Extended warranty is it worth it?

[Docwagon1776]

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

So what would it cost to self install, say, a new furnace and AC coil vs pay someone else to do a reasonably major car repair? Who does the work isn't really the issue, although by doing the work you have significantly more freedom over needing insurance and a provider to do it (some parallels there, but incomplete). The issue is cost, and if paying someone else to shoulder the risk of that potential cost is either 'peace of mind' or a financial winner. Why do you feel comfortable shouldering the risk of needing to outlay that cash, or say a new roof, etc. but not the risk of engine work? Rhetorical, the answer doesn't matter to me but something to consider for yourself.

I think people tend to make these decisions off the cuff, frequently in the F&I office, without real consideration and then justify the decision later (which is an inherent human thing to do for all decisions). The entity that just spend time building up the vehicle to you so you'd buy it now dangles the fear of a massive repair bill in your mind. It's fun to simply reconsider the purchase right then, "you're right, if this vehicle is potentially unreliable and the costs are so exorbitant to fix it I should probably just keep my proven reliable X..."

Being mindful on where your money goes and why is really the only reason I post in these threads, to get people to question and to provide some real world info from the 'inside'. If you still think it's the right decision for you after consideration, it is. For others, they may decide that money is better used elsewhere.

 

[techman]

Remember the day you took delivery and you went through all the delivery paperwork with or without a loan. Sitting there basking in the glow of finally getting the keys.

THEN.....the finance guy pulls out the extended warranty info. He blathers on about how these are highly complicated vehicles with expensive failure prone systems and you are basically taking the keys to a ticking time bomb to your future wallet. Sound familiar?

I sit back....listen for a moment....abruptly interupt and politely say "no thank you" and leave with my new truck.

It's their final attempt to seperate you from a bit more of your cash. Don't play or pay the game.

 

[Brutal_HO]

Then there are those of us that knew what the process was going in and did the up front research well in advance of delivery. I also used the pre-priced and heavily discounted MaxCare from zeigler as a bargaining chip to get a lower price and a lower financing* rate, and both to get the dealer to take $30K down on a CC. Best part is it ended up being the same (large) bank I use for my primary demand deposit accounts. I even made the dealer remove a few banks I won't do business with from their rate checks and limited them to just a few large reputable lenders.

* The cost of interest on the financing (also a 2020 pre covid rate) is a pittance compared to what I'll make keeping it in my portfolio. Frankly, same for the cost of the warranty. Pay cash? LOL.

Bottom line, it's always a personal decision and for some it makes sense. To blanketly claim people are sheeple for buying them or financing an auto loan is presumptuous and naïve.

 

[Docwagon1776]

Remember the day you took delivery and you went through all the delivery paperwork with or without a loan. Sitting there basking in the glow of finally getting the keys.

THEN.....the finance guy pulls out the extended warranty info. He blathers on about how these are highly complicated vehicles with expensive failure prone systems and you are basically taking the keys to a ticking time bomb to your future wallet. Sound familiar?

I sit back....listen for a moment....abruptly interupt and politely say "no thank you" and leave with my new truck.

It's their final attempt to seperate you from a bit more of your cash. Don't play or pay the game.

This. Everything in F&I is high profit for the dealership, including financing.

The last dealership I used was: https://www.stevefaulknerchrysler.com/

I don't live anywhere near, but they had the truck I wanted. I told them what I'd pay by phone, made the drive, and we made the deal. The F&I guy was awesome. "You don't want any of this stuff, do you?" "No." "Ok." and that was that. Not only did he not push any of the profit center purchases, he took a check from me that I told him wouldn't be good for 5 days while I moved money around and let me drive the truck home (to a different state). Keep in mind I was not financing any of this, if that check bounced they were out the entirety of the price and would have to report the truck stolen via deception. I'd intended to just put a deposit down and come back when the check could clear as I never would ask anyone to for that level of trust. I'll say of all the dealership experiences I've had, Faulkner was hands down the easiest, fastest, and most honest place I've ever dealt with. Real small dealership, mind you. They treated me like an old time trusted customer and I'd never stepped foot in the place before that day.

 

[techman]

Bottom line, it's always a personal decision and for some it makes sense. To blanketly claim people are sheeple for buying them or financing an auto loan is presumptuous and naïve.

I guess I will stick to my guns and say an extended warranty as a financial investment NEVER make sense. And if you bundle that warranty cost into a auto loan too.....ouch.

I don't appreciate the sheeple crack...I never think in those terms. I am trying to educate, guide, and assist those that might not be thinking clearly as to what an extended warranty is. It is a cash grab by dealerships and warranty companies. Former employees and warranty salesman have said as much themselves directly on this forum.

