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2011 Prius Extended Warranty for only the Battery - worth it?

Hello all-

I didn’t find any information domestically (I’m here in Israel), so I’m reaching out over the ocean to the Car Talk Community.

I have a Prius which was put on the road in 2011 (August). Apparently, the warranty is up, since we started getting brochures from the dealer/service center hawking their Extended Warranty. In general, what I’ve read on the internet (and here on the site: http://community.cartalk.com/discussion/2296818/ ) seems to indicate that Extended Warranties in general are a waste of money and in particular for the Prius. But on the other hand, they always get you with the fear that “well, if it breaks down and you need a new battery, it could be upwards of $3,150 to replace the battery…” So I thought I would consult with you guys.

Here are the details about the car:
The car has about 70,000 miles, and as I said, it’s a little over three years old. It saw some heavy use for the first 2.5 years, but now it’s less heavily used (my wife drives about 20 miles back and forth to work, occasionally we’ll take a longer trip on the weekend, maybe 80-90 miles).

The terms of the warranty are as follows:
It only covers a failure of the hybrid battery (parts and service).
It costs $78.60 for 1 year of coverage or 9,320 miles, whichever comes first.
The policy can be renewed until the car is 10 years old (no upper limit on mileage, though you would have to pay each time you hit the 9.3k limit).

So my question is: is this worth it?

Any input would be much appreciated. On the one hand, $79 a year doesn’t seem so bad to not have to worry about getting slapped with a $3150 bill. But on the other hand, if that money is really not needed, then it can be put to other use than paying into an insurance plan that isn’t worth it.

If we do buy the plan for each of the next 7 years, it will cost us more than a sixth of the replacement cost. Does that mean we should only do it if we think there’s a greater than 1/6th chance of the battery failing? (sorry for nerding out)

Thanks again to all.

Extended warranties are usually worthless. Put that money in the bank and draw interest on it until you need it. Extended warranty companies are very good at putting fear into the average owner and big bucks into the warranty company’s bank account.

Thanks missileman.

I agree with you that in general that’s the case, but at the same time there has to be some break-even point at which the policy is worth it. It really all comes down to the risk of failure as compared to the ratio of the cost of the premium to the cost of the replacement.

In other words, is there a greater-than-17.5% chance that the battery is going to fail before the car turns 10 years old? I feel like the answer is no, since if every sixth Prius’s battery died before the cars were 10 years old, the perception of Toyota’s vaunted quality would be much lower.

usually a warranty is $1800 and you might get a $3000 trans out of it. or about 2X the value? never happens of course. the prius warranty is 40X in coverage. yes its 1 yr but if you do it for 2-3 yrs and than sell car, you are only out $250 or so.

While the cost looks OK, many warranty companies are very unreliable. That would be my concern, how good is the company? How do you file a claim? What are the terms of the contract? Do they have a good history of backing up their warranties?

prius_driver wrote:
I agree with you that in general that’s the case, but at the same time there has to be some break-even point at which the policy is worth it.

The sense I get from various discussions of extended warranties in the past is that this break-even point is around half of the price they’re charging you at best.

I agree with you that in general that's the case, but at the same time there has to be some break-even point at which the policy is worth it.

Nope…It’s a gamble. Some people will make out very well. But it’s impossible to tell who and when. Most (90% or higher) will loose money.

Here’s the breakeven: when the chance of failure times the cost of failures exceeds the warranty cost. But who knows the chance of failure? It’s easy to refuse the extended warranties pushed in electronics stores, the chance of failure on most items is very small, making the warranty cost 10X to high, or more. Here, it’s harder to tell.

Since the expected battery life is 10 years or some 200,000 miles, the probability of breakdown before 10 years is significant, much more than 17.5%! Israel is a hot country and batteries don’t like heat.

The only part that bothers me is that you have to renew each year, which could well be that after a few years, just when you need it, they may withdraw the offer. Then you’ve spent money on a low probability of failure.

I would go for it if (1) it is a TOYOTA warranty, and (2) it covers a whole 10 years in writing up front. Otherwise it appears to be just smoke and mirrors.

The OP wrote ’ apparently the warranty is up’ The first logical step if you can not find the coverage in your manual ask the service department .

@Docnick - 10yrs/200k? I though the average was better than that.

I know I started getting extended warranty promotions well before it was not covered

Warranty

Toyota covers the Prius with a three-year/36,000-mile bumper-to-bumper warranty and a five-year/60,000-mile powertrain warranty. The Prius’ hybrid-related components are covered for eight years or 100,000 miles.

