year to have a zero deductible contract from the vehicle manufacturer for ten years or 100K miles, whichever comes first, especially since it covers everything other than wear items and cosmetics.
Is your Subaru one of the Return To Dealer for repair and maintance work

[Brian Elfert]

Extended warranties are sort of like casinos. Overall, the house always wins. If every customer came out ahead on extended warranties the companies would go bankrupt. (Some extended companies have gone bankrupt.)

If newer vehicles require more repairs due to electronics and so on the cost of the extended warranties will have to go up.

[Jim Becker]

Is your Subaru one of the Return To Dealer for repair and maintance work
Any Subaru dealer in the US for repairs to be covered by both the OEM 3/36 Warranty and the Subaru Added Care Gold Extended Service Contract. Maintenance can be done anywhere, including by oneself, and many folks do routine things that way. They must document it for sure. Some maintenance is best left to the dealer...an example would be changing the CVT fluid in and Ascenty (or Outback/Legacy XT/WRX) because there is only one fluid in the world that meets spec for that particular transmission, it's only available from Subaru and the smallest quantity is 5 gallons. It must also be filled with careful electronic monitoring of both volume and temperature. Not something for most weekend warriors and a $12K mistake if you do it wrong. (Not the same situation with other models that have the lower capacity CVT)

I personally will only consider a manufacturer backed ESC...never a third party contract.

[Patty Hann]

We bought the extended warranty from Lowes on our LG refrigerator back in 2018.
...
It died - the compressor went out - in 2019 right as everything was shutting down.
They tried for over four months to fix it. Finally they gave up and refunded our purchase price.
....

So, just out of curiosity (about how people handle this sort of major annoyance) what did you do for a refrigerator for those 4 months, considering that after the first attempted repair ended in failure, you now had, by then, an unreliable fridge.
You can lose a lot of food that way.
Anyway, as I said, just curious.

[Ole Anderson]

Some time ago I purchased and installed a GE water heater from Home Depot for probably $450. It had a lifetime warranty from a third party (who does that?) 12 years later it started slowly leaking, so I filed a claim last year. They were unable to find an installer (at a reasonable price?) so they cut a check for the price of an equivalent water heater at today's price plus installation. $1600! Felt like I won the lottery. Used it to buy a new water heater (12 year warranty), with another 5 years of extended warranty and a water softener. I tape the receipts right to the new units so when it fails I have the paperwork to make a claim. Hoping I never have to pay for another water heater.

Been leasing cars for a long time, last car (a Jeep Cherokee) I bought outright. As with most US cars it came with just a 36K mile warranty. I plan on keeping it a while so I purchased the extended warranty. Like the salesman said, just a bad touch screen can cost two grand. I am just past the original warranty after 4 years, so far no problems. Paying for the peace of mild as much as anything. Neighbor always buys the extended warranty on his used cars and it has paid off every time.

[Bill George]

Time have changed folks its not 1957 any more where you just replaced spark plugs and changed oil... all was fine. People who do not understand cars and electronics and do not buy those factory extended warranty's are in for a big surprise.

[Stan Calow]

I've always been against them on principle, but you folks are changing my mind. Thanks for the discussion.

[ChrisA Edwards]

I bought a 1993 Dodge Caravan, new in 1993. I bought the factory extended warranty at the time. Over the next four years of ownership, I had five transmissions and an engine block. My wife claimed I was too hard on the vehicle, but it was front wheel drive and I changed the original tires at 66K miles and was about half way through the second set at 92K miles when we traded it. The first transmission went out at 32K miles while still on the 3Y/36K miles OEM warranty.

I also had a transmission go out on my Cadillac Escalade at around 110K miles. On this I had one of those aftermarket warranties. That was much harder getting payment. They eventually paid me $2500 for a $3600 repair. They would not cover the cost of an OEM transmission, which I wanted as that came with a 60K mile GM warranty, so I paid the difference.

The best extended warranty I had purchased was on my '97 F150. At the time, when they offered the warranty, they stated if I never used the warranty they would refund 90% of the cost of the warranty. I showed up at the dealership, four years later, with the contract in hand and left with a check for the 90% without any hassle.

So I'm a bit of a believer and figure it's just a cost of owning a complicated/expensive piece of equipment that I do not have the expertise to fix.

