Is extended warranty warranted?

Shawn · 2024-09-09

If you "sleep well at night" because you have an extended warranty, perhaps you should change your thinking. Make no mistake: Extended warranties are for ONE reason: Profit (off YOU!). That means the premiums they collect are far more than what they pay out in claims. All insurance is this way. My son married a woman who "buys every protection plan known to man". She bought one on a cell phone, paid $20 per month for about 34 months, ($680) then had a claim. Here is how that went: They explained the coverage had a $150 deductable. Further, her (now used) phone was only worth $150. So, they could mail her a check for $0.00 how much she was due. She was mad, and never buys an extended warranty again. She got smart. A mechanic shop owner always cringes when a customer brings in a repair and has an extended warranty. He hates them, and explains why: When he calls the warranty company, they always want details on the repair, as well as the cost. So, he gives them the price and work to be done. They call back, and offer probably about 30 to 50 percent less than the amount the warranty will pay. Since his prices are not marked up that high, and his margin is about 10 percent, he can not absorb that cost. And, so he asks the customer: The warranty pays $800, but you need to cough up another $756 plus tax. Remember, this is a "best case senario, "provided that" you meet all the criteria in the insurance contract. You say you didnt check that the oil in your tranny needed to be changed at 50k miles? Sorry, it wont pay. It wont pay if its your fault you did not keep up with the maintenance, modified the vehicle, or a bunch of other "gothcha's", like you were driving off road in a vehicle not designed for it. You THINK you have peace of mind, but you dont. We have an elderly friend who just fixed her car with one of those famous warranty companies often advertised on tv. This is almost exactly what happened to her. She "thought" they would pay, but they only paid about half. You are "sleeping well at night" but the wolf is outside your window waiting. Here is the smart way. 1. Research your car carefully, and get a relaible one. Do your homework on cost, including negotiating the interest rate before you go to the dealer. 2. Buy your car "with knowledge at hand" at how much its worth, and dont let the dealer talk you into converting to payments. 3. Drive the car to the point where "its no longer feasable" to keep the car, as the maintenance and repairs will soon exceed car payments, and its time to get rid of the car. Waiting too long to dispose of your vehicle always results in higher cost to own. Remember the 80/20 rule. 20 percent of your repairs come in the first 80 percent of the cars life, but 80 percent of the repairs come in the last 20 percent of the cars life. Dont keep fixing what is not worth fixing. You are better to trade off too early, rather than too late. Be smart and dont fall for extended warranties, which are a "protection plan" which keeps your wallet thin. Its programed to cost you money and profit the company. The actuary, who calculates the premiums you pay for extended warranties, calculates it so the company makes a profit. Its like going to a casino, and you know the machines are programmed to take your money. As explained, instead of paying money for useless protection plans and warranties, invest that same money in a s and p 500 index fund. YOU can really sleep well at night because that fund will soon have enough money not only to pay for repairs, but to buy you a new car, for cash, relatively soon. That's how I sleep well at night. I dont have to worry about it.

Darnon

Well-known member

Sep 21, 2024

By my math the $1415 I paid for my ESP from Granger would take 31 years at average S&P500 rates to equal the cost I paid for my truck not counting inflation and capital gains tax. So I guess my scale of 'relatively soon' is a bit different than yours.

Is extended warranty warranted?

Darnon

Well-known member

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