Extended warranty/service plans

[MLowe05]

I don't feel strongly either way on the issue. Everyone's situation is different. But believing that "they make a lot of money on them. That means customers lose a lot of money on them" is wrong headed. The same could be said about Home Insurance, Medical Insurance, Auto Insurance etc. It is the nature of the beast. In over 40 years of home ownership I have never had to place a claim. That doesn't mean I should not buy home insurance. It is the nature of the beast.

It's not "wrong headed" or whatever that means, it is mathematically true. If they lost money on service contracts, they would not sell them.

Comparing an ESP to home insurance (where a claim can cost hundreds of thousands of dollars), medical insurance (where it can be millions of dollars), or auto insurance (where it is required by law) - now that is "wrong headed".

The fact is most new cars are extremely reliable and you are very unlikely to have an issue within even an extended warranty period. Buying a $1,900 ESP because you're afraid of a $1,500 LED headlight failure 8 years from now makes zero sense at all.

But again, car forums are internet kingdoms full of paranoid owners throwing good money after bad on cars for no reason.

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[mcc63303]

It's not "wrong headed" or whatever that means, it is mathematically true. If they lost money on service contracts, they would not sell them.

Comparing an ESP to home insurance (where a claim can cost hundreds of thousands of dollars), medical insurance (where it can be millions of dollars), or auto insurance (where it is required by law) - now that is "wrong headed".

The fact is most new cars are extremely reliable and you are very unlikely to have an issue within even an extended warranty period. Buying a $1,900 ESP because you're afraid of a $1,500 LED headlight failure 8 years from now makes zero sense at all.

But again, car forums are internet kingdoms full of paranoid owners throwing good money after bad on cars for no reason.

No one better than a car manufacturer knows what the cost to repair a vehicle on average is. When a manufacture sells an extended warranty it is to cover the average cost of repair by a certain date or mileage. The question is, will YOUR vehicle need less than average or more in repair cost? If a 5 year / 50K mileage plan is $2000, history has told the manufacturer on average a vehicle with that miles in that time will need around $2000 in repair. Will you be the lucky one that doesn't need the repairs or the unlucky one that needs that or more in repairs?

 

[MLowe05]

No one better than a car manufacturer knows what the cost to repair a vehicle on average is. When a manufacture sells an extended warranty it is to cover the average cost of repair by a certain date or mileage. The question is, will YOUR vehicle need less than average or more in repair cost? If a 5 year / 50K mileage plan is $2000, history has told the manufacturer on average a vehicle with that miles in that time will need around $2000 in repair. Will you be the lucky one that doesn't need the repairs or the unlucky one that needs that or more in repairs?

Why do you think that is how this works? They are not selling this to you as a favor to protect you. They are selling this to you to maximize profit. They know full well that the cars are unlikely to need that amount of work in X amount of time, thus they are maximizing their profit off of the suckers who buy them.

 

[YazYaz]

It's not "wrong headed" or whatever that means, it is mathematically true. If they lost money on service contracts, they would not sell them.

Comparing an ESP to home insurance (where a claim can cost hundreds of thousands of dollars), medical insurance (where it can be millions of dollars), or auto insurance (where it is required by law) - now that is "wrong headed".

The fact is most new cars are extremely reliable and you are very unlikely to have an issue within even an extended warranty period. Buying a $1,900 ESP because you're afraid of a $1,500 LED headlight failure 8 years from now makes zero sense at all.

But again, car forums are internet kingdoms full of paranoid owners throwing good money after bad on cars for no reason.

It looks like I hit a nerve.

Nowhere in my reply did I state that companies "lost money on service contracts.." Of course they don't lose money, they make money. But what does that have to do anything. Are we not supposed to buy products and service where sellers make a profit? Insane.

Think of the person who lives paycheck to paycheck, works seven days a week at two jobs and depends on their vehicle every day. This person has no savings and can't afford a $150 repair never mind a $1500. They are paid hourly and if they don't have their car they can't go to work and they don't get paid. They can afford to finance an ESP when they purchase their new Chevy Spark for $14,000 which gives them the security they need. In their situation that might be the best thing for them to do. So let us stop with the "never buy an ESP" nonsense.

 

[MLowe05]

It looks like I hit a nerve.