[Bill George]

One thing I did do is purchase a app for my IPhone that with the proper adapter on my OB2 connector can read fault codes and much more. I had some sort of code on my 2014 Silverado and it told me which sensor was bad. Went to the dealer and purchased for 1/3 the cost of a hours labor and replaced, bingo cleared the code and I am done.

[John Lifer]

99% of the time the extended warranty is just money in the pocket for the seller. New Car? 100k and 5 year warranty? you have Zero need in an extended warranty. If you had saved that money, you could pay for ANY repair needed in 7 years after the extended warranty ends. BUT, I just paid for a 2 year warranty on a HF air compressor. I just don't trust 90 days to be enough.....

[Rich Engelhardt]

So, just out of curiosity (about how people handle this sort of major annoyance) what did you do for a refrigerator for those 4 months, considering that after the first attempted repair ended in failure, you now had, by then, an unreliable fridge.
You can lose a lot of food that way.
Anyway, as I said, just curious.
Thankfully - it was in late Winter and we had an enclosed porch.
We also went out and bought one of those small bar type refrigerators.
Since there's just my wife and myself, it was pretty easy to just cut back on what we normally stick in the refrigerator anyhow.

[Bill George]

99% of the time the extended warranty is just money in the pocket for the seller. New Car? 100k and 5 year warranty? you have Zero need in an extended warranty. If you had saved that money, you could pay for ANY repair needed in 7 years after the extended warranty ends. BUT, I just paid for a 2 year warranty on a HF air compressor. I just don't trust 90 days to be enough.....

You must not of priced out of warranty hourly rate at the Dealership and they are the ones with the tools and testers to do the job, not Joe down at the Amico station. When expensive parts could be at fault it starts at maybe $800 and never gets cheaper. I can do limited repairs and always maintained my own vehicle's, today is different. Your afraid they are making money?? They will make a H*** of a lot more when you bring it in for repairs and aside from that most ESW are a sales bonus when you go to sell.

[mike stenson]

The actual cost of the warranty is significantly less than what they charge for it. That's what he's referring to.

That is, you can get it for pennies on the dollar.

[Bill George]

The actual cost of the warranty is significantly less than what they charge for it. That's what he's referring to.

That is, you can get it for pennies on the dollar.

I don't understand what your saying? The extended warranty's come in different coverages and at different prices, never buy one from a after market mailing, only with the factory coverage. Its an insurance policy.

[Dave Lehnert]

I got an extended warranty with my last new suv purchase. Never had any luck with it covering anything. If a part was clearly covered they denied it because it was "dirty" Um. the reason the part goes bad.
Had a axial seal go bad. They covered it BUT......... It did not cover the cost of fluid and labor for the fluid exchange.
All the warranty ever did for me was having to wait an extra day for the warranty company to get back to the shop denying the claim.
I paid 2K for a 10 year power train warranty. Think it only covered about $200 in work. You know, just enough so I was unable to take advantage of the 50% refund if I never filed a claim.

My point. Just because you have a warranty, dont think it will be covered.

[Brian Elfert]

My point. Just because you have a warranty, dont think it will be covered.

I am guessing your warranty was aftermarket, not from the dealer? Some independent repair shops refuse to deal with extended warranty companies because of the extra time they take to deal with. Also, the extended warranty companies often pay an hourly rate that is lower than the shop normally charges, or they don't allow enough hours for the repair. Some shops will require the customer to pay and then let the customer deal with the warranty company. Other shops will require the customer to pay the difference between the warranty labor rate and the normal shop rate.

[Bill George]

I got an extended warranty with my last new suv purchase. Never had any luck with it covering anything. If a part was clearly covered they denied it because it was "dirty" Um. the reason the part goes bad.
Had a axial seal go bad. They covered it BUT......... It did not cover the cost of fluid and labor for the fluid exchange.
All the warranty ever did for me was having to wait an extra day for the warranty company to get back to the shop denying the claim.
I paid 2K for a 10 year power train warranty. Think it only covered about $200 in work. You know, just enough so I was unable to take advantage of the 50% refund if I never filed a claim.

My point. Just because you have a warranty, dont think it will be covered.

All the dealer/factory warrantees I purchased there was no need to go to the Warranty Company.... it was the dealer right there on the spot and they always paid. You must have purchased a aftermarket one... perhaps it came in the mail and was much cheaper?