@texases Yes, I’ve seen a lot better figures than that. The battery itself has a very long warranty, making it popular with taxi companies. I’m using the lower figure as a reference point for making an economic decision. Driving style and climate have a big influence as well.

Last I heard there was a cab on the West coast that went well over 200,000 miles without a single powertrain related repair.

I say skip the extended warranty

Of all the hybrids out there, the Prius has a very reliable battery pack

There are some first-gen Priuses out there with the original battery and well over 200K

If you ever do need a battery pack, there are companies out there who specialize in rebuilding the battery

Wow, thanks everyone for all your input and help.

@texases‌ :

While the cost looks OK, many warranty companies are very unreliable. That would be my concern, how good is the company? How do you file a claim? What are the terms of the contract? Do they have a good history of backing up their warranties?
All I have is a tri-fold brochure, so I'll have to make sure I check the full contract. Good point. The brochure and as far as I can tell the warranty are direct from Toyota Israel, which makes me optimistic about their "putting their buck where their mouth is".

@lion9car‌ :

The sense I get from various discussions of extended warranties in the past is that this break-even point is around half of the price they're charging you at best.
Interesting - that seems quite high. How do you get to that number?

@MikeInNH‌ :

Nope...It's a gamble. Some people will make out very well. But it's impossible to tell who and when. Most (90% or higher) will loose money.
Obviously there's some element of risk. But if I use an Expected Value approach, the question is rationally, which is better. Either way I lose money. If I buy the policy, I lose the cost of the premium times the number of years I buy it (whether the battery fails or not). If I don't buy the policy, I have some small chance of having a big outlay (replacement cost) if it fails. But this is still a negative expected value even when averaged with the larger chance of no payment if it doesn't fail. The question is, how big is that chance of failure? That's what makes the decision. If I think the chance of failure is larger than (premium)/(replacement cost), I should buy the policy. If I think it's smaller than that, then I'm better off not buying the policy. (Obviously the problem is that I only have one car involved in this and not the thousands the company does to amortize their risk).

@Docnick‌ :

[T]he probability of breakdown before 10 years is significant, much more than 17.5%! Israel is a hot country and batteries don't like heat. I would go for it if (1) it is a TOYOTA warranty, and (2) it covers a whole 10 years in writing up front.
Interesting, I didn't know that ambient heat has an impact on battery life. Is that a real factor? Also, I'm not clear on your reasoning - if the designed battery life is 10 years, then why is there a greater-than-17.5% of the battery failing before reaching 10 years old? As I said above, it does appear to be a Toyota warranty, and I'll ask them about the option to "lock it in" for the full 7 remaining years.

@knfenimore‌ :

Toyota covers the Prius with a three-year/36,000-mile bumper-to-bumper warranty and a five-year/60,000-mile powertrain warranty. The Prius’ hybrid-related components are covered for eight years or 100,000 miles.
I'm assuming that's for the US - as I said, I'm overseas. But I will check the documentation again.

@db4690‌ :

Of all the hybrids out there, the Prius has a very reliable battery pack There are some first-gen Priuses out there with the original battery and well over 200K If you ever do need a battery pack, there are companies out there who specialize in rebuilding the battery
Thanks for the reassurance. I also came across an article about these kinds of companies - I'm not sure if they have them in my country, but definitely the way I'm leaning right now.

Once again, thanks to all for your time and input - I feel like I may be over-analyzing the issue, but I’d rather not be taken advantage of by the insurer here.

Looks like you’ve already had good advice.

I will give you my experience with my Prius batteries. They should go to 10 years no matter the mileage. I had one fail at 9 years and 11 months of operation, but no warranty would have covered the 291K miles. The other went to 150K and the insurance wrote it off after a wreck.
The trick with the battery is keep the cabin cool. The failure of the battery started at the start of the summer and my AC was out of 134a.

If the battery fails, there are solutions cheaper than the dealer. It can vary between $800 to $3000. At the lower end, it can be near the same price you are paying into this warranty. I would rather risk it than guarantying a $490 loss.

prius_driver Don’t strain your brain trying to do the math. The insurance company has done it for you. They have determined that the odds are sufficiently in their favor to risk a $3,000 claim verses a $500 premium. I am confident the only way Toyota or the dealership is involved with the insurance company is the finder’s fee (kick-back) they receive. This is the way the typical extended warranties are sold. knfenimore posted “Toyota covers the Prius with a three-year/36,000-mile bumper-to-bumper warranty and a five-year/60,000-mile powertrain warranty. The Prius’ hybrid-related components are covered for eight years or 100,000 miles.” It appears the extended warranty has very little value.