Rocket Venus died two weeks ago after 13 years of solid, dependable service. Now, I have taken possession of a 2010 Toyota Matrix with which I am deeply in love. I put 20% down in cash, financed the rest, and ended up just under $2000 under my budget. The question is: do I buy an extended warranty?
The dealership offers a two-year “bumper to bumper” (a meaningless term to me) extended warranty for $2000 for two years. the offer expires in three weeks. It does not cover “wear and tear” items (I’m not talking tires, I’m talking things like CV boots), and all work must be done at a dealership.
The website I found a lot of good information at advises against a dealership warranty and recommends two 3rd party extended warranty (Vehicle Service Contract) - CARCHEX and Warranty Direct. Warranty Direct’s quote is $1700, CARCHEX’s quote is $1500. Warranty Direct covers wear and tear. Both of them pay the mechanic directly, and they don’t limit you to a dealership.
I called my mechanic and asked him, but he couldn’t stay on the phone. He sounded like he wanted to talk me out of buying an extended warranty. I searched around online a bit and found some frankly horrifying reviews of both companies. The crux is that the companies will deny and/or delay payment to the mechanic as long as possible, figuring, I suppose, that a percentage of their customers will give up and pay for the service themselves. Problem is, I can’t tell if the reviewers are cranks. I work tech support, and I am all too familiar with that certain type of entitled whiny-baby who refuses to try to understand what’s actually going on and believes if they scream long enough, they’ll get what they want. Some of what I read sounded like that.
There are other things to take into consideration. Specifically:
I am crap at money. Adult ADHD and its concomitant lack of impulse control mean I waste more money than most people. I hate it. I’m ashamed of it. I battle it every day. It’s just not going to change anytime soon.
so when I have money, I like to pay down bills and bring everything up to current.
except I also dream of having savings. Any savings. Currently, I have this ->|…|<- much in savings. One small to medium sized car repair bill will wipe that out.
my mechanic inspected the car and likes it very much. The only thing that needs attention is the CV boots as they have “pinhole leaks” and need to be replaced.
So, I figure my choices at this point are:
buy the dealership warranty, replace the uncovered CV boots with my tax refund sometime in February, and hope really, really hard that nothing else uncovered needs fixing.
get more information on the Vehicle Service Contract people in the hopes that the reviewers were just cranks, talk to the mechanic who actually does like them but had just caught fire while we talked, and go with a 3rd party, saving money over the dealership, gaining flexibility, and peace of mind. While I’m considering that happy fairy tale, I’d like to put in my order for a talking pony, a self-cleaning litter box, and a year of daily massages from Detective Inspector James Hathaway.
take the money and put it in a CD which, while not keeping up with inflation, will keep me from frittering the money away but can be taken out (at a penalty, I know) in fairly short order in case of desperate car repair, cat repair, masseur repair, or other calamity.
pay down the bills and sneer at my savings account.
stuff it in my savings and sneer at my bills, knowing full well that I will burn my way through it before the end of next summer with nothing to show for it. Og, how I hate you ADHD.
Talk me down, talk me out, talk me in, or talk me through. Personal experiences, discreetly gained insights, and past debacles/triumphs are invited.
Who can know the future? That’s the whole gimmick with insurance: you never know if it’ll pay off…or be a dead waste of money.
In my own experience, the extended warranty paid for itself more than twice over. The next guy might never find himself applying for benefits under it at all, and rue the wasted expense.
General rule of insurance is to never insure against a loss you can afford. On top of the average loss you are paying administration costs and profits to the company that offers the insurance. Extended warranties tend to be among the higher profit margin forms of insurance so they are the worst deal among insurance policies. Frequently they get rolled in to the cost of buying a car that’s financed; you pay interest on the insurance policy cost in that case making a bad deal even worse.
An extended warranty is just insurance. That’s the first thing to realize. And pretty high margin insurance at that - the dealer will (on average) make quite a bit of money from such a deal. And like DinoR said, you generally don’t want to insure against losses you can reasonably afford.
Of course, you then ask how much are you really insuring. Naively, you might figure that your insuring the total cost of the car. Depending on your finances, a newish car may indeed be something that you can’t reasonably afford. And indeed, for a car that new you should probably have comprehensive insurance on it, because if you get into a crash, you could easily drop the value of the car to near zero. But for the things that an extended warranty is going to cover, it’s very unlikely that anything would go wrong that drops the value to zero. Worse case scenario is what, need a new engine, and on a car that new, that’s pretty unlikely.
Anyways, that’s just a roundabout way of me saying that in general, it’s good advice to avoid extended warranties. Now that’s no guarantee of course. You might lose the engine and the alternator and the transmission, and the repair costs just as much as the car. But the laws of statistics say on average that it’s a suckers buy.
I have bought the extended warranties on my last 3 vehicles. It paid for itself on the first two. Transmission literally fell out on the first, dealer installed a new transmission. Total cost was about twice what I paid for the warranty. Second vehicle ate engine control modules, the warranty fixed them at no cost the first two times, it cost me $950 the third time after the warranty had run out. I’m am about half way through the warranty period on the third vehicle, so far it has fixed a drive axle and a busted tail gate latch.
Wish my wife’s car had a warranty, the transmission currently being rebuilt. Out of pocket cost? $4700.
Maybe I don’t understand, but it sounds like you will have to pay for the CV boots whether you buy the extended warranty or not.
Go back to the dealer and say that you will buy the extended warranty if they agree to fix the CV boots for free. If they say No, refuse the extended warranty.
I don’t usually buy extended warranties. Whatever is going to go wrong is likely to do so during the period of the regular warranty, and since it doesn’t cover “wear and tear” I usually have to pay for repairs after that anyway. As mentioned, dealers usually make money off extended warranties, therefore it is not a good deal for me.
Whenever I hear “Extended warranty” I always think of this Simpsons scene.
It doesn’t show it in the clip but Moe goes on to tap the crayon further up Homers nose to make him even more stupid, to which Homer exclaims: “Extended warranty?! How can I lose?!”
What, if any, original manufacturer’s warranty is left & what does that cover? Is there a 10 yr/100m mile powertrain warranty that you have anyway? If so, anything covered by the OEM warranty is being fixed by Toyota, not your extended warranty. If the extended warranty is not covering wear items & Toyota is covering your engine &/or transmission what is the warranty covering?
<Bolding mine> What if they go out of business? What if they are acquired? What happens to your warranty then; does it transfer to somewhere else? Is there any language that the new owners must honor it?
In general, these are a good deal for the seller.
:eek: Did you extinguish him? Was he burned badly?
All the advice I’ve seen says don’t buy. I bought a 2013 Mazda3 Monday. I bought.
But not until they knocked the price down by 2/3rds. Their premium deal covers every that isn’t expected to simply wear out – like tires, light bulbs and brake shoes. They wanted me to pay $45 a month for 96 months – 8 whole years. Since there is still just a little bit left on the original new car warranty, this insurance and the payments won’t kick in until the original coverage expires in a couple of month. I finally bit when the price went down to $16/month.
Since I’m paying just over 1500 for 8 years, I’m guessing you can get a much better deal.
MV.