Extended Warranty?

[Murphyg]

Dont forget the deductible !

[turnne]

So if an 3 year STS warranty is $2000 and a 3 year 740i warranty is $3000 you know the STS is significantly more reliable or significantly cheaper to fix

There is much more too it than that...you also have to factor in ( just like any insurance policy) that some cars are very low risk...Accords, Camry.s.etc
Those people are actually driving the cost for the higher risk individuals down somewhat

Just think if all cars fell in the high risk/high cost to repair category?....just like if all drivers had 4 moving violations....I think the Accords and Camry's of the world as well as the elderly drivers who drive 300 miles a year( but carry full coverage) help out everyone's case..they are more than likely big winners overall for the insurance company

I did some reasech a few months ago comparing warranty costs( same company, same coverage) with several different cars

as I recall these were the figures
all cars 2003 models with 60K miles...3 year 36K warranty

2003 745 $4500.00
2003 Cadillac STS $4300.00
2003 Oldsmobile Aurora $3300.00
2003 Lexus LS430 $2514.00

I believe the company was warranty direct


Now, based on these figures the 745 is worth more than twice the Caddy's value and more than 3 times the Auroras value in the retail used market

It also implies that the 7 series has the same cost/incidence of repair as the caddy...which in itself is interesting
I also think the Lexus figure is very interesting

so I think you have to think about what you are spending the money on( car wise) to make sense of the warranty prices..I can make sense on a $4000 warranty on a car like a 2003 7 series that retails for the low 30's...but what I can't do is understand the $4000 for a warranty for a car that is 13K like the caddy's are priced

I am generally not the type of person that would invest more in the car than it is worth


Warren

[turnne]

I just looked again this korning at warranty quotes to make sure the figures I posed in the last post were representative of facts

here is the latest

2003 models with 60K miles....37 month..37,000 mile coverage..0.00 deductible

2003 Toyota Camry V6 $1945
2003 Honda Accord V6 $1945
2003 Lexus LS430 $2514
2003 Caddy STS $4283
2003 BMW 745 $5197
2003 BMW 540 $5197
2003 Olds Aurora $3436
2003 Acura RL $2514

based on what the cars are worth...which I completely believe has a relation to what someone is willing to spend on an extended warranty at purchase time...or willing to invest in repairs with their own money...I find these figures interesting



Warren

[Ur7x]

Originally Posted by turnne

which I completely believe has a relation to what someone is willing to spend on an extended warranty at purchase time...

Warren

Trust me, as I noted, I worked in this industry for half of my working life. It has very little to do with what someone is "willing to pay" In fact, if our firm found that we were being undercut, we were happy to lose customers to a competing firm because we were confident that that firm would be loosing money on each policy they wrote and would soon be broke... And THAT happens ALL of the time. If your carrier goes broke your policy is worthless BTW.

Progressive Insurance (not where I worked) does this with their auto insurance web site, they post their price and the price of competitors even if the competitor is cheaper. Why? Better the competitor lose money then you.

What your numbers show is that the BMW's are ~23% more expensive to service over the life of the contract the the Caddy. This could be because they are just as reliable and the parts cost 23% more or the parts cost the same and they breakdown 23% more.

The Aurora is cheaper since it is a blend of simpler V6 cars and the more complicated high end models where the Seville's are ALL fairly complicated cars. The more toys the more things to break.

Keep in mind there is a HUGE commission on all of these polices (usually 40-50% of the contract) That's why you will probably experience more pressure and fear tactics at this part of the sale then any other.

Most salespeople will make more on the sale of a extended warranty then the sale of the car.

[submariner409]

In the electronics business (consumer and military) there is a term called "infant mortality" which refers to out-of-the-box equipment failures. Most electronic failures are of this nature: If it works for the first 6 months, the chances of failure decrease remarkably.

Extended warranties are everywhere: Did you buy one on your TV or cell phone? You gave someone a lot of money for nothing. If the thing craps out in the first year or two, you get a new one under the OEM warranty anyway. If it is still alive after 2 years, it will last forever.

Apply the above to a car. More complex and expensive, yes. But the same principle of decreasing chance of failure applies, and in many new cases we're looking at 75-100 thousand miles and 5 years.

No, that doesn't help the used car buyer, but that person would be $$$ ahead if they would self-insure as in my post above ^^^.

[turnne]

What your numbers show is that the BMW's are ~23% more expensive to service over the life of the contract the the Caddy. This could be because they are just as reliable and the parts cost 23% more or the parts cost the same and they breakdown 23% more.