Nowhere in my reply did I state that companies "lost money on service contracts.." Of course they don't lose money, they make money. But what does that have to do anything. Are we not supposed to buy products and service where sellers make a profit? Insane.

Think of the person who lives paycheck to paycheck, works seven days a week at two jobs and depends on their vehicle every day. This person has no savings and can't afford a $150 repair never mind a $1500. They are paid hourly and if they don't have their car they can't go to work and they don't get paid. They can afford to finance an ESP when they purchase their new Chevy Spark for $14,000 which gives them the security they need. In their situation that might be the best thing for them to do. So let us stop with the "never buy an ESP" nonsense.

This is really no different than this Chevy Spark driver buying lottery tickets. Extended "warranties" are really just service contracts, with lots of loopholes and lots of things that will not be covered. It sucks for Spark guy but he's still most likely screwed, ESP or not.

That is the point. It's not that "oh you shouldn't buy stuff where someone makes a profit" it's that ESP's exist ONLY to generate profit. The terms are set and contracts are written to make sure the consumer loses.

 

[YazYaz]

This is really no different than this Chevy Spark driver buying lottery tickets. Extended "warranties" are really just service contracts, with lots of loopholes and lots of things that will not be covered. It sucks for Spark guy but he's still most likely screwed, ESP or not.

That is the point. It's not that "oh you shouldn't buy stuff where someone makes a profit" it's that ESP's exist ONLY to generate profit. The terms are set and contracts are written to make sure the consumer loses.

You have a very unique way at looking at insurance. All forms of insurance are designed so that the insurer makes money. It is actually the law. Just because a consumer never has to utilize the insurance does not mean they "lost". It is like buying your kid a safety helmet for when they bike and skate board as a safety insurance if they fall. They wear it for two years, never have a fall and you feel somehow as a consumer they "lost". Like I said, a very unique take on insurance.

 

[grumpyunk]

To each his/her own. I bought my first ever ESP on the Maverick. I am not young any more, and talked with my brother about service on his daughters ecoboost. Water pump was leaking. Normally, I would figure $50 for a pump, and maybe a bit more for labor.
The bill was around $700 for a water pump replacement.
This ecoboost has a direct injection high pressure pump, injectors, a turbo, intercooler, and controls for same. My bet is a failure of any would make the ESP worthwhile.
If the crummy radio or display fails, it is covered. What does a new display cost? HVAC with the new YF1234ab refrigerant, etc is a costly repair that I cannot do. All the aforementioned repairs would likely be something I can no longer do with the gusto that I used to have. I got a bit better price than the list shows for 8 years/100k mile premium coverage, $100 deductible. By eight years of use, it is unlikely I will have more than 80k on the clock, and I will perhaps no longer be behind the wheel anyway.
Ya payz yer money and ya takes yer chance...
tom

 

[MLowe05]

You have a very unique way at looking at insurance. All forms of insurance are designed so that the insurer makes money. It is actually the law. Just because a consumer never has to utilize the insurance does not mean they "lost". It is like buying your kid a safety helmet for when they bike and skate board as a safety insurance if they fall. They wear it for two years, never have a fall and you feel somehow as a consumer they "lost". Like I said, a very unique take on insurance.

I understand insurance just fine. You have an odd way of looking at ESP for vehicles, which is not at all insurance. But we can leave it at that.

 

[mcc63303]

Why do you think that is how this works? They are not selling this to you as a favor to protect you. They are selling this to you to maximize profit. They know full well that the cars are unlikely to need that amount of work in X amount of time, thus they are maximizing their profit off of the suckers who buy them.

Why do you think that is how this works? They are not selling this to you as a favor to protect you. They are selling this to you to maximize profit. They know full well that the cars are unlikely to need that amount of work in X amount of time, thus they are maximizing their profit off of the suckers who buy them.

You are correct any seller of extended warranties does not as a favor to the buyer but to make a profit. As a retired Ford Dealer Service Advisor I can tell you as a fact anyone that came in with an extended warranty and had a repair covered by the warranty was never unhappy with having the warranty. Those that came in without the warranty and had to pay for the repair were very unhappy. Many would ask for assistance, so explain to me why those that chose to not have the coverage should get the same benefit as those that paid for the extra coverage. Will you be the same as many that came in for repair and be mad at what the repair will cost you or will you be the rare person that says I gambled on not buying an extended warranty and lost?
You say "They know full well that the cars are unlikely to need that amount of work in X amount of time" then why is there any need for any warranty if cars are unlikely to need any work in x amount of time. If a car manufacturer gave you a choice of getting a vehicle for $2000 less but no warranty at all would you do that? If the price is set only as a random amount and not based on known repair cost then why is the extended warranty cost different for each vehicle type? I do question your knowledge; but you are certainly free to voice your opinion and choice to not buy an extended warranty, just please don't take it out on anyone when you have to pay for a repair.

 

[mcc63303]

For those that do buy a Ford Extended Warranty, there is coverage for "travel expenses" if a covered repair occurs when out of town by a certain number of miles.

 

[MLowe05]

Those that came in without the warranty and had to pay for the repair were very unhappy. Many would ask for assistance, so explain to me why those that chose to not have the coverage should get the same benefit as those that paid for the extra coverage.
I do question your knowledge; but you are certainly free to voice your opinion and choice to not buy an extended warranty, just please don't take it out on anyone when you have to pay for a repair.

I had to trim your reply a bit. As a rule I don't buy service contracts on cheap cars like the Maverick. I can afford to pay for repairs, again, in the unlikely scenario they are needed.

As for this scenario - a person (not me) coming to you, a dealership, for an out of warranty, out of pocket repair. That is the hallmark of the clueless car buyer. Anyone who has even a bit of car knowledge knows that dealerships rarely "repair" anything and are nothing more than glorified parts swappers that charge ridiculous prices. Hard pass. I believe most knowledgeable car people know that dealerships should be the last resort after warranty.

Average Bob with his average, out of warranty car in need of repair should find a trusted independent mechanic who will treat him fairly and actually repair his issue at a reasonable cost.

 

[mcc63303]

I had to trim your reply a bit. As a rule I don't buy service contracts on cheap cars like the Maverick. I can afford to pay for repairs, again, in the unlikely scenario they are needed.

As for this scenario - a person (not me) coming to you, a dealership, for an out of warranty, out of pocket repair. That is the hallmark of the clueless car buyer. Anyone who has even a bit of car knowledge knows that dealerships rarely "repair" anything and are nothing more than glorified parts swappers that charge ridiculous prices. Hard pass. I believe most knowledgeable car people know that dealerships should be the last resort after warranty.

Average Bob with his average, out of warranty car in need of repair should find a trusted independent mechanic who will treat him fairly and actually repair his issue at a reasonable cost.

