Extended warranty is it worth it?

[Docwagon1776]

Factory emissions warranty is federally mandated and already 'extended'.
There is no peace of mind like money in the bank. Warranties are similar to casinos. Some people win short term. Very few win long term. They don't make money on winners.

 

[jebruns]

There is no peace of mind like money in the bank.

You can have both an extended warranty and money in the bank. They are not mutually exclusive. But if buying one is tough on your finances, I get your point.

 

[Docwagon1776]

You can have both an extended warranty and money in the bank. They are not mutually exclusive. But if buying one is tough on your finances, I get your point.

You can, but you'll have less and that's not the point.

Paying for your own repairs means you can use what parts you want, what provider you want, and never have to be concerned if a modification ruins your warranty. You never have an administrator tell you your issue isn't covered under the warranty.

Insuring against loss is, financially, for losses that you can't afford to shoulder yourself. If your house burnt down, few can stand that loss. If you need a kidney transplant, few can pay for that out of pocket. So you pay someone else to shoulder that burden, and you *do* pay them. They make a profit, and a nice one. Warranties are just a version of that insurance, and one with a very very poor payout. I worked in the warranty industry for 3 years and it's on the edge of a legal scam. But people like to live above their ability to pay, so it thrives.

Save your money until you can self-insure and you'll have more money long term.

 

[Brad460]

I worked as a warranty manager at my current company many years ago- We loved selling extended warranties. Big money makers for the business.
Majority of failures occur during the initial operation of a mechanical product (car, truck, skid steer, etc) which are always covered by the standard warranty terms, then further down the road you have “wear out failures” which for sure are not covered by any type of warranty. It’s the bathtub curve of reliability..

I always feel like there are two types of people buying extended warranties- 1)financially/personally naive people..gullible people 2) Rich people who have stupid money to waste.

 

[Brutal_HO]

I worked as a warranty manager at my current company many years ago- We loved selling extended warranties. Big money makers for the business.
Majority of failures occur during the initial operation of a mechanical product (car, truck, skid steer, etc) which are always covered by the standard warranty terms, then further down the road you have “wear out failures” which for sure are not covered by any type of warranty. It’s the bathtub curve of reliability..

I always feel like there are two types of people buying extended warranties- 1)financially/personally naive people..gullible people 2) Rich people who have stupid money to waste.

Wow.

Define Rich.

I think it's naïve to assume anyone who buys an extended warranty falls into either of those groups. True that MOST of the time a warranty isn't worth purchasing. That doesn't hold true in every case, and it most certainly doesn't hold true for one that's mostly refundable. The key to that one is to pay for it up front and not roll it into any financing. Is it naïve to use a CC that pays points/moneyback/miles that's paid off before due every month? Where would you put that money to use? A low interest bearing savings account that can't keep up with inflation? LOL. Lock it up in a CD or other fixed rate investment? Play it in the stock market?

I'll give you an example. We remodeled our kitchen in 2018 and bought all new (LG) appliances. The DW was somewhat troublesome from the install but not so much that I was going to rip it out and pay to have a new one installed and it couldn't be returned, so when the initial warranty ran out and they offered a 2 year $99 warranty I jumped on it. Boom, it needed a new door control board to the tune of $400 Parts & Labor and a riser tube that was a $178 part alone. I also got a new door seal at one point, though the tech had it shipped to me and I installed it myself. Now the labor I could have done myself, but the parts costs alone far exceed the cost of the warranty and frankly I have better use of my time and can bill someone else for it far in excess of the cost of that warranty. Does $99 affect my net worth and investment opportunity? ROFL. It costs $175 to fill my tank.

You can, but you'll have less and that's not the point.

Paying for your own repairs means you can use what parts you want, what provider you want, and never have to be concerned if a modification ruins your warranty. You never have an administrator tell you your issue isn't covered under the warranty.

Insuring against loss is, financially, for losses that you can't afford to shoulder yourself. If your house burnt down, few can stand that loss. If you need a kidney transplant, few can pay for that out of pocket. So you pay someone else to shoulder that burden, and you *do* pay them. They make a profit, and a nice one. Warranties are just a version of that insurance, and one with a very very poor payout. I worked in the warranty industry for 3 years and it's on the edge of a legal scam. But people like to live above their ability to pay, so it thrives.

Save your money until you can self-insure and you'll have more money long term.

Do you have any idea what the cost to R&R a Cummins is?

 

[Docwagon1776]

Do you have any idea what the cost to R&R a Cummins is?

No, and don't care. What I do know is how the warranty companies work, having worked for one for three years (an independent warranty administration company that was bought by Kemper Insurance then spun back off post-9/11 when Kemper lost their ass in the terror attack and needed to raise cash)

The warranty companies will have actuarial data to estimate the number that will fail in the warranty period and you can be assured that the money they take in is significantly more than the money they pay out to cover that expense. They have to pay for multiple levels of costs and profit as well as your expected repairs. If it's a catastrophic loss for you, pay them to assume that risk. Maybe it pays off for you, just like some people hit the slot machine. Most don't, and over a lifetime of paying other people to assume your risk you will lose money, again just like feeding money in to the slots.

 

[Docwagon1776]

Pencil it out. Figure the warranty cost, put in an account paying 5% which is what a decent savings account is paying now. For easy figuring, your money doubles every 14 years (simplified, no tax burden and with rounding)

Figure how many warranties you'll buy over the course of your driving life.

Figure how many motors/trannies/major components you expect to fail in the window between "no factory warranty" and "aftermarket warranty expired". Assume no vehicle gets totaled out in a crash. Assume you keep your vehicle for whatever your normal length of ownership is.

I'd easily be tens of thousand in the hole over my years of vehicle ownership. Instead I self insure. I have a specific account I keep money in for vehicle expenses, be that replacement or repairs. That account paid $237.07 in interest for the month of November.

I paid cash for my Power Wagon with no trade in (gave my old truck to my son). Zero debt other than a mortgage, which doesn't make sense to pay off due to the interest rate and tax advantage. I guarantee my salary is not significantly different than many on this forum. We are a one income family. I'm on pace to retire at 52-55 if I choose. What you make is definitely part of it, but how you use what you make matters a lot long term. Laugh as you like but I think my way results in real peace of mind vs hoping the warranty agrees to fix whatever my issue is.

 

[Brutal_HO]

No, and don't care. What I do know is how the warranty companies work, having worked for one for three years (an independent warranty administration company that was bought by Kemper Insurance then spun back off post-9/11 when Kemper lost their ass in the terror attack and needed to raise cash)

The warranty companies will have actuarial data to estimate the number that will fail in the warranty period and you can be assured that the money they take in is significantly more than the money they pay out to cover that expense. They have to pay for multiple levels of costs and profit as well as your expected repairs. If it's a catastrophic loss for you, pay them to assume that risk. Maybe it pays off for you, just like some people hit the slot machine. Most don't, and over a lifetime of paying other people to assume your risk you will lose money, again just like feeding money in to the slots.

You can, but you'll have less and that's not the point.

Paying for your own repairs means you can use what parts you want, what provider you want, and never have to be concerned if a modification ruins your warranty. You never have an administrator tell you your issue isn't covered under the warranty.

Insuring against loss is, financially, for losses that you can't afford to shoulder yourself. If your house burnt down, few can stand that loss. If you need a kidney transplant, few can pay for that out of pocket. So you pay someone else to shoulder that burden, and you *do* pay them. They make a profit, and a nice one. Warranties are just a version of that insurance, and one with a very very poor payout. I worked in the warranty industry for 3 years and it's on the edge of a legal scam. But people like to live above their ability to pay, so it thrives.

Save your money until you can self-insure and you'll have more money long term.

So it's OK to pay for collision insurance on a car with a value of, let's say $20K, that you may never collect on, and pay money into for zero return if there's no claims, but it's not for let's say a $20K engine R&R that carries a refundable if not used option?

ROFL.

So while a $20K expense might be "affordable" to some, and it certainly wouldn't present any sort of hardship for me (does that make me rich or just responsible?), I'd rather float $1800, get the miles and the spend credit which also helps contribute to making a higher status level with UA and improves my chances for flight upgrades that are worth $$$, AND be able to get a refund if there's no claim. FWIW, I don't condone it, but one could always "lose" your keyfobs to potentially maximize the costs if there was another claim that did not exceed the cost of the warranty. Naïve? Irresponsible? Don't think so.

 

[Brutal_HO]

Pencil it out. Figure the warranty cost, put in an account paying 5% which is what a decent savings account is paying now. For easy figuring, your money doubles every 14 years (simplified, no tax burden and with rounding)

Figure how many warranties you'll buy over the course of your driving life.

Figure how many motors/trannies/major components you expect to fail in the window between "no factory warranty" and "aftermarket warranty expired". Assume no vehicle gets totaled out in a crash. Assume you keep your vehicle for whatever your normal length of ownership is.

I'd easily be tens of thousand in the hole over my years of vehicle ownership. Instead I self insure. I have a specific account I keep money in for vehicle expenses, be that replacement or repairs. That account paid $237.07 in interest for the month of November.

I paid cash for my Power Wagon with no trade in (gave my old truck to my son). Zero debt other than a mortgage, which doesn't make sense to pay off due to the interest rate and tax advantage. I guarantee my salary is not significantly different than many on this forum. We are a one income family. I'm on pace to retire at 52-55 if I choose. What you make is definitely part of it, but how you use what you make matters a lot long term. Laugh as you like but I think my way results in real peace of mind vs hoping the warranty agrees to fix whatever my issue is.

You still aren't factoring the refundable nature of this warranty.

 

[Alligator John]

There are so many factors to choosing a warranty that apply to each person differently that there is no correct yes or no answer to the "is it worth it" question.
I did weigh the idea of putting the cost of two warranties into a Roth and investing it against buying the warranties outright. I would be able to draw the principal out anytime if I had any repairs in the 4th and 5th years, then draw the earnings anytime after 5 years. Anything left after 8 years would be profit. IMHO, it would have to have some risk to to grow enough to cover any repeat major repairs and keep up with inflation. Any money drawn for repairs in the early years would greatly effect the total return. There is some gamble here.
And all the things on warranties mentioned and more. Off the top of my head. It can be refunded if it is never used, partially refunded if you total the truck, can be a selling point by transferring to the buyer if you sell it. The cost of repairs and parts will increase with the rate of inflation or more. Limits on mods and parts that might void the warranty. Maintenance schedule by the book and has to be well documented. And additional cost if financed.
For me, I was in a position to be able to pay cash for my truck and my wife's jeep with money made in the market during the covid crash. I'm retired and strive to live in a mostly bill free environment and I no longer wish to do my own repairs. And no plan to do anything to the truck that would void the warranty. Though I probably could have done better with the Roth, at this point in my life it was worth it to me to just pay cash for the warranties for the convenience of dropping them off at a dealer service center less than two miles from my house and let them take care of any warranty repairs instead of doing them myself or having to chase down a reputable mechanic each time.

 

[jebruns]

You can, but you'll have less and that's not the point.

Paying for your own repairs means you can use what parts you want, what provider you want, and never have to be concerned if a modification ruins your warranty. You never have an administrator tell you your issue isn't covered under the warranty.

I don't modify my vehicles in anyway that would jeopardize my warranty, so I'm good with the dealer fixing it.

Insuring against loss is, financially, for losses that you can't afford to shoulder yourself. If your house burnt down, few can stand that loss. If you need a kidney transplant, few can pay for that out of pocket. So you pay someone else to shoulder that burden, and you *do* pay them. They make a profit, and a nice one. Warranties are just a version of that insurance, and one with a very very poor payout. I worked in the warranty industry for 3 years and it's on the edge of a legal scam. But people like to live above their ability to pay, so it thrives.

That is one reason extended warranties sell, no doubt.

Save your money until you can self-insure and you'll have more money long term.

I could do it that way. But the cost of an extended warranty is such a tiny part of our investments/savings, it's just not a worry. It's just the price of peace of mind and I'm willing and able to pay it.

 

[jebruns]

I'm on pace to retire at 52-55 if I choose.

Good for you. I retired at 52 and life is good.

 

[Herrred]

I had it on my 2016 EcoDiesel. Had problems with the back-up camera, BCM and PCM. All covered by the MaxCare warranty I got from Zeigler. The price of the MaxCare warranty was easily cheaper than replacing those out of warranty items. Then when I traded it for a RAM 2500, I still got a partial refund of almost $800, and I took that and put it into a new MaxCare for that.

Those that don't have issues see it as a waste of money, and for them it is. Those that had it and used it will tell you it's a great investment. For me, I'll always have it with newer vehicles. The computers and electronics are great, but when they fail it's a nightmare for the wallet.

 

[techman]

The computers and electronics are great, but when they fail it's a nightmare for the wallet.

How so? Personal experience?

In my experience the electronics in modern autos age-out but rarely break. Sensors go bad, sure, but hardly a bank buster.

Several folks on this forum stare at their pretty 12" Uconnect screen just worrying about the day it goes blank.

SMH.....

 

[Brutal_HO]

How so? Personal experience?

In my experience the electronics in modern autos age-out but rarely break. Sensors go bad, sure, but hardly a bank buster.

Several folks on this forum stare at their pretty 12" Uconnect screen just worrying about the day it goes blank.

SMH.....

I had it on my 2016 EcoDiesel. Had problems with the back-up camera, BCM and PCM. All covered by the MaxCare warranty I got from Zeigler. The price of the MaxCare warranty was easily cheaper than replacing those out of warranty items. Then when I traded it for a RAM 2500, I still got a partial refund of almost $800, and I took that and put it into a new MaxCare for that.

Those that don't have issues see it as a waste of money, and for them it is. Those that had it and used it will tell you it's a great investment. For me, I'll always have it with newer vehicles. The computers and electronics are great, but when they fail it's a nightmare for the wallet.

SMH

 

[ppine]

Docwagon makes some good points. Insurance is a form of gambling. The odds are all in the favor of the insurance companies.

 

[Riddick]

To me extended warranties are not worth it. I am not saying this due to the cost but from the amount of shady dealerships out there. There are far to many dealers out there looking for a reason to deny warranty coverage. If you do not have your truck serviced by the dealer you are increasing your chances of these shady dealers denying claims. I personally do all my maintenance and while I keep a log book with miles I don't save receipts. Even if you supply receipts and have documentation I have seen dealers turn people away. Hell, on my previous F-150 it was overheating on the highway, the coolant temps would get in the 220s just cruising. I took it in and the dealer said the aftermarket front grill I put on altered the airflow and refused to even look at it. For one it was the lower grill for the intercooler and if anything it increased airflow. I ended up troubleshooting it myself and fixed the issue by replacing the thermostat.

I know there are several good dealers out there and for those of you that have access to them I am happy for you. My wife is still Active Duty so every couple of years we have to move and its hard to find good service departments these days. Once we settle down and I am not capable of working on my vehicles I will reconsider extended warranties. However, I personally try to avoid dealer maintenance departments at all cost. I resort to forums and YouTube videos to show me how to R2 parts.

 

[Docwagon1776]

I could do it that way. But the cost of an extended warranty is such a tiny part of our investments/savings, it's just not a worry. It's just the price of peace of mind and I'm willing and able to pay it.

There's certainly value if it helps you sleep at night. I just don't get the same peace of mind from having to ask an administrator if my issue is covered, having to use their parts, their provider, on their time schedule, etc. Cash remains the ultimate peace of mind for me, and I can go where I want, when I want, and use the parts provider I want. Forums are full of people upset about the reman tranny or whatever the warranty company used and people upset because their warranty claim was denied, either for legit or specious reasons.

Do you keep a home warranty that covers your HVAC system, etc? If no, what's the difference?

You still aren't factoring the refundable nature of this warranty.

Does it not make you question the level of payouts they have vs the money they take in that they can afford to do this and remain profitable?

It's a great sales tactic, and it's also a great psychological ploy to make you not claim the smaller, but more frequent, repairs that may be required. If you need a $350 repair, do you now gamble your 'full refund' to get them to pay the claim, or do you eat it and keep the warranty for a more expensive issue that may or may not happen?

If you find value in it, buy it. I buy a Powerball ticket a few times a month. I fully understand it's $2 wasted financially speaking, but I have $2 in fun playing 'what if'. My point is simply that financially the house wins long term and you'll do better financially long term by self-insuring for as many risks as you can comfortably support.

 

[jebruns]

To me extended warranties are not worth it. I am not saying this due to the cost but from the amount of shady dealerships out there. There are far to many dealers out there looking for a reason to deny warranty coverage. If you do not have your truck serviced by the dealer you are increasing your chances of these shady dealers denying claims. I personally do all my maintenance and while I keep a log book with miles I don't save receipts. Even if you supply receipts and have documentation I have seen dealers turn people away. Hell, on my previous F-150 it was overheating on the highway, the coolant temps would get in the 220s just cruising. I took it in and the dealer said the aftermarket front grill I put on altered the airflow and refused to even look at it. For one it was the lower grill for the intercooler and if anything it increased airflow. I ended up troubleshooting it myself and fixed the issue by replacing the thermostat.

Yep, as was discussed earlier, if you like to modify your vehicles, an extended warranty makes less sense.

 

[jebruns]

Do you keep a home warranty that covers your HVAC system, etc? If no, what's the difference?

No. I'm extremely handy. I can fix/install anything around the house, including HVAC. Not so much a modern vehicle engine or tranny.