Do you really need an extended warranty?

[Lou Hamilton]

Extended warranties are for people that are bad at math and also bad at being financially responsible. If you did the math you would see that about 12 percent of the money you spend on the warranty is actually used to fix your vehicle. And financially responsible people have a fully funded emergency fund and money saved for anticuoatee car repairs; they pay for repairs out of pocket.

And I would guess that less than 12% of Americans are financially responsible and have a cushion like that.

I know a number of people in various socio-economic classes that still live pay check to pay check. Many want to keep up with the Joneses so they have multiple car payments, a huge mortgage, lots of toys and hobbies, etc.

I sort of fall in the 12% but right on the cusp. Yes, I have a cushion, but it is not so huge that it could cover a disaster.

Also, if a tragedy happened so bad, I would have no issues getting rid of many of our "excess" wants -- NetFlix, high speed home internet, etc. I grew up relatively poor, my wife even more so. We have no issues living without. Heck, selling the house and living in our RV would probably be a dream, not a punishment. LOL.

 

[Bigfishfin]

FWIW...Extended warranties/insurance are always priced/sold as a profit item...The emotional side may give comfort and that could make for a rational decision, but it is gambling against a sure thing for the "house"...Me, never!...

 

[Lumos]

Extended warranties are for people that are bad at math and also bad at being financially responsible. If you did the math you would see that about 12 percent of the money you spend on the warranty is actually used to fix your vehicle. And financially responsible people have a fully funded emergency fund and money saved for anticipated car repairs; they pay for repairs out of pocket.

Something to consider:

Car breaks down, you bring in for repairs paying out of pocket: repair cost $1000.

Alternative:

Car breaks down (same issue as above), you bring in for repairs under warranty: repair cost $10 (but you don't have to pay because it's under warranty)

Repairs out of warranty are far more serious and always seem to cost way more than repairs under warranty.

 

[ssmock]

All negotiable on a new car. A high dollar used one as well.

 

[Calidad]

Follow up question - Do dealers give you a bad time if you do your own regular maintenance, like oil/filter changes? I would hate to drop $1700 bucks then tell me I voided the warranty by putting in a non-Motorcraft oil filter.

By law warranty can only be void if the warranty issue is related. So for instance if you bring in your vehicle for engine issues turns out damage typically seen by running no oil in the engine then yes self service question will surface. No different than a quick change oil shop forgetting to put oil in it. Ford won’t warranty damage caused by someone else. Can they tell? Yes!

Are warranties voided often? No! But they do deny warranty claims for obviously damaged vehicles due to miss use and such

 

[EWOregon]

In the last month The front A/C Blower sensor went out, $100 deductible, my Driver side from Wheel Bearing went, $100 deductible, and my Muffler started blowing long fiberglass witches hair requiring a new muffler, fully covered. WTF Ford ? I think that along with the included regular maintenance I have covered my extended warranty cost...I'm starting to lose confidence in the vehicle (2017 Limited).

Update.
Long Fiberglass threads coming out the exhaust...total cost to replace the muffler...$967 at Ford.

 

[Bigfishfin]

FWIW, my "strategy" is that any insurance should be bought/used only for catastrophic losses, not for the usual or customary...Buying high deductible insurance policies and keeping substantial emergency funds in reserve is financially prudent (the actuaries ALWAYS win)!...

 

[mwl001]

Actuaries win because they diversify risk... people buying one vehicle don't have that option. On average, you will be better off not buying a warranty, while in all likelihood the actuary will win either way (kind of like a bookie).

 

[Bigfishfin]

Good points! Insurance is bookmaking, just legalized. If more folks realized that, they would be more restrained in their use of it...It serves many purposes that are valuable, but self insuring as much as possible is a very prudent life strategy and economically sound...You can’t protect yourself against all hurts!

 

[NukeLife]

Extended warranties are for people that are bad at math and also bad at being financially responsible. If you did the math you would see that about 12 percent of the money you spend on the warranty is actually used to fix your vehicle. And financially responsible people have a fully funded emergency fund and money saved for anticipated car repairs; they pay for repairs out of pocket.

LOL
You might have had an argument years ago. Today? You’re way off.

It was an EASY decision to buy the extended warranty.
I knew with absolute certainty that my 2018 would incur over $1700 in repair bills over the additional 75,000 miles of my purchased warranty. Absolute certainty.
It’s not a Camry or a RAV4.

within the last 12 months I have had both turbos replaced, the VCT cam replacement, the sunroof tracks replaced, the IWE wheel hub replacement and TSB, the side mirror popping TSB, the passenger massage seat control repair, a coolant leak repaired and the transmission main control valve body replaced.

ALL OF THIS performed after the factory warranty had expired,... and it cost me a grand total of $200 out of pocket.
So including the initial cost of the extended warranty I’ve paid $1900 for all of these repairs,...

I don’t get to see “their “ cost, but I’m fairly certain I have made out like a bandit.
Oh, and their still troubleshooting a drivetrain issue and scheduling a third party repair for one the headrest video screens.

That math doesn’t take a genius.