Quote Originally Posted by Jim Becker View Post
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!