[Jerome Stanek]

When I was shopping for a new pickup the dealer offered a extended warranty that was bumper to bumper. I asked if the bumper rusted was it covered they told me no. I asked if the antanna was covered they said yes it would only cost $200 to replace it. I went to the parts department and the antanna was less then $25 dollars, Needless to say I did not take that warranty

[Brian Elfert]

When I was shopping for a new pickup the dealer offered a extended warranty that was bumper to bumper. I asked if the bumper rusted was it covered they told me no. I asked if the antanna was covered they said yes it would only cost $200 to replace it. I went to the parts department and the antanna was less then $25 dollars, Needless to say I did not take that warranty

That $200 was probably parts and labor.

[Keegan Shields]

Extended warranties are sort of like casinos. Overall, the house always wins. If every customer came out ahead on extended warranties the companies would go bankrupt. (Some extended companies have gone bankrupt.)

If newer vehicles require more repairs due to electronics and so on the cost of the extended warranties will have to go up.

In fact, extended warranties are often the highest margin portion of the product.

[Jim Becker]

In fact, extended warranties are often the highest margin portion of the product.
My dealer's profit on my contract was about $300. But it absolutely is pure profit in that they just need to collect the money. The manufacturer is on the hook for any resulting costs from claims.

[Earl McLain]

That $200 was probably parts and labor.

And if it's roof-mounted like most antennae today--i'd pay the $175 for labor. Sunroof in my wife's 2008 Scion Xb needed repair, and the headliner removal step-by-step from All-Data was all i needed to convince me to buy a tube of caulk instead. Estimated labor billing time for the roof liner remove/install was in the 6-8 hour range (by a mechanic, not by an insurance guy!!)

For my 2017 Ford Flex, in order to add the module to add Navigation to the Ford Sync system--i'd have needed to start with removal of the front seats to disassemble the center console, and then if i recall correctly partially disassemble the dashboard to get to the connectors. Part would have been just $300 or $400, but it would have taken a full day to install. All-Data's estimated billing time to swap out that module was 7 or 8 hours as i recall. So i just use a USB cable to connect Google Maps on my phone--and will never need to purchase an update.

Parts are cheap, labor is...well...labor!!

[Keegan Shields]

My dealer's profit on my contract was about $300. But it absolutely is pure profit in that they just need to collect the money. The manufacturer is on the hook for any resulting costs from claims.

The manufacturer is collecting most of the margin. Your dealer is just a reseller of the warranty.

[Dave Lehnert]

I am guessing your warranty was aftermarket, not from the dealer? Some independent repair shops refuse to deal with extended warranty companies because of the extra time they take to deal with. Also, the extended warranty companies often pay an hourly rate that is lower than the shop normally charges, or they don't allow enough hours for the repair. Some shops will require the customer to pay and then let the customer deal with the warranty company. Other shops will require the customer to pay the difference between the warranty labor rate and the normal shop rate.

No, it was warranty from the dealer.

[Dave Lehnert]

All the dealer/factory warrantees I purchased there was no need to go to the Warranty Company.... it was the dealer right there on the spot and they always paid. You must have purchased a aftermarket one... perhaps it came in the mail and was much cheaper?

No, Dealer warranty.

[Jim Becker]

The manufacturer is collecting most of the margin. Your dealer is just a reseller of the warranty.

That's not really in conflict with what I said. And for the $2350 I paid for 10 years, 100K miles with $0 deductible, "they" (the manufacturer) would potentially lose money on the first claim if it's, say...the head unit. Even worse if the transmission went because their portion of costs someone out of warranty $12K is still a big chunk of change. Consider also that my contract covers everything...literally...other than wear items and some specifically listed cosmetics, etc. Pretty good insurance policy, IMHO, if for some reason my particular vehicle is "the one" that has issues over time.

[Jerome Stanek]

That's not really in conflict with what I said. And for the $2350 I paid for 10 years, 100K miles with $0 deductible, "they" (the manufacturer) would potentially lose money on the first claim if it's, say...the head unit. Even worse if the transmission went because their portion of costs someone out of warranty $12K is still a big chunk of change. Consider also that my contract covers everything...literally...other than wear items and some specifically listed cosmetics, etc. Pretty good insurance policy, IMHO, if for some reason my particular vehicle is "the one" that has issues over time.

Is there a chance that they can deny a claim for some reason.

[Bill George]

No, Dealer warranty.