 

[jebruns]

So what would it cost to self install, say, a new furnace and AC coil vs pay someone else to do a reasonably major car repair?

Completely apples to oranges.

I think people tend to make these decisions off the cuff, frequently in the F&I office, without real consideration and then justify the decision later (which is an inherent human thing to do for all decisions). The entity that just spend time building up the vehicle to you so you'd buy it now dangles the fear of a massive repair bill in your mind.

No question about it. But as Brutal_HO says, there are a lot of that have done the research before getting to the dealer and still choose to buy it. I didn't have to shop mine around because I ordered my truck from Granger, who had the lowest cost for the Maxcare plan. Probably still do.

 

[Docwagon1776]

Completely apples to oranges.

If you rent or have a condo association or the like, then maybe it's apples to oranges, but single family home? How so? Cash outflow is cash outflow. Uninsured risk is uninsured risk. I can guarantee you over the past 20 years I've spent more on home repairs/maintenance than I have in auto repair/maintenance by a large margin. Like not even close.

* The cost of interest on the financing (also a 2020 pre covid rate) is a pittance compared to what I'll make keeping it in my portfolio. Frankly, same for the cost of the warranty. Pay cash? LOL.

Bottom line, it's always a personal decision and for some it makes sense. To blanketly claim people are sheeple for buying them or financing an auto loan is presumptuous and naïve.

And that's where my risk aversion is. I don't carry commercial debt hoping the market continues to play nice. I understand I may limit my returns, but if it does crash and burn I'm in a better position with better cash flow and owning my assets. Mortgage is the only exception for me, and I could pay it off today if I choose. Tax benefits, particularly property taxes in my state, plus my rate make it nonsensical to pay off. As far as a car note, I don't know the spread between the rate at the time vs what a safe rate is now, less taxes, would do me any good. If my crystal ball functioned better, I could have bought bit coin, sold bit coin, shorted bit coin, then bought bitcoin again. But mine is cloudy AF so I am a pretty safe and boring buy and hold sort of investor.

 

[Docwagon1776]

* The cost of interest on the financing (also a 2020 pre covid rate) is a pittance compared to what I'll make keeping it in my portfolio. Frankly, same for the cost of the warranty. Pay cash? LOL.

So in fairness, I did run the numbers. Assuming that interest rates remain steady and assuming a 5 year note, I cost myself about $360 a year (after tax burden) to pay cash. One could argue, correctly, if interest rates crash I could just cash out and pay off the loan at that point and if interest rates rise all the better. Even at the time I would have had a .5% spread between loan and savings rates, I knew I left money on the table but not enough to feel comfortable dealing with a loan.

So, with a little hindsight, not the best decision from a financial only standpoint. Not carrying commercial debt is worth it for my peace of mind, however. I'm the first male in my family (paternal side) in at least 3 generations to not declare bankruptcy, which likely informs my aversion to borrowing.

 

[Brutal_HO]

And that's where my risk aversion is. I don't carry commercial debt hoping the market continues to play nice. I understand I may limit my returns, but if it does crash and burn I'm in a better position with better cash flow and owning my assets. Mortgage is the only exception for me, and I could pay it off today if I choose. Tax benefits, particularly property taxes in my state, plus my rate make it nonsensical to pay off. As far as a car note, I don't know the spread between the rate at the time vs what a safe rate is now, less taxes, would do me any good. If my crystal ball functioned better, I could have bought bit coin, sold bit coin, shorted bit coin, then bought bitcoin again. But mine is cloudy AF so I am a pretty safe and boring buy and hold sort of investor.

Fair assessment. Ditto on the bitcoin. Stupid me was still buying silver in 2011-2013 timeframe instead of BT. For that matter, if I was that savvy, I'd have been in on the GameStop short.

I got a late start to saving and investing wisely (I hope) after spending my "formative" years in the Army, but plan to retire* soon at 100% income. Was going to go in 2020, but CV19, then our Co got bought (again) so I'm just kicking the can down the road and can basically pull the plug any time.

* Retirement for me in the first few years just means I stop working W2 and punching the proverbial clock (though I don't really work hard - as evidence by the time I spend here) and just do a little freelance consulting to stay only as busy as I want to be,

 

[Brutal_HO]

I guess I will stick to my guns and say an extended warranty as a financial investment NEVER make sense. And if you bundle that warranty cost into a auto loan too.....ouch.

I don't appreciate the sheeple crack...I never think in those terms. I am trying to educate, guide, and assist those that might not be thinking clearly as to what an extended warranty is. It is a cash grab by dealerships and warranty companies. Former employees and warranty salesman have said as much themselves directly on this forum.

Unlike this post, I did not quote you, I merely posted after you, so your assumption that I was attributing it to you is incorrect (and vain LOL).