Let me see if I can help you a bit. Having been in the auto repair business for over 49 years I believe I have a very good knowledge of auto repair. For background, I completely managed a 12 bay independent shop for 20 years. I say completely, I hired, fired, did payroll, scheduled, dispatched and sold repairs. While doing all that I was also a mechanic. Take a look at my 1957 Chevy in "show case, other vehicles".
Being an independent repair shop we worked on most makes of vehicles. About 25 years ago as vehicles started to become more complex which required more specialized training, diagnostic equipment and tools it became increasing difficult to repair so many different brands of vehicles so I left and started at a Ford Dealership as a Service Advisor.
Vehicles have only become more complex as time went by. The test equipment and specialized tools just to work on one type of vehicle (Ford) is massive. For an independent shop to acquire and afford the equipment for many different makes would be very difficult, much less for just one make. Having worked at a large dealership and large service department it was still more than what the dealership could do to keep up with the equipment demands. For smaller dealerships it has to be impossible (all makes included).
Now about training, dealer techs have training classes each time a new model or technology (be it mechanical or electrical) is introduced. For Ford, dealer techs have access to Ford engineering for assistance that also includes in rare instances engineers coming to the dealership to assist in a repair.
Over the years, several times a month a vehicle would be towed into the dealership shop from an independent shop with them being unable to do a repair due to unable to correctly diagnose (usually with numerous parts being installed) or not having the tools necessary to a repair. We never had a vehicle towed out of the shop so an independent shop could diagnose or repair something we could not do.
Parts swapper you call dealer mechanics. I challenge you to tell me any shop (much less any trade) (furnace or A/C, refrigerator, washer or dryer) today that doesn't replace parts and instead rebuild parts. The days of rebuilding alternators, starters, brake calipers or wheel cylinders are long gone. Many problems of today's vehicles are electrical in nature requiring extensive and complex diagnosis after training.
Expense: Check around and you'll find most dealership shop hourly rates are close to independent shop hourly rates in the same area. Difference can be in parts price, usually because dealership uses NEW Ford parts and not remanufactured parts. Many times an electrical reman part causes a problem due to RFI interference with sensors and only a highly trained tech with the proper testing equipment can diagnose.
Also, considering the hourly labor rate, let's say an independent shop rate is $100/hr and a dealership is $125/hr, the independent shop tech takes 2.5 hours to diagnose compared to a manufacturer trained (only on that specific make) tech that takes only an hour to diagnose and do so correctly, which cost you more? I can't tell you how many times a vehicle was brought in by a customer saying they had their vehicle in a shop for over a week and the shop was unable to repair it. Much less the customer saying I hope it won't cost much.... after spending hundreds or thousands at another shop with numerous parts replaced. (parts swapper and wrong parts at that!)
With all I've described, why would you say "I believe most knowledgeable car people know that dealerships should be the last resort after warranty." Having managed a large independent shop for 20 years then 20 years in a dealership that with today's vehicles more than ever I feel I have experience to say it is wise to take your very complex vehicle to a dealership for repairs over an independent shop that works on many different makes of vehicles. Just as in any repair business, diagnosis is the number one issue, be it in the medical field, HVAC, computers and especially vehicle repair.
I've never understood while someone will think they can and be willing to work on a vehicle, but let the TV, refrigerator, washer or dryer, furnace or A/c need repair they call for service help. Any of those will cause an inconvenience while a vehicle not repaired correctly can leave you stranded on the side or the road, not start and cause you to miss an important meeting or work, or worse injure or kill you, a family member or another person. Never made sense to me.
Now back to the original question, extended warranty or not? If someone wants to take the chance of not having a costly repair, that is certainly their decision. I can tell you for a fact it is devastating to someone that does not have a lot of disposable income when a very costly repair is needed. If you finance a vehicle, the cost added to a monthly payment is not much. If you can't afford the $2k when you purchase the vehicle what makes one think they can when it's out of warranty. As for me, I can afford a $5K or $10K repair if it happens but why would I when I can sleep better knowing I won't have to.
I hope by taking a long time and giving you a different perspective you will at least see some insight from one that has been in the automotive repair field over 45 years. Please, stop bashing dealerships, yes there are some very bad dealerships, there are also very good ones that are honest and doing a very difficult job.
I have to wonder what your profession is, is it perfect or does it have it's problems also?

 

[ClemsonU88]

Yes, but we’re required to buy home, medical, & car insurance (up to a certain point), and as you pointed out, the insurance companies usually come out WAY ahead (ie 40 years of home owner’s insurance with no claims).

Insurance is intended to help pay for something you can’t afford if it happens (house fire, car wreck, death, medical emergency,…), and it’s generally a small premium for a big payout.

Most dealer warranties are a fairly sizable premium for a potentially small (or zero) payout. It really comes down to risk tolerance. Are you willing to risk a big expense or not?

Since the dealers know their vehicles likely won’t have many big problems, they offer the warranty. I’m just agreeing with their assessment that the truck won’t have many/any significant issues in the first 6 years and saving my money.

 

[ClemsonU88]

You have a very unique way at looking at insurance. All forms of insurance are designed so that the insurer makes money. It is actually the law. Just because a consumer never has to utilize the insurance does not mean they "lost". It is like buying your kid a safety helmet for when they bike and skate board as a safety insurance if they fall. They wear it for two years, never have a fall and you feel somehow as a consumer they "lost". Like I said, a very unique take on insurance.

Yes, but at some point the cost of protection isn’t justifiable. If the safety helmet costs $30, you get it; $50? You probably get it. $100? That $50 helmet is looking pretty good. $10,000 helmet? Here’s your $50 helmet son; be careful.

With everything in life there’s risk. The odds of a car having a high dollar expense between years 3-6 is unlikely, so I don’t get the warranty.

And for the guy working 2 jobs and living paycheck to paycheck, instead of paying $550 a month for the truck loan and dealer warranty, pay $500 for the loan, and put $50 per month in savings. Then you have that money for any emergency, not just a truck emergency that may never happen.

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