Factory warranty I bet not.... and was it a new or used vehicle. Never heard of a factory authorized warranty being approved off site. Speaking from GM, Honda and now Toyota experience.

[Jim Becker]

Is there a chance that they can deny a claim for some reason.
Negligence, etc., such as not following the published maintenance schedule, using non-spec fluids, modifications that cause a failure, etc. Expected things. Manufacturer ESCs have less issues with claim denials than "third party" contracts that are often focused on finding ways to not pay.

[Keegan Shields]

"they" (the manufacturer) would potentially lose money on the first claim


Nope, that's not how insurance works. The risk is spread out over all of the vehicles covered.


For example, if the stereo head unit in a particular car has a failure rate of .01%, costs $500, and there are 100,000 cars covered, then the expected cost per covered vehicle is $0.05.

If the manufacturer charges you $1 to cover your head unit, that's $0.95 of profit / covered car or $95K in profit for our theoretical insurance program.


The risk to the manufacturer comes when the failure rate ends up being higher than expected or their cost of replacement increases unexpectedly.

Since there isn't a general insurance market that competes to insure your specific car's head unit, there's no real pricing pressure which would reduce the rates.

So the limiting factor for a cars warranty program is how much the customer is willing to pay (perceived value). Obviously, components with a high failure rate or an unusually high cost would be excluded from the warranty.

[Doug Garson]

Keegan, I think you are "splitting hairs", don't think Jim was suggesting the company was actually losing money overall, just that the one claim might be for more than he paid for the coverage.
Another consideration is the dealer you are dealing with (no pun intended). When we bought my wife's used Mini, it still had a few years warranty left on it. When the warranty was close to expiring, they encouraged us to bring it in for service. They made a bunch of warranty covered repairs on things we didn't know were a problem but they knew from experience were. It was good for us and them as the repairs were covered by the factory warranty so they made more money. So it depends whether the dealer has loyalty to the owner or the factory.

[Jim Becker]

Nope, that's not how insurance works. The risk is spread out over all of the vehicles covered.
I know how insurance works...I was in the industry for a few years and my father was in the industry for over 30 years. My statement wasn't meant to be taken literally as Doug pointed out, but I can see how my wording might have made it seem to ignore how underwriting spreads risk. I'm sure that they have worked things out so that they come out ahead by offering the ESCs. But from an individual owner perspective...I'm happy, covered and have no worries for major costs over the next ten years if I hold the vehicle that long. If something goes bang, it will not be a big, surprise expense.

[mike stenson]

I don't understand what your saying? The extended warranty's come in different coverages and at different prices, never buy one from a after market mailing, only with the factory coverage. Its an insurance policy.

I can't make it any clearer then.

[Paul F Franklin]

So as the factory warranty on my Ranger is nearly up, I have the paperwork for the Ford Extended Service play and have been considering it. The "ultimate" level plan covers all failures except those specifically listed in the "not covered" clause. In the not covered clause is: all failures to a covered part caused by normal wear and tear and not a defect in materials or manufacturing. So tell me, if a fuel pump (say) fails after 4 years, how is that not going to be considered a normal wear and tear failure? Who gets to decide what is normal wear and tear and what is a defect in materials or manufacturing? Pretty sure it's not going to be me.

I am not talking about normal wear items like tires and brake linings, those are clearly excluded from coverage.

Maybe some plans don't have this exclusion, but I see it as a huge loophole, am I wrong?

[Keegan Shields]

So as the factory warranty on my Ranger is nearly up, I have the paperwork for the Ford Extended Service play and have been considering it. The "ultimate" level plan covers all failures except those specifically listed in the "not covered" clause. In the not covered clause is: all failures to a covered part caused by normal wear and tear and not a defect in materials or manufacturing. So tell me, if a fuel pump (say) fails after 4 years, how is that not going to be considered a normal wear and tear failure? Who gets to decide what is normal wear and tear and what is a defect in materials or manufacturing? Pretty sure it's not going to be me.

I am not talking about normal wear items like tires and brake linings, those are clearly excluded from coverage.

Maybe some plans don't have this exclusion, but I see it as a huge loophole, am I wrong?

Of course its a big loop hole. :)

[Bill Howatt]

I think it could be used as a loophole and while your fuel pump issue one thing, what if they say XXXXXXX miles is the normal wear and tear life for an engine or transmission.?

