Extended warranty and Service agreement

warranties

#1

I just bought a '08 Prius. The dealer offered a 4-year extension on the warranty for $1350 with NO deductible. Similarly, he offered a “factory-backed Prepaid maintenance program” that would pay for ALL maintenance costs for 4 years or 55K miles for $1195. Is either of those a worthwhile investment?


#2

Take the $2,545 and open a “car post-warranty emergency repair” account at the bank. Don’t touch it. If after the warranty expires you need a repair, you’ll have th cash available. If during the entire time you own the car you never have a post-warranty repair bill, you’ll still have the money. When you buy your next car and they again offer en extended warranty, decline it again, take another $2,500 and add it to the account. Repeat with every car purchase.

Why give the money to them to keep in case you need a repair? Keep it yourself in case you need a repair. That way, if you don’t need it you still have the money!


#3

Forget the maintenance program. You may not like the dealer, move, crash the vehicle or multitude of other things not to use it. Pay as you go.

On the warranty $1350 should simply be put into your bank account as a repair fund(not maintenance) and you will get part or all + interest back at the end of the warranty period. That is what warranty backing company’s bet and win at if they stay in business.


#4

Agree, these extended warranty programs are great for the people who sell them, it’s good commission income. In industry, companies perform a Risk Analysis, and usually conclude that these warranties:

  1. Cover things that seldom break
  2. The timespan covers a time before the normal wearout occurs.
  3. All failure-prone items are excluded

In domestic appliances, the retailers push these programs as well. I have kept track of 11 major purchases, which had a normal 1 or 2 year warranty. The extended programs usually cover 4 years max. after the manufacturer’s warranty runs out.

The results were as follows:

  1. Repairs encountered on 11 items I had to pay for $104.00 (after factory warranty expired)
  2. Cost of extended warranty for the 11 items $1263.00 (cost of what I would have paid)

So, you typically get $100 in benefits for $1263 paid in “insurance”. This is a great NEGATIVE RETURN ON INVESTMENT!!! The big winners are the retailer and the salesman.

Previous poster suggests setting up a repair account; my mechanic always tells his customers to set aside $125 per month for service & repairs. If it does not happen, you can always take the familiy out to dinner.


#5

Don’t forget that the service department will have to be convinced that what you are complaining about needs fixing and that reimbursement rate for warranty work may be less for regular repairs. In my case, I bought a used car that had a transferable extended warranty. It gave me some comfort, but I had to fight with the dealer to get them to replace some tie rod ends where I could see visible play.


#6

Heck no! The Toyota dealer tried the same thing when we bought our 2006 Sienna. If the Toyota is as good as it’s reputation, it shouldn’t need an extended warranty. As for the Prepaid Maintenance plan, if you don’t mind paying $300 for a $30 dollar oil change, it’s a bargain. I’m guessing the dealer tried to sell this after you had been sitting for several hours and just wanted to go home.

Ed B.


#7

They are NOT worth it. They are just very very expensive insurance policies.