Extended Warranty Story

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One of my patients just came back from Maine and she related that her 2005 Ford Escape broke down and needed a $3500 transmission. It had 72,000 miles on it.

I know both sides of the arguement on this but I'll admit, I am an extended warranty kind of guy.

Yes, she could have just put it in savings, her EF and tapped it, but I don't know. . .wow $3500.

[disneysteve]

Wow. I'm impressed that she got 72,000 miles out of a Ford before needing a major repair.

So if she would have taken a 5-year, 60,000-mile warranty when she bought the car, the money would have been wasted as she is 12,000 miles beyond that limit.

Even if she bought a warranty upfront that would have covered this repair, the odds of her actually needing it were tiny (ok, maybe not so tiny with a Ford). Why do you think the dealers push the warranties so hard. They make a fortune on them, probably more than they make on the cars themselves.

My last 4 cars (ok, my only 4 cars) had 113K, 82K, 127K and currently 111K. No extended warranties on any of them. Never needed anything that would have mattered either.

[tripods68]

If she had GEICO Insurance that would be covered under the "mechanical breakdown insurance."

[maat55]

I believe, that if you were to set aside the money you spend on warranties into a savings account for a twenty year period, you would have a good chunck of change after paying for your own repairs.

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Yeah, you are right. . .I didn't think that she would have been over the mileage limit. She doesn't even have the car paid off and had to borrow $2000 from her son to pay for the transmission.

Maybe another reason to buy a stick - the worst that usually happens with that is a new clutch.

[disneysteve]

She doesn't even have the car paid off and had to borrow $2000 from her son to pay for the transmission.

Sounds like the typical American.

The car is a 2005. The 2009s are out now so that car is 4 years old by model year and she's probably had it for at least 3 years. That means she financed for more than 3 years which goes against the rule of thumb for affordability.

Add to that having no savings designated for auto maintenance and no emergency fund. Even though she's got no savings, though, it didn't stop her from buying a brand new car 3 years ago.

She's got bigger problems than not having an extended warranty.

[simpleyme]

many moons ago- my old car was still under extended warranty,I noticed a problem with my transmission
I called the dealership and they said to bring it in they would take a look at it , I did they said the only way they could know if the repair was covered by warranty was to start the work , once they dug into it would either be covered by warranty or we would have to pay

so my choice was to let the dealer work on it in hopes it was covered by warranty or do nothing as I had no money to cover the repair

so the idea that the warrenty it will help you out in a finacial bind if you fail to plan ahead is false for the most part

[Scanner]

Yeah, another thing I have noticed is often a warranty excludes a head gasket repair, which is a major expense. . .that is kind of like a health insurance policy excluding coverage for cancer but covering for the sniffles.

Perhaps I should rethink my philosophy on extended warranties if what you are saying is true - they exclude major repairs.

I have only ever bought one. . .we have it on our Matrix. . .for 7 years and 72,000 miles. . .we are still covered.

[MonkeyMama]

If you put the cash in the bank every time you were offered an extended warranty, you would have plenty of cash for that repair. Which brings us to the point that extended warranties are like excessive tax refunds. People don't have the discipline to save, so they don't think they can afford repairs without warranties.

Likewise, simpleyme makes a point. A lot of stuff is not covered under warranty and it is hard to know. Car dealers charge much more for repairs than other mechanics. I have never had a car warranty whatsoever and I have never seen the draw. I think most people pay a premium for a new car in essence for the manufacturer warranty. I see almost even less point for that. I can go used, skip the warranty, and save $10k-$30k for repairs. My mechanic costs a fraction of the dealer mechanics, AND I don't think people realize how little warranties really cover anyway - because they don't really use them much in the end.

Our Ford has 90k miles and has never had a major repair (not that many minor ones wither). I have had a terrible Ford - don't get me wrong - but not all their cars are dogs. I think their Focuses are particularly terrible cars though. I've seen a lot about the Focus on these boards. Our Ford on the other hand is one of the best cars we have ever had.

(What do we know - we drive our cars 200k miles).

[Like2Plan]

We often opt for the extended warranty probably because we often buy American labels (with so many parts manufactured outside the US, I suppose it is difficult to call them American made)
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We had a Chevy S-10 pickup that needed 2 transmissions (sadly, no extended warranty on that one)
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We had a Dodge Caravan--it needed a new A/c unit and a new transmission early on in its life. Both were covered under warranty. No major repairs beyond that. This vehicle turned out to be a real gem--it is currently in the hands of a relative and it has over 200,000 miles on it and it is still going strong.
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Our Oldsmobile Silhouette needed a new A/C compressor within the extended warranty period.
Then, last year we spent around 3,000 on repairs (one of them being another new A/C compressor just 24 months after the other one was replaced and all beyond the warranty period). We pulled the plug on that vehicle at only 6 years and over 130,000 miles after taking it into the shop and receiving an estimate for more repairs totally over $3,000. The folks in the service dept had an atitude like what do you expect beyond 100,000 miles? I was a little dissapointed.
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I bought a Pontiac Vibe 3 years ago. I did sign up for the extended warranty when I bought it. But, after I got to thinking about it, I cancelled it and received a refund. It is a twin to the Toyota Matrix and I'm thnking the reliability ought to be pretty good. (I only drive it about 8,000-9,000 miles a year.)
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DH just bought a Toyota Sienna in June and he signed up for the extended bumper to bumper warranty which will take him to 6 years or 100,000. Only time will tell if we need it, but I must admit there is a certain comfort level in having the coverage. If we have one major problem within the time frame it will have been worthwhile. Still, I'm thinking with a Toyota, it will be less likely we need the coverage.

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Like2Plan:

That's the thing. . .usually 1 repair and you out ahead and I'll admit, to me, that's the "draw."

What's the chance in 5-7 years that one repair will be needed? Pretty big.

If everyone took the philosophy of "Well gee, the warranty companies always win." well then. . .you wouldn't ever have car insurance, health insurance, homeowners, travel insurance, etc. . .yeah, it's like a legalized and industrialized form of gambling I suppose.

Yes, I suppose the warranty co.'s do always win if that's the point.

I always buy travel insurance too and prefer not to "self-insure" for that.

[disneysteve]

extended warranties are like excessive tax refunds. People don't have the discipline to save, so they don't think they can afford repairs without warranties.

Actually, warranties are a lot worse than tax refunds. At least with a refund, you are sure to get your money back. With a warranty, the vast majority of the time you spend the money and never get anything back, or only get back a small percentage of what you paid in. It is more like buying a lottery ticket.

[disneysteve]

If everyone took the philosophy of "Well gee, the warranty companies always win." well then. . .you wouldn't ever have car insurance, health insurance, homeowners, travel insurance, etc.

You really need to weigh the cost vs. the potential benefit.

With homeowners insurance, the worst case scenario is a total loss of my home from fire, gas explosion, etc., so you're talking about a mid-6-figure amount.

With health insurance, the potential costs are unlimited. Medical bills can easily exceed $1 million.

With travel insurance, you could lose the entire cost of your trip plus $10,000 or more for medical evacuation due to illness or injury.

But what do you get with a car warranty? A new air conditioner. A transmission repair. You're talking about a couple thousand dollars of work. How much is the warranty? Is it really worth spending hundreds of dollars for the warranty to potentially save just $2,000-$3,000?

If you really insist on getting a warranty, keep in mind that you don't have to buy it from the dealer. You can get an after-market warranty from AAA and other companies that offer better rates than the dealers.

[tripods68]

This is main reason why I believe Japanese made cars are by far more SUPERIOR in terms of quality engineering and realiability. Sure, Japanese cars are bit more expensive, but the premium cost outweight the benefit general. You can always argue that your certain Honda model saw more problems in the shops but that is few and far between. Some may disagree, but this is just my experience.

[bigsaver]

Had a ford taurus that needed like three transmissions.