[Keegan Shields]

I know how insurance works...I was in the industry for a few years and my father was in the industry for over 30 years. My statement wasn't meant to be taken literally as Doug pointed out, but I can see how my wording might have made it seem to ignore how underwriting spreads risk. I'm sure that they have worked things out so that they come out ahead by offering the ESCs. But from an individual owner perspective...I'm happy, covered and have no worries for major costs over the next ten years if I hold the vehicle that long. If something goes bang, it will not be a big, surprise expense.

I think warranties make sense for people who don't have much saved (are just starting out, or had some extreme life event that wiped out their savings) or for people who are unable to save money (lack of impulse control).

When you buy a warranty, you are prepaying for a future repair at a much higher rate. (because the company is marking up the actual risk adjusted cost)

The alternative is to take the cost of the warranty and leave it in your savings account. If you do this across the board, you will come out money ahead in the long run.


Jim, in your case, it seems you place a high value on hedging against unexpected costs. By all means, do what you want - its a free country.

I just wanted to point out that you are paying a significant premium to the manufacturer in order to do that.

Instead, if you held a portion of your savings to cover these unexpected cost (perhaps in a CD) - it would be a far more efficient use of your money. Now you aren't paying for the manufacturers profit margin and you are also accruing interest!

[Bill Howatt]

Fascinating - we all want to save money.
I looked at the US Consumer Affairs page on this and it showed the Platinum (bumper to bumper) plan from Endurance to be $122 and from Olive about $70 more. This is for a 2019 Chev Equinox with 51K miles.
Now if I applied this to my 2017 Grand Caravan, I would have spent $122 x 84 months = $10,248 - is this correct? I've never bought one of these. Perhaps, buying with a new car is a lot cheaper?

Going back to the Grand Caravan, the amount I would have claimed outside the wear and tear (brakes) is $0.

For my much older 2005 Grand Caravan: A rough estimate says that I have spent under $4000 Cdn (about $2600 US) in repairs on my old, still being used, 2005 Grand Caravan apart from the brakes and tires stuff but I admit it could use some shocks now but it isn't worth putting the money into.

Of course, nobody has a good crystal ball, so knowing what future expense will be as strictly a guess - the transmission could have fallen out but it didn't.

[Keegan Shields]

Fascinating - we all want to save money.
I looked at the US Consumer Affairs page on this and it showed the Platinum (bumper to bumper) plan from Endurance to be $122 and from Olive about $70 more. This is for a 2019 Chev Equinox with 51K miles.
Now if I applied this to my 2017 Grand Caravan, I would have spent $122 x 84 months = $10,248 - is this correct? I've never bought one of these. Perhaps, buying with a new car is a lot cheaper?

Going back to the Grand Caravan, the amount I would have claimed outside the wear and tear (brakes) is $0.

For my much older 2005 Grand Caravan: A rough estimate says that I have spent under $4000 Cdn (about $2600 US) in repairs on my old, still being used, 2005 Grand Caravan apart from the brakes and tires stuff but I admit it could use some shocks now but it isn't worth putting the money into.

Of course, nobody has a good crystal ball, so knowing what future expense will be as strictly a guess - the transmission could have fallen out but it didn't.

Agreed, nobody has a crystal ball - but you can bet on the high margins charged for product warranties. That means you'll be significantly overpaying compared to your risk.

[Jim Becker]

I think warranties make sense for people who don't have much saved (are just starting out, or had some extreme life event that wiped out their savings) or for people who are unable to save money (lack of impulse control).

When you buy a warranty, you are prepaying for a future repair at a much higher rate. (because the company is marking up the actual risk adjusted cost)

The alternative is to take the cost of the warranty and leave it in your savings account. If you do this across the board, you will come out money ahead in the long run.


Jim, in your case, it seems you place a high value on hedging against unexpected costs. By all means, do what you want - its a free country.

I just wanted to point out that you are paying a significant premium to the manufacturer in order to do that.

