I keep seeing commercials for CarShield, which insures cars against future repairs. It sounds like a good thing, but that’s what makes me skeptical. Anyone have it?
No, but it sounds like a scam. It’s like home appliance insurance. Every furnace is eventually going to fail, and every water heater, and every dishwasher. So where is the pooled risk? Same with cars. They are eventually going to need repairs. Better to save your money in your own bank and keep the interest.
Take the money you’d spend on the “insurance,” put it into a dedicated bank account and only use it for car repairs. I’m betting by the time you sell or retire the car in question you’ll still have money in that account.
I have heard that some of these “insurance” plans require you to use on of their “plan” mechanics. One problem is that these mechanics agree to do X hours of work on plan accounts per month. Their hourly rate on “plan” jobs is about half that of their normal rate, so they limit plan jobs to a low percentage of their business. That is, your repair isn’t going to be high on their priority list. It might take them a while to get to it.
Another issue is they require the mechanic to use parts supplied by the insurance company. So, for example, if you need a power steering pump, instead of getting a rebuilt pump from a source the mechanic has a reputation with, they get sent a used PS pump from a junkyard. Yeah, they can make it work, but it’s going to take a bit more work (which they can’t charge for) and if it fails, you have to file another claim (the mechanic won’t fix it on his dime).
So, many good, reputable shops don’t even work under “the plan”. Those that do, limit it to a small amount of their business. If the replacement parts are junk, so is your repair.
So, SmartAleq has it right. Just put the money you’d pay for the insurance into a bank account and you’ll probably come out ahead.
Not to mention the massive list of limitations and exclusions on what the plans actually cover.
True story, when my daughter bought her used car, she noticed the dealer had an extended plan from a third-party supplier. They quoted her a price of $11,000. The entire car cost her only $7,000.
Deals like these are targeted for low income earners. Earners who do well in paying expected bills, but struggle with unexpected bills and building their savings account.
Like any insurance plan, CarShield is a bet against yourself, betting that the cost of the warranty is less than your out of pocket expenses would be.
That said, I didn’t hesitate to get a 10 year extended warranty on the car I purchased last year because the extended warranties (all 10 years, bumper to bumber) on my last three cars/trucks paid for themselves several times over. They all allowed me go directly to the dealership for repairs (no having to hunt for a good mechanic) and it was nice not having to worry about unexpected bills. My ex took the car before the warranty was over, but I owned my trucks for 11 and 14 years respectively, and passed them on because they were both due for $1000+ overhauls. My only costs during the time I owned them was the usual tires, brakes and batteries.
Now, I understand the dealership mechanics may not be top notch, but if they don’t do a good job, I just take the car back!
FYI, the cost of the warranties on the first car and two trucks were ~$1000-$1500. I know for certain the last truck was $1500. I think the warranty on my newest car was ~$3200, but it’s a fully loaded CRV, so about a 10% premium. As I think about, all the warranties worked out to ~10% of the cost of the car/truck. Hmm…
Consumer Reports found:
Optional warranties, like insurance, are the company’s calculated risk that they’ll take in more money than they pay out, and vice versa. They hope, and usually correctly, that you’ll pay them more than they pay you.
If you, like lingyi, are consistently having enough car troubles that your warranties are paying off for you, maybe you should look for a more dependable brand of car.
$3,200 for an extended warranty seems like a lot, particularly for a Honda vehicle (which are, in my experience, extremely reliable). Was that the price after you negotiated down from a higher number? Because I’ve heard that there is a lot of markup in these products and the dealer will come down quite a bit if you don’t bite.
I just double checked and it was $2600 as a line item with 0 deductible at the dealership I got it from. I could have got it for way less online, but I wanted to convenience of a one stop deal as I plan this to be my last car purchase (knock wood). I rather live with, I’ll get it repaired for free vs. is it worth it? And one of the reason’s I got a Honda was because of it’s reliability. Plus I know nothing about car repair. The only reason I get an oil change is because the car reminds me to!