Everyone is entitled to their opinion, and I think everyone has been able to express theirs without resorting to personal attacks, because that's what reasonable, responsible adults do.

 

[jebruns]

If you rent or have a condo association or the like, then maybe it's apples to oranges, but single family home? How so?

Because one is a vehicle and one is a house. And I do have insurance on my house. Costs about the same as my Maxcare insurance, except I have to pay it every year instead of just once. And it does not cover nearly as much stuff.

 

[Docwagon1776]

Because one is a vehicle and one is a house. And I do have insurance on my house. Costs about the same as my Maxcare insurance, except I have to pay it every year instead of just once. And it does not cover nearly as much stuff.

Do costs for a house differ materially from cost on a vehicle? It's still money out of your pocket, so a distinction without a difference. Some electronic gizmo in your truck goes out, mechanic wants $1k. Your front loader washer dies. $1k replacement cost. Show me a financial difference because one is a vehicle and one is a house. Obviously there isn't one. Trying to make the presence of financial risk "apples to oranges" in this regard is trying to compartmentalize mentally and justify a decision already made, not a logical difference.

Insurance won't cover mechanically failing equipment or items that simply age out. A roof will cost you a lot more than a transmission, live long enough and you'll need one. Even an insurance job will have a high deductible. Storm damage got me a new roof, but at the cost of some $3800 out of pocket.

Insurance for the house is to insulate from a catastrophic loss, like I said early on. Few can recover from their house burning down and losing their possessions. That's what insurance is for, to pay someone to assume risk you can't afford to assume yourself. It is distinct from a home warranty, just as maxcare is distinct from collision insurance.

Which brings us full circle to my hypothetical. Why is it 'peace of mind' to pay someone to assume risks for some vehicle repairs while remaining on the hook for similar, or greater, risks in other arenas. That's why cash is the greatest peace of mind. Cash doesn't care if it's for a roof, a tire that picked up debris in the roadway, health insurance deductible, or bail money. There's no administrator to decide it's not covered. It doesn't care you're 10 miles outside your window of coverage. Cash remains the ultimate peace of mind and provides the most freedom to make your own decisions.

 

[jebruns]

Do costs for a house differ materially from cost on a vehicle? It's still money out of your pocket, so a distinction without a difference. Some electronic gizmo in your truck goes out, mechanic wants $1k. Your front loader washer dies. $1k replacement cost. Show me a financial difference because one is a vehicle and one is a house. Obviously there isn't one.

Totally different. I'm not going to be 1000 miles away from home in my house.

T hat's why cash is the greatest peace of mind. Cash doesn't care if it's for a roof, a tire that picked up debris in the roadway, health insurance deductible, or bail money. There's no administrator to decide it's not covered. It doesn't care you're 10 miles outside your window of coverage. Cash remains the ultimate peace of mind and provides the most freedom to make your own decisions.

Already covered. You can have both good amounts of cash AND an extended warranty.

 

[Docwagon1776]

Totally different. I'm not going to be 1000 miles away from home in my house.

That's a great argument against warranty work. 1000 miles away from home but have to use the approved repair provider with the approved parts after going through an approval process. If an independent shop could get you on the road again in 24-48 hours but the dealership can't get you in for diagnostics for a week?

Ah, peace of mind.

Already covered. You can have both good amounts of cash AND an extended warranty.

Yup, already covered. If you have good amounts of cash you can self insure instead of paying someone else a profit to cover expenses you could cover yourself cheaper in the long run.

 

[jebruns]

That's a great argument against warranty work. 1000 miles away from home but have to use the approved repair provider with the approved parts after going through an approval process. If an independent shop could get you on the road again in 24-48 hours but the dealership can't get you in for diagnostics for a week?

Ah, peace of mind.

I don't mod my trucks, so no worries here. I prefer dealer shops personally. I've never had to wait to get my truck in for service work. I know that would be luck of the draw, depending on where a breakdown might happen, but that would true of independents too.

Yup, already covered. If you have good amounts of cash you can self insure instead of paying someone else a profit to cover expenses you could cover yourself cheaper in the long run.

Possible profit. Many do benefit from extended vehicle warranties.

 

[MichiganPW]

I think Maxcare is great deal, if you don’t need it, they refund you minus the allowed charge to cancel in your state. In my case it’s $75.
I bought my warranty within the last year and not from the dealer at time of purchase, but direct though RAM.

I haven’t paid interest in many years. I wait for the 0% deals to come out. I hate paying any institution interest, so I choose not to across the board. Its all what a person wants or feels comfortable purchasing.

 

[Poolmonkey]

I paid more for steps that will genuinely protect the door sills than I did for a warranty that protects the entire truck.
Nickels and dimes…why dwell on them?