Instead, if you held a portion of your savings to cover these unexpected cost (perhaps in a CD) - it would be a far more efficient use of your money. Now you aren't paying for the manufacturers profit margin and you are also accruing interest!
The bottom line is that an Extended Service Contract (they are not "warranties" no matter how many folks call them that including the folks selling them) is a form of insurance. As I noted previously, some states even regulate it that way, such as Florida. I choose to buy the insurance as it's not expensive (to me) but I'll only buy it from the manufacturer, never a third party. $2350 isn't in any way, shape or form a "significant premium" for 10 years, 100K miles and $0 deductible for everything except wear items (fluids, brake pads, tires, wiper blades, etc.) and cosmetics, given the cost of replacements. Almost nothing is field serviceable anymore. At least to me. And it also has nothing to do with how much money I have saved, either. Again, this is just insurance to me like any other form of insurance I carry.

[Bill George]

I think some of you did not read correctly, Jims total cost for 10 Years was $2350 or close. Not $150 or $170 a month! Correct me if I am wrong, it was more like $235 PER Year. Where are you guys getting $170 per month?

A transmission replacement these days is up to about $4000 to $6000.

My wife owned a Honda CRV when the air bag warning light came on. The dealer was going to start with the module as they could not narrow it down. It was $800 plus labor and NO guarantee it would be fixed. The next step was a higher priced something else.... no guarantee again.

We traded for a new Toyota and they took the CRV as is. needless to say for $1700 (total not per year) we purchased the extended warranty!!

[Keegan Shields]

The bottom line is that an Extended Service Contract (they are not "warranties" no matter how many folks call them that including the folks selling them) is a form of insurance. Agreed.


$2350 isn't in any way, shape or form a "significant premium" for 10 years, 100K miles and $0 deductible for everything except wear items (fluids, brake pads, tires, wiper blades, etc.) and cosmetics, given the cost of replacements.

How do you know that the risk adjusted cost of your Extended Service Contract is not a significant premium? $2,350 is a significant premium if nothing is anticipated to break in the first 100K miles. Anecdotally, I've never had a major vehicle component fail in the first 100,000 miles. Maybe that's why they offer the warranty for only the first 100K and not the first 200K miles?



Your error-in-logic is conflating what you pay for the ESC ($2,350) and the cost to repair a component on your vehicle (lets go with a $6000 transmission Bill mentioned).

What's missing in this comparison is the likelihood that you will need a new transmission. Lets say its .01% (or 1 out of 10,000 cars). Then your risk adjusted cost is $0.06 for the transmission. Do that for all of the covered components on your vehicle and you'll have a clear answer.

Now, obviously that would be near impossible for a lay person like us to calculate. But, we can count on the fact that these types of warranty's are high margin for manufacturers.

If you believe that*, then you are in fact overpaying by a significant amount. QED :) (this is all in good fun Jim)


*I can tell you from personal experience that warranty's are very high margin at the company I work at (IT manufacturer). I have a friends in different professional fields that have confirmed the same thing (rental cars, car sales, banking, consumer goods, heavy mining equipment). That doesn't mean they all are, but c'mon... these are for-profit business with intimate knowledge of their own products (asymmetric knowledge) in a market where there's not much competition.

In fact, that's one of the reasons 3rd party insurance (warranties) like Endurance are so expensive as noted above. They have to cover the risk of not knowing the failure rates of components on a whole array of different vehicles. Plus they need to cover all of the insurance fraud (like buying coverage after your car starts making a clunk-clunk sound).

[Bill George]

Transmission failures have always been an issue with Dodge built cars and trucks... this is just one example but other problems with other makers are also a issue. https://luxurydimension.com/dodge-ram-transmission-problems/

So go ahead, if $250 a year is something you can't justify. Or Ford > https://www.freep.com/story/money/cars/ford/2023/10/02/ford-engine-failure-investigation-explorer-bronco-edge-suv-lincoln-nautilus-aviator/71030958007/

More common than you non mechanical folks would understand? https://www.carcomplaints.com/Chevrolet/Silverado_1500/2021/

BTW anytime I can buy a 10 year warranty extension for $2350 I'm going to do it! You would be a fool not to.

[Brian Elfert]

For a lot of folks a $12,000 transmission repair would be a financial disaster it could take years to recover from. They don't have the savings to pay cash for the repair and would likely have to put the repair on one or more credit cards. The payoff of $12,000 in debt at 25% interest could take many years, depending on how much was paid per month. A lot of people would prefer to pay for an extended service contract, even if the seller makes more money from it. That couple of thousand over the life of the loan is something they can afford more than a $12,000 hit.

My 2016 Dodge Grand Caravan has only needed a valve cover gasket a month or two ago at about 95,000 miles. It will probably hit 100,000 miles without any super expensive repairs. If it needed a $12,000 repair my first stop would be a car dealer for a new, or newer, vehicle.

Edit: I forgot I spent less than $50 to have my A/C recharged at one point. Yes, it was a legitimate shop that pretty much only does auto A/C repairs. They couldn't find any leaks so they added a bit of refrigerant and some dye. I need to go back again as the A/C was a bit warm last summer.

[Bill George]

With the UV Dye they can find with a black light. Sometimes leaks can be difficult to find even with a good electronic leak detector. R134a has a better chance to leak than R12.

I said $4000 - $6000 for transmission replacement OEM dealer with a warranty not $12000. No one has that kind of money ($12,000) floating around most are in CDs or investments with a penalty for withdrawing or even a loss.

[Jim Becker]

I said $4000 - $6000 for transmission replacement OEM dealer with a warranty not $12000.
$12K is a real number for the TR-690 CVT transmission in my Subaru Ascent out of warranty. It's also not field serviceable so if it were to go south, replacement is the only option. Times are a changin....

[Phillip Mitchell]

Call me a dinosaur, but this thread illustrates why I choose to still drive vehicles manufactured in 2000 and 1997, respectively and will be looking for another (additional) vehicle soon from the same time period.

Everything is a gamble, has a "cost" and needs maintenance and typically repair of some type eventually, but at least I have a chance at troubleshooting and often times working on my own older vehicles as opposed to having no clue where to start with a vehicle riddled with sensors and computers in every major component.

I am also the person who has never, ever considered buying a brand new car, so take this with a grain of salt as I am likely more "frugal" than some here.

[Jim Becker]

I am also the person who has never, ever considered buying a brand new car, so take this with a grain of salt as I am likely more "frugal" than some here.
Ironically, I've never bought a pre-owned vehicle. :) The only one I've owned was the 1969 Dodge Dart that my parents gave me as a 21ts birthday present in the late 1970s. :D

[Alex Zeller]

Never bought an extended warranty and even if I had to spend $12k on a transmission I would have still come out ahead by not purchasing one once you figure in the number of cars I've owned and the amount of time. You have to figure in (even more now with high interest rates) interest on that money you paid. If you rolled it into an auto loan there's the interest on that.

When I buy a vehicle I normally buy Toyotas. I've owned many that have gone over 200k without anything more than usual maintenance items. The ones that didn't I sold while still running just fine. People say todays cars are complicated, in fact the are less complicated than ones 10 and 20 years ago. The sensors are more refined and usually cheaper. Companies have learned how to minimize assembling an engine. Companies are much better at making sensors.

You can see it with electronics. Look at a 30 year old board and all the massive chips and related components. Look at one made today. The motherboard in my laptop is a fraction of the size and has maybe a dozen chips at most. The computer in a car (all of them) are much more reliable and smaller than even ones made 10 years go. I work for a company that makes chips for cars and I can tell you that due to competition every company now places reliability just as high as yield and over all cost. Companies know if they loose a customer they may never get them back. For a short period a few years ago demand was so high you didn't have to worry about it. But over all, including today, companies are competing to get any customer they can. That means chips and sensors that don't break so the supplier who sells them to the car companies don't have risk loosing their customers.

Then you have both he internet and much more advanced computers in cars. Even washing machines now can self diagnose problems. Often you can pinpoint what the problem is before opening the hood. Sure the transmission could go out but if that was a major problem most good car companies would redesign it as reliability is a key selling point for vehicles. I know a lot of people who bought a Dodge once. When it had issues they swore never again. Companies can't afford to loose customers plus the bad word of mouth to other potential customers.

I'm lucky. I have the ability to work on my own vehicles. I have a car lift and most of the tools needed. That also plays a big role in whether or not I would buy an extended warranty. I can see plenty of cases where other people would want one.

[Bill George]

Its not so much the mechanicals today, its the electronics and when our Honda CRV had issues and they were resorting to changing expensive parts with no end in sight and no guarantee it would be fixed and the OB2 dealer readout did not pinpoint the issue, that is when we said enough. Our next new vehicle had the extended warranty. I have no issues paying for a new transmission on my Tacoma pickup at $4000 plus and I replaced the spark plugs and serpentine belt last summer. I have always worked on all my stuff, never took ever to a dealer. We did switch over to all Toyota and my Tacoma will be replaced with another.