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What Stephen said Posted by Ari [Email]  (#2847) [Profile/Gallery]
(more from Ari) on Thu, 13 May 2004 13:47:07
In Reply to: 2000 95 Aero with 25K, Extended warranty?, nat, Wed, 12 May 2004 19:23:28 Members do not see ads below this line. - Help Keep This Site Online - Signup |
Any warrantee is only as good as the company behind it - Company Stability. If they go belly up, you're out of luck. Then find out what they don't cover. Lastly, find out what it takes to get the work paid for. In most of the cases I've seen, the shop has to contact the warranty company for authorization to do the work, and to get paid. So at a minimum, I'd talk to the shop where you expect to get most of the work done, and make sure they accept the companies you're considering. They very well might provide some interesting insight. Of course, this won't help you if you break down in East Oblivion and the only shop there takes only cash or moosemeat. But it's a start. That'll teach you to buy something that moves.
The next question is, Is It worth It? Damn fine question. I can saw with complete authority that it isn't worth it. But you have to understand the context.
An extended warranty is nothing but insurance. You're betting the car will break; the company is betting it won't. Or less than the price of the policy, give or take. So the company has done some math and decided that their exposure for repairs will be less than $2,032. If it were any other way, the company would be losing money.
Remember, that's for a population of a lot of cars. On some individual cars, they'll lose money. On most, they'll make money. But in the end, for the population of cars they cover, they'll take in more than they spend. That's why I can say it's not a good idea.
OK, when is it better for you? Well, first off, maybe the company bet wrong. Maybe they estimated the 9-5 population would be more reliable. In which case, on average, you'd come out ahead. Of course, if the company does this on a regular basis, they lose money and go out of business. Bad for them, worse for you. See Company Stability, above. But assume that they have been doing this for a while, and know the repairs to an 'average' 9-5.
Where else is it good for you? If you have a car that's worse than the average 9-5. OK, that's 'good' in a relative sense. Again, the company works to the average - for you, it's a bet.
If you're a betting person, or you drive the piss out of cars, then the warranty may be good. Again, that's assuming it has good coverage from a good company.
When is it good? Why do you buy insurance? Do you expect a house fire? Attract lighting strikes on a regular basis? Probably not. Insurance is a way to limit costs. If you have a warranty with good coverage, you've limited your repair costs to $2K, plus non-covered items, plus deductables. It won't be higher. No need to hit the Christmas Club to buy a new cylinder head. Alternatively, you could put the $2K in the bank at today's stellar interest rates, and effectively self-insure. The upside is if the car is very reliable, and only needs $500 in repairs in the next 100K miles. The downside is that a bunch of major things go wrong, and you blow through the $2K in the blink of an eye, and your mechanic starts looking at putting an addition on the garage. The limit on costs now is your threshold before you throw a lighted carped under the car and walk away. It could be well above $2K.
Again, from a purely economic argument, on average you should self-insure. That assumes that you've got the cash-flow to deal with a major repair. The extended warranty buys you a measure of cost control, and it may buy you some peace of mind.
I hope that makes everything clear. That's assuming you didn't fall asleep after paragraph 3. You should see my 'long' posts.
posted by 192.249....
, Thu, 13 May 2004 13:47:07 <-- Viewing This Message, Fri, 14 May 2004 06:13:47
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