The Aurora is cheaper since it is a blend of simpler V6 cars and the more complicated high end models where the Seville's are ALL fairly complicated cars. The more toys the more things to break

First of all the 745 is WAY more complicated than an STS( hopefully you have driven one and can attest to that)...and more than twice the price to buy on the used car market.. and all things being considered I would imagine if you had the exact same part repaired, on the two, then the 745 would be at least 23% more expensive to fix..there is a lot more going on in the 745 ..hands down so that is to be expected as wellas I think the average BMW dealer charges $20-30 an hour more than the caddy dealer

Actually the 540 is a more close comparision to the STS and they were close in proce brand new( but not close now)

There are many systems that the 745 has that the STS doesn't ..so there its apples and oranges

..my point is that someone is likely to spend the extra 23%( or roughly 1000) to insure a car that is worth an additional 10-12K


and then there is the Lexus at half the cost of the 745( and 540) and 42% less than the Caddy...another thing that amazed me was the Camry and LS430 costs for warranty are only 23% different...roughly $500

so that means based on your assumptions that extended warranties are not worthwhile..then if the Lexus costs that little to protect.. for a car of that cost and complexity then it is truly as waste of money to buy an extended warranty on one of those...they must NEVER break...lol

Quite frankly I have always looked at the asset ( value of) when I was making decisions on paying for repairs...My 740 while two years and 35000 older than the STS is still worth 25% more..and that to me is a consideration in how I choose to manage the two


Warren

[Ur7x]

Originally Posted by turnne

so that means based on your assumptions that extended warranties are not worthwhile..then if the Lexus costs that little to protect.. for a car of that cost and complexity then it is truly as waste of money to buy an extended warranty on one of those...

I'm not sure I understand your post in its entirety but the above part is almost right.

It would be more accurate to say

it is truly as waste of money to buy an extended warranty on any car...

[creeker]

I read an article by consumer reports a few years ago,they said extended warranties were not a good deal.

[turnne]

sorry I wasn't clear....I merely wanted to point out two things
1. The relation between the market value of the car and the extended warranty cost.....and that someone might be willing to pay more because of this value

ex.....2003 745....$33,000 retail..warranty cost $5197..15.7% of the cars cost

Thats reasonable considering the value of what is being repaired
I would consider purchasing..can't imagine this is a hard sell

2003 Cadillac STS $13,000 retail...warranty cost $4283.00..32.9% of the cars cost

That is not reasonable considering the value of what is being repaired


And the Lexus at retail value $25000...warranty cost $2514...10% of the market value...and frankly amazing( to me)..I guess that says something about the brand

Other warranties I have looked at had different rate...but the same percentages of price difference between the cars

2. The repair costs versus market value...how much would you be willing to pour into the car versus its market value

Honestly.. a car with poor resale value..to me I would be very cautious about what I was willing to pour into it

[I~LUV~Caddys8792]

What I think is the dumbest thing is the people who buy a 5 year/60k mile warranty on a brand new car. They've already wasted three of those five years, because the GM factory warranty takes priority over the aftermarket one. Then they're really only gonna get maybe two use of good usage out of it.

[z06bigbird]

I wonder why no one has ever discussed this before!!

LOL

[Murphyg]

Originally Posted by I~LUV~Caddys8792

What I think is the dumbest thing is the people who buy a 5 year/60k mile warranty on a brand new car. They've already wasted three of those five years, because the GM factory warranty takes priority over the aftermarket one. Then they're really only gonna get maybe two use of good usage out of it.

Its my understanding that when purchasing extended over the factory warranty; The extended doesnt kick in till after the factory expires. It extends the factory warranty. Thats in bold print not squinty.
My Mother In-Law recently bought a Santa-Fe. She purchased the extended and now has 7 years.

There is one insurance that does pay off at all times. That would be life. But the thing is. Even though you buy it. You dont prosper from it LOL.

[Ur7x]

Originally Posted by Murphyg

Its my understanding that when purchasing extended over the factory warranty; The extended doesnt kick in till after the factory expires. It extends the factory warranty. Thats in bold print not squinty.
My Mother In-Law recently bought a Santa-Fe. She purchased the extended and now has 7 years.

Very true, but it is not at all smart to buy this warranty at time of purchase. Now the third party insurance Co holds your money for 3-4 years and delivers NOTHING.

If you must buy one of these, buy it just before the factory warranty expires.

[Murphyg]

She got the extra for only 1200 Canadian.
If she waited till the end of the factory expired, am sure that she would be paying twice as much if not more.
Sure you receive interest if you bank that 1200 and wait. But that interest would be no where near what the mark up on the extended would be if you wait to purchase after the fact.

[turnne]

I always factor in the price of the warranty versues what I am spending...or on some items like a cell phone..television etc..if it lasts 3-4 years and breaks you throw it away
More than likely you could replace the item and get newer features for not much more than the repair of the old broken unit

BUT if the warranty is say 10-15% of a used cars value..and its a good warranty that lasts for 3-4 years...30-36K miles or so..I say thats cheap insurance

For instance looking at the figures I posted above...coverage for a 5 year old $25000 Lexus LS430 is about $2500...sounds like a good deal there...and sellable based on what you are insuring...and some cheap insurance

what I have an issue with is a 5 year old STS that is worth half as much... but yet the warranty from the same company with the same coverage is twice the price...ie 33% of the value of the car...that is not cheap insurance



Warren