So tell me @MikeInNH you have no insurance policies that have adjusted costs to cover overhead, or every insurance coverage you have has resulted into a net gain for you.
I accounted for that. I was a software consultant to the Insurance industry for several years…right about the time car extended warranties started to really get big. Why are you arguing against something I never said. Insurance policies (ALL INSURANCE POLICIES) are a gamble. You buy them based on how much risk you can afford. The 1 percenters (aka millionaires) do NOT buy insurance policies. They can afford taking the risk. I have insurance on my home/health/life and car accident and liability…because I can’t afford to take that risk.
But car warranties I can easily do without. I’ve NEVER EVER bought one…and NEVER EVER needed one. I figured I’ve saved myself several thousands of dollars over the past 20 years (when they were first offered to me). And the VAST VAST majority of people who buy them would be far better off never to have bought them. If you buy vehicles that constantly need them…then I’d seriously consider buying a more reliable vehicle. The REPAIRS on our last 8 vehicles within the mileage of the extended warranties is $0. Extend that out to 200k miles…and it’s less then $1000. Extend that to 300k miles…it’s less then $2000…for all 8 vehicles combined.
Basically, anybody who buys an extended warranty is betting that the vehicle will sustain a failure more expensive than the cost of the warranty sometime between the end of the manufacturer warranty period and the end of the extended warranty period… AND it will a failure not excluded by the extended warranty terms… and probably that they can prove they’ve fully complied with the maintenance terms of the warranty. The odds are against them winning their bet… by a longshot.
However, for those that can afford it and want to buy the peace of mind, I support their right do buy one. However, those that can afford it aren’t generally the ones that buy these things… and people who do don’t really know what they’re buying. The terms may be clear, but people’s reading comprehension and their foundations in statistics isn’t always good. And they’re approached with these warranties at the time of greatest weakness, when they’re all pumped up with the glory of buying a new car, when it can be “included” in their loan, and when they don’t want anything interfering with their feeling of being financially successful. And I have to wonder how many states have recision rights and if most people are familiar with theirs.
If our primary and secondary school systems provided a solid foundation in reading comprehension and math, like we pay them to do, I doubt if these extended warranty insurance plans would exist. There wouldn’t be enough buyers of them to keep them in business.
Yes there is a world of difference. Some are great to deal with and provide seamless top-notch service to the customer and the repair shop. Some are outright slimeballs that will cover a leaky water pump but not the gallon of Dexcool that goes in. One requested that I repair a car with used parts but still offer a 12/12 warranty.
How much of that $1250 actually went to the service company? Probably less than $500. I used to work for a large RV sales lot and the breakdown for “extended warranties” went like this: 30% went to the salesman, 30% went to the dealer and 40% went to the service company. I believe that’s the standard for all vehicle dealerships that handle extended warranties from an outside company.
@oldtimer Yes, that’s correct. I tracked 11 items bought over a period of time and all the extended warranties offered would have come to $1100 or so. The actual failures during that warranty period came to $120. So the payout would have been 11% .
When I bought my new Toyota in 2007, they offered me an extended warranty for $1500 for an extra 5 years. So far, at year 9, the second last year covered, there has been only a $68 repair that would have qualified, and the outlook for year 10 is little or no repairs as well.
Having said that, if you buy an UNRELIABLE or unproven car, drive a lot and are a sloppy maintainer, doing only the bare minimum, you can profit from such an extended warranty. The Chevy Citation owner profited because the car was a dog and unproven,
In the 70s, when shopping for a microwave oven, we were at Sears and the salesman told us to buy the extended warranty because the touchpads were poorly designed and he had 2 replacements already on his . We quietly left the store and bought a Toshiba commercial model elsewhere without a touchpad. It lasted 20 trouble free years.
Several years ago, I was buying some sort of inexpensive electronic gizmo at Best Buy, and the purchase price was something on the order of $30 or so. The salesman actually asked me if I wanted to buy an extended warranty for this device (I can’t recall exactly what it was) for $20.
I asked him if he was kidding, and he said something along the lines of…“I know that it’s ridiculous, but they force us to try to sell this stuff”!
After a few efforts to deal with after market ‘warranty’ providers I decided it wasn’t worth the hassle and turned down all such business. If the owner wanted to pay the bill and hope that they would be reimbursed I wished them well and did the work but I don’t know that any were ever paid.
On the other hand GM put out an extended warranty on the Quad-4 engine but kept it secret. When I became aware of the situation I sent copies of the GM notice and the original invoice for repairs that I had made to 3 customers. After taking their cars by the local dealer for inspection all were paid 100% of their bills. And one included the updated oil pump that was outrageously expensive. After those 3 cars I decided to refuse to open Quad-4 engines though. They were a real pain.
Heh heh that’s funny. A neighbor of mine had a GM something-or-other on his driveway with a Quad-4 engine. He was happy when he got it, said he paid $100 for it and was going to fix it up himself. Well, he worked on it and worked on it and worked on it and worked on it and eventually he had it towed away. I don’t think he ever did get it on the road. . .
When my turn comes and I get hit with that extended warranty pitch, I’m going to say something along the lines of, “Well, I chose to buy a {insert name of vehicle here} because of your reputation for reliability and longevity, but now you tell me I NEED this extended warranty because this vehicle is going to fall apart? I think I should leave now and go take another look at your competitor’s vehicle!” I wonder what their response to that will be???
One thing extended warranties really paid off on (for me, anyway) was headphones. After a while, the sound would go out on one ear. We used to go to Circuit City, pay $9.99 for a pair of headphones and $14.99 for an extended warranty, and get about 4 or 5 replacements for free. I don’t know if that trick works anymore. Nowadays they want to sell you headphones for $300 or more, I buy the $6 ones and replace as necessary. . .
The Quad-4 was apparently an experimental prototype built and marketed so independent shops could go broke finding all the problems. And that redesigned oil pump was the straw that broke the camels back for me.
When extended warranties first surfaced many years ago some shops would do the work, let the customer leave with the vehicle, and file a claim against the insurer.
It didn’t take long for shops to scrap this policy as the insurers would not pay up in almost all cases and a shop had to move heaven and hell to get the ones that did to pony up.
What does that tell you about those companies.
As mentioned, if an extended warranty is desired the only way to go in my opinion is with a brand specific policy offered by the car maker through the make specific dealer.
Just want to clarify: This extended warranty was offered by (or I guess sold through) the finance guy at the Honda dealership.
I just recently bought a new 2016 Honda Fit and the dealership talked me in to purchasing an 8 year 100000 mile warranty from Carefree Car Protection for $1250. The service company and administrator for this extended warranty is listed as Fidelity Warranty Services. Do you all know anything about this company and if these deals are usually worth it or a rip-off? I think I can still cancel it and recover most of my money. Any advice you all can offer is appreciated.
Warranties are more about not losing a lot of money, rather than about coming out ahead. The insurance company (who knows more than you do, hopefully) calculates the odds. You probably shouldn’t buy a policy if you are trying to come out ahead on average, and you certainly shouldn’t buy a policy if you don’t need it (say, if you trade cars before the extra warranty begins). You should consider one if you may be facing a major loss that you can’t pay or don’t want to pay for, and if the money you pay for a policy is relatively trivial. Most policies sold by reputable dealers will probably be pretty reliable, but check it out. For a Honda Fit, you will probably have paid for the car before the factory warranty expires, so you’ll have money for repairs, and my guess is that it will be cheap enough to fix the car that you probably wouldn’t benefit from it.
We bought an extended warranty when we bought our hybrid because repairs to the hybrid system could be costly, but for our conventional car the most expensive repairs would probably be for the electronics, and we could buy an aftermarket electronics system relatively cheaply, so we passed on the extended warranty.
@JBofEastTN Service contracts are available at many different levels of coverage. A third party contract for $1250 may be only a powertrain warranty, you’ll get more value from a Honda Care warranty.
You should review the contract that you purchased now so you are not disappointed 3 to 8 years from now when you need a repair. Things that you want to see covered by the plan are window motors/regulators, door latches/lock actuators, alternator, starter, air conditioning components, ABS components, suspension components etc.
The service company and administrator for this extended warranty is listed as Fidelity
Warranty Services. Do you all know anything about this company and if these deals are
usually worth it or a rip-off?
The web is filled with complaints from those who purchased a warranty from them.
I note that on the Fidelity site they tout what they cover but leave out the important info such as exclusions and that always onerous “pre-existing condition”.
The deductibles are said to be 0 to 250 PER visit. This means if you visit the facility 8 times for the same problem you will likely get hit for that deductible each and every time.
For details see the service contract.
Translation: You’re at the dealer being leaned on and you’re not going to pore through page after page of service contract so odds are many will go ahead and bite.