I am purchasing my out of warranty leased vehicle a Volvo xc70 with 70,000 good miles, no repair issues, dealer maintained, the dealer is offering a 2 yr/24,000 mile extended warranty for $2500 I will probably drive the 24,000 in a yr. and a half…should i consider this
I’m not an advocate on extended warranties. IMHO all they do is add pocket money to the dealers coffers.
That said, the need for the warranty hinges on what the long-term reliability (5-8 years) of the vehicle is.
Before getting the warranty, check the reliability and other issues with your vehicle in the latest issue of Consumer Reports. This is just a guide but may help in your decision.
Extended warranties make money for the insurer. That means less than half of the money disbursed is paid for repairs, since the seller (dealer, usually) gets a 100% sales fee. You should put the $2500 in the bank and use it as your own insurance fund. If you are financing the car, it’s even worse, because you are paying interest on the $2500 for the extended warranty, too.
You need $2500 in covered repairs simply to break even. Even then you are not ahead until the repair exceeds that amount. I would simply “risk” it and bank your money and have your own repair fund. Your likely to come out ahead just like the warranty company.
Pay a mechanic for a prepurchase inspection (volvo knowledgable independent) to see if this is worthwhile car.
I looked up the cost of repairs as predicted on Edmunds for wear and tear for this model with this amount of miles and it did predict about $2000 in upcoming issues. I just came back from the dealer and they are now offering to throw in the powertrain portion or $1575 worth of the warranty at nocharge which of course I will take and if I want I can upgrade to the entire “gold plus” package for the additional $1000 of the originally quoted offer. The power train covers all moving parts and if I buy the remainder of the offer it will add electrical. I agree with the general consensus that warranties are overpriced but this is an all wheel drive Volvo with 70.000 miles on it and this seems like a good offer???
I agree with the replies thus far, and am also not a fan of extended warranties.
Having said that, understand that 3rd party warranty companies tend go bankrupt and reopen under new names quite often. When that happens, your warranty is worthless. They also carefully word their warranty contracts to give them the upper hand to deny many claims that you and I think should be covered.
As a matter of fact, a major administrator of service contracts, Automotive Professionals (API) is in chapter 11 even now leaving many consumers holding the bag.
See if the warranty treats items that fail from “wear and tear” differently.Does the warranty cover time to dissassemble a component and find what failed.Check on how diagnostic time for electrical concerns will be paid,are rental cars covered? if yes will they give you a rental as soon as you drop the car off before a diag. is made. Who does the warranty allow to repair the car? Whats the deductible per visit,per item?
I have never seen one person even break even with one of these extended warranties. They are foolish to buy, right up there with meteor insurance. Put the money in the bank and you’ll be ‘miles’ ahead.
Well any car can have major expensive repairs. The profit to the salesman and company is usually over 50%. So for every $1,000 you spend the insurance company has less than $500 to pay for repairs or they will loose money, something insurance companies do not do. Some peop;le will get nothing back and some will get a lot more than they pay. Most will get far less. In addition you need to keep in mind that the insurer has worded it to eliminate as many expensive things as they can. Remember that the seller is out to make money and they get to write the rules and set the price. They are not going to sell them at a loss so one way or another they are going to have you pay more than they will pay out. Would you gamble with a car dealer who gets to set all the rules and knows all the odds? Your decision has to do with the value of the piece of mind it gives you. If that is worth the cost then buy it. Don't expect it to cover everything however, most are written to keep cost down and exempt what they know will cost them money.
Extended warranties are usually a waste for the buyer. (1) Half of the price goes straight into the dealer’s pocket. This leaves little to cover repairs. (2) The fine print contains many loop holes that leave items uncovered that were covered in the original warranty. (3) The warranty companies often go bankrupt. Their clients are left without any coverage.
As others have suggested, put the $2,500 into a savings account with the highest possible interest. If you need repairs that would have been covered by the extended warranty, pay for them out of this account. (Note that this doesn’t apply to routine maintenance and wear items like tires, brakes and timing belts.) Most likely, two years from now, your $2,500 will still be there.