UPDATE:
After more research and consultation, I decided to pass on the extended service contract. I made an offer on the car a few minutes ago based on the “out-the-door” price I had been quoted. I will now wait patiently for a response and try not to stress out about it.
Once again, many thanks to all who posted in this thread for providing independent - and virtually unanimous - support for not going with such a plan.
This. Save the money & you have a fund to pay for repairs, if necessary, for anything except maybe a transmission you’ll come out ahead, probably even after using some of it to pay for the routine wear items - brakes, tires, oil change, etc.
I’ve heard that you can take it wherever you want, your mechanic gets it up on the lift, rips the car apart & finds a bad “turbarater”. Your mechanic calls the warranty co & they state that they want to see the old one before it’s removed/replaced but they can’t have ‘their guy’ get there for 3 or 4 days. Your mechanic isn’t going to tie up his bay for 3 or 4 or 5 days so you can either pay the extra for him to reassemble it to get it out into the lot & then break it down again next week, all while you’re w/o a car or just pay for it your self while muttering that the warranty co sucks.
In a manner of speaking, you do have such legal means–filing a lawsuit.
Of course, that’s a whole 'nother kettle of fish. But the possibility does exist.
You have to define “worth the $$$”.
Unless the seller/insurer made some kind of mistake designing their product, statistically the “warranty” should not be worth it – and of course they have much more information and can put much more effort into designing the product than you can bring to bear on making your choice. I struggle to think of a kind of insurance for which this is not true.
We shouldn’t judge insurance based on whether it’s statistically worth it. We should judge based on how disastrous the loss could be to us. That is, there’s a separate value for the risk management itself. For example, if you’re just getting by, but rely on your car to get to work, such that having an expensive failure would prevent you from earning the money to fix it, such a failure could be catastrophic. A family member who was a social worker helping the homeless tells me that a great many of them were just getting by until something like that knocked them down, triggering an unrecoverable chain reaction of financial adversities. If you’ve got enough in the bank to manage an expensive failure, and you own your house, you still might not have enough to replace the house, so that might be the only object worth insuring. People with lots of assets may not have much motivation to insure anything.
It’s just one of the many ways that it is expensive to be poor.
I don’t get why people think differently about service contracts than actual insurance. I have “wasted” all the money I’ve have spent on homeowner’s insurance for 30+ years - but the fact that I don’t have to worry about coming up with the money to rebuild after a fire is worth something. It’s probably not worth the price of the insurance if I can afford to rebuild if it burns down - but I don’t have that kind of money. And the same goes for service contracts - it’s not worth buying one if I can pay for an expensive repair on my own but it may be worth it if I can’t .
It’s not about a comparison between service contracts and insurance. Either one can be a bad deal. Covering replacement cost of a $100,000 house for a homeowner’s policy that costs $30,000 a year for 30+ years would be a really bad deal. For most auto service contracts there is no replacement coverage, they cost over $1000 a year, and the maximum payout is not much more than 1 years cost, and never as much as 3 years cost. Most insurance contracts are state regulated and you can’t do all that bad. Not the same case with service contracts.
Well, true, but even a relatively expensive repair on a car or appliance is more likely to be affordable than recovering from your house burning down—especially if you save up the money that you would have spent on the service contract.
You seem to be implying that a used car service contract would offer some protection from these financial catastrophes that exceeds its price. I would not take that bet.
At best, with a plan paid monthly, you’ll be betting that something goes wrong with your car shortly after starting the service plan. Even then they’ll probably make it very difficult for you collect and get the repair done.
That’s their business model.
Ah, I didn’t mean to imply that the contracts out there would be a good bet.
I do think in general the idea of pooling risks is inherently good, and that various kinds of insurance companies should exist, which would demand that they do so profitably for themselves. There’s no reason car repair insurance couldn’t be designed to be both profitable and a legitimate strategy for consumers for whom an expensive repair would be catastrophic.
But I don’t know that ANY contracts on the market do that.
I think this is a great example of why a big insurance marketplace heavily regulated by the government would be a public good. Since customers are at the company’s mercy when it’s time for a payout, insurance without heavy regulation probably couldn’t work.
Just an anecdote, but… I saw my dental hygienist yesterday who told me that a car she had purchased relatively recently (which sounded like it was a used car) had an issue and needed an entire new engine. She felt fortunate that she had a warranty. The entire engine is going to be replaced under the warranty. So that’s one data point…
I wonder if she had the car inspected prior to her purchase.
In theory such an INSURANCE product could exist. In practice no such product can ever exist in the regulatory environment in the US.
Therefore all products currently on the market are rubