I have a used car, and the manufacturers warranty is expiring shortly. Trying to figure out if it’s worth buying the extended warranty. Seems to come out around $1000 for each 15K miles for the top of line warranty which has a low deductible, no coverage limits, and is transferrable (good for resale).
With PCs/electronics/etc, I think the data shows that extended warranties are not usually worth it. But with cars, seems like I’m geting conflicting feedback, and the beta/risk is higher — fixing something can be $1000s.
Hence the need for a poll — what do you guys think ?
Raanan Bar-Cohen 
I usually skip extended warranties in favor of just getting a new car when the current one finally dies. With that said, there are two big questions you can ask yourself:
1. Will you feel a great emotional loss when the current car dies? If so, get the extended warranty. If not, move on to question 2.
2. Can you financially afford a new car (or newer used car) within the next year? If so, save up for that instead of paying for the extended warranty.
Good questions …
1) no emotional attachment 😉
2) the math is a bit fuzzy. Car is used and financed — so if it died, I still owe a bunch on the loan – so would likely need to fix it, and then sell it, or keep it.
Oh, that’s interesting. I’ve never had financing outrun a warranty before. The dealers around here usually offer warranties with their used cars that either meet or exceed 5 years, which is what I shoot for when financing a car.
I guess it would come down to the math then. How much you would have to pay to pay-off the car vs. how much would you have to pay to extend the warranty.
Statistically all warranties are the same. Cars aren’t any different but one distinction to make is between “the” extended warranty (a dealership’s?) and just any. When I shopped around and compared warranties, I realized the dealer was charging more than double for the same coverage I could get elsewhere.
Another distinction is that, from my experience, it did not appear that the warranties were custom tailed to the model vehicle, so the actuary calculations don’t take into account variations in the likelihood of failure of specific parts between models. After doing some research to compile anecdotal evidence of part failures for my car on an enthusiast forum and getting wholesale quotes for those parts I decided the warranty was not a good investment.
Your car could be different, but if not, but you’ll most likely end up subsidizing someone else’s cost for a big-ticket repair like a transmission replacement. Unless the car you own is known to fail in that way I can’t see a way to justify the cost.
good stuff. which forums did you look into ? I was looking around TrueDelta for data — but didn’t see much. As you said, an actuary per model would make the most sense — I’m surprised that data isn’t out there somewhere.
I looked at the E46 Fanatics forum and remember there was a similar but smaller forum for my Jeep. A search for “jeep” on the Edmunds forum seems to give a list of part-by-part breakdowns.
I’m sure actuary models are employed for the policies but not surprised they are proprietary. Unlike car or life insurance, which actually lose money on the policy and make it up on investing the premiums to generate an overall 1-2% profit, warranties are much bigger profit drivers.
The first point would be vehicle reliability studies are unreliable. It really doesn’t matter the percentage of brake problems a particular model had out of ten million cars manufactured. What you would really want to know is how many problems did the 10 cars that came off the line before yours and the 10 cars after yours have. Now if you bought a Saab then believe all of the studies and horror stories otherwise the studies and forum comments won’t give you a good read on the reliability of your particular car.
The question would be how well do you take care of it? Do you change the oil before its time or do you procrastinate, when was the last time you changed the air filter, when was the last time you washed it? Do you have a heavy foot and speed up to the next traffic light then brake hard or would my grandmother be honking at you to move it along? Do you sit in traffic a lot or mostly highway driving? Is your climate extremely hot or cold? Is it kept in the garage or out in the elements? These are the things that have more of an impact on your car.
The number one reason to purchase an extended warranty is to protect your investment. It comes down to simple finances. Can you handle three, four or five $800 to $900 repair bills over the next few years? Can you handle a catastrophic engine failure bill of $4,000? If you answered no to these questions or you tend to be hard on your car or a little lax on the maintenance then an extended warranty would be good investment.
Depending on your current mileage the average prices for 4/5 year 50k/ 60k additional miles of coverage range from $2,000 to $2,500 for an American or Asian car and $2,500 to $3,000 for a European car. You might want to shop around.
The last point is you mentioned no coverage limit. Every extended warranty has a limit. You will find it in the contract under Limit of Liability. The limit of liability will state how much the policy will payout over the coverage term. Typically it’s the value of your vehicle at time of repair. What this means is when you go in for service they add up all of the repair costs they had previously paid and your current repair. If totals more than the value of your car then the policy expires and you have to pay the balance of the repair. A few policies will have a limit of the value of your car at the time you purchase the policy and it doesn’t decrease. If it doesn’t have a limit of liability – red flag. Almost all fully insured policies from the top companies have one including the manufacturer’s extended policies.