Service guy suggests I consider getting an extended warranty on my 2-year-old vehicle. Should I?

In My Humble Opinion
1

I have a nearly 2-year-old Explorer that is now in the shop for minor warranty work. The service tech said to the wife, over the phone, that because it has high mileage (35,000), we should consider purchasing an extended warranty.

It is in perfect shape and well maintained. We have 5 years left to pay on it. The warranty will cost us somewhere between $900 and $1500.

I’m not sure yet exactly what the warranty covers, but in general, does this seem worth considering?

I will withhold my own opinion for the moment.

Thanks,
mmm

2

Is the warranty from Ford? Or from a third-party?

If it’s from a third-party, do not buy it.

If it’s from Ford, it may or may not be a good deal depending on a number of things.

3

Think of this as a form of insurance (which is what it is).

In general, insurers make money out of selling insurance, because the premiums they collect cover the amount they pay out, plus a margin for themselves. Therefore, the policyholders, as a group, lose money; they pay out more in premiums than they would pay out if they simply carried the risks themselves.

Of course, an individual policyholder may either gain or lose. Insuring your house against fire every year is a net loss, financially, if your house never burns down. But it’s a big win if your house does burn down. On average, though, any one policyholder is more likely to be a financial loser than a financial gainer.

So why do people insure? Because they are risk averse, and they can reduce their risk by pooling it with other policyholders. I can afford to pay a few hundred dollars a year to insure my house, but the loss of the house would break me, financially, so I can’t afford to carry that risk.

So, odds are that, if you don’t take out this warranty, the amount you will pay for work to your car (of the type the policy would cover) will be much less than $900-$1500. So this policy is likely to be a net cost to you, if you buy it.

But it’s a cost you might be willing to pay to avoid the risk of massive costs. On the worst analysis, your car could suffer a mechanical defect so catastrophic that it would be written off - i.e. the cost of repair would exceed the cost of simply buying a replacement car. Is that a loss you could afford to bear, should it materialise? If the prospect of such a loss spooks you, then it make make sense to buy the warranty. (Only you can say whether $900 to $1500 is a price you are willing to pay to avoid having to worry about that risk.) But if that’s a loss you’re willing to risk, the warranty is a bad deal.

4

35,000 miles should not be considered high mileage by any reputable mechanic. They are scaring you and scamming you.

5

Personally, I think it depends on whether you can replace the car or not. In general, buying insurance is a bad idea unless you know something the insurance company doesn’t about the risks being covered by the insurance, as the insurance companies have very talented people in their employ to determine just how likely the event being covered is to happen, and what sort of premium one should pay based on the likelihood of payout that makes them money when averaged over all occurrences. However, if you do not have the means of replacing something should it be destroyed or need service, you should be willing to forgo some expected value in order to not be left destitute if things turn upside down. Thus, life insurance on a primary wage-earner and home insurance make sense, while other kinds of insurance are generally suckers’ bets.

I bought a 3rd party service warranty on my car I bought 3 years ago coming off a lease from an acquaintance, and never used it once. You probably never will. But I was not in the position to be able to afford a new car or extensive repairs on the one I was getting. The rate they wanted was absolutely highway robbery based on how much they told us that their cars were extremely reliable, but I was a captive market. I did manage to negotiate them down in price a little, but the ease by which they did so definitely suggested I was still getting the shaft. Still, ~$1k down the drain is better than not having a car in the worst case scenario.

6

Since the OP wants opinions, let’s move this from General Questions to IMHO.
samclem, moderator

7

The small print in many aftermarket warranties often specifies obscure failures that rarely get out of the factory but not the typical wear parts. At 35,000 miles you’re beyond the period of “infant mortality” problems and I wouldn’t go for it.

If this is a Ford offering it might be worth some web searches for others experiences.

8

In general I am against these, but my husband managed to get talked into one when I stepped out of the room to breastfeed the baby. I was generally in charge of buying the car, and had gotten us a great deal, I stepped out for ten minutes, and he does this. Several things happened down the road that were not covered, even though we were assured several times that EVERYTHING, excluding routine maintenance, like brakes, was excluded. Every time something would break, like the bevel holding up one sun visor, they called it “Operator error,” and said it wasn’t included, even though it basically crumbled in my hand. We got one from a junkyard for $20. Then finally just before the purchased warranty expired, the cylinder head gasket sprung a leak, and it was covered. I could have done this work myself, but we let them do it, because parts and labor were covered, and so was the loaner car while it was in the shop.

We also talked them into fixing something with the exhaust system that another dealer had done incorrectly when it was in for an insurance repair when we were rear-ended. They were really nice about it, and even threw in an oil change, so we gave them a great yelp review.

We just about broke even, but only because my husband hadn’t insisted that the rear end/exhaust work be done correctly at the first shop.

I remain skeptical about such warranties. When I bought my new car, it came is an automatic 30,000 mi/3 year warranty, with the option to purchase more-- anywhere from 20,000/2 years to 50,000/5 years. I will have the option to buy more again at the end of my original warranty period, but it will cost more. Well, yeah, but then I’ll know if this car needs it. I’ll also know whether I’m planning on driving the car into the ground, or dumping in as soon as the warranty wears out.

That’s all my personal opinion.

Only you know these things yourself-- how much maintenance can you personally perform; are you qualified to catch things before they become problems, and save lots of repair money that way? How long are you likely to keep the car? or do you even know? How much has previously gone wrong? what does your mechanic think? What does the warranty really, truly cover? What are they allowed to call “operator error”?

9

Exactly this. Not taking out insurance is essentially self-insurance and in the long run it makes sense*, because the odds are figured into the premiums and on average you keep the money that would otherwise be paid to the insurer for all overhead and profit. Plus, part of the profit model may be deductibles and a list of things they won’t cover, none of which applies when you self-insure. That kind of insurance never covers routine maintenance and parts that are expected to wear out.

The only reason to have insurance is to cover catastrophic events that would cause losses you couldn’t sustain*. Which is why I have house and vehicle insurance and liability coverages for both. And is also why I automatically refuse “extended warranties” of all kinds, although in a few special cases they may be wise (on brand-new technology, for instance, where there is credible buzz about likely problems, but the store just applies their standard percentage formula).

  • I’m not talking about health insurance here, which is a whole special case. Don’t get me started. I’ve said enough about it on these boards! :slight_smile:
10

One easy way to make this decision is to obtain a copy of the entire extended warrenty, the one you actually sign, and read it. Make sure you get a copy of the document you sign, not the promotional literature they like to hand out. Two things will happen:

  1. if you actually go to the trouble of reading the entire thing, it demonstrates you are serious about it and it might be a good idea for you,
  2. You will be in a position to judge whether what you are buying is worth the cost.

In general, I apply these rules to myself, mostly, and discover at the beginning of step 1 that I am not really that interested in the purchase. It has saved me a considerable sum over the years. I also learn a lot by how hard it is to actually obtain a copy of the document in advance of signing. If they are unwilling to share the document with me, that says a lot of what they think is in it.

11

Please take careful note of what she said.

The salesmen who sell these warranties often don’t know exactly what is covered, yet typically seem prone to claim they cover everything, or almost everything. Some premium plans might come close to that, but the lower tier ones certainly don’t. Either way, should you actually use the coverage the people who administer the warranty will set you straight. And the salesman will not make good on any promises he made about coverage.

Some of these warranties are pretty good about covering most of what you think they cover, and some companies are pretty good about honoring the policies. A lot of them, however, offer more disappointment than protection. It seems way too many are in the latter group.

I’ve seen warranties that will cover a failed part but not pay for the gaskets and fluids that are required to do the repair. A great many of them compensate repair labor at significantly less than prevailing rates, and some do likewise on parts, meaning the vehicle owner may have to pay a fair amount more than the deductible (unless the shop is stupid enough to accept the company’s lowball offer and not get the remainder of their usual price from the customer). Some of these companies seem to work really hard to find a way to deny coverage. I would google the heck out of the particular company to see whether they’re in the good 10% or the crappy 90% before buying a warranty.

12

In my career as a bookkeeper at several different dealerships, I have paid a shit ton of money in commissions to the salespeople who sell these (mostly) worthless extended warranties.

I would never buy one.

The coverage is never what you think it is. I’ve seen these companies go out of business after a year.

13

Guess they should’ve bought the extended warranty.

14

Extended warranties are a scam, they have the highest profit margin of anything the service guy is trying to sell you and if you assume you’re average, and you should always assume you’re average, they’re priced so that the average person loses money on the deal. Yes you may get one car where it paid off but averaged over a lifetime and you’ll always lose money.

15

35K miles in 2 years? That’s a high mileage rate. Has the car been reliable? Has its reliability reports (for your model, year, and type) been good? If yes to both, don’t buy the policy. If no to either, especially to the first question, then seriously consider buying the policy, together with info in this thread about these policies being a money maker from most customers, and yet for some customers this policy type has helped a great deal. Either way it is your risk to decide to live with.

16

I have never had to ask about any kind of “Extended Warranty” - the sales rep made sure I knew all about the wonderful benefits.

They are 100% profit.

Try to find out how often there are claims against these policies - and how many times they actually paid.

17

OP stepping to clarify:

The recommendation was made by the mechanic/service technician, not a salesman. And it wasn’t a ‘sell’, more of a side comment in the conversation.

He was speaking of a Ford warranty, not a third-party deal.
mmm

18

Still, the answer is “Likely not worth it, but it depends”. Thirding the advice to not buy under any circumstances until you have read the actual warranty and know what it covers, what it doesn’t, the per incident deductible/service charge, etc.

19

One of the first places I look at is the NHTSA site (followed by car forums) to see what complaints and issues have come up with a vehicle when I’m shopping for new or looking at things like this. For a 2014 Explorer, most of the complaints were for things like exhaust smells, slow fixes on the suspension recall, and power steering issues. If the mechanic is recommending it, I would give that more weight than the sales guy who has a vested interest in upselling you. My $.02

20

‘‘Service guys’’ are often required to up-sell you warranties, parts and services you may or may not actually need.

They actually go after people with cars that are cared for more aggressively than people who don’t keep up and might actually need the coverage. While they go after just about everyone, it’s the people who have the nicer cars and who are proactive about service (and paranoid) that will buy at a higher rate.

Good luck. I don’t buy extended warranties on anything. If I add up all that money over many dozens of expensive things… I am way, way, way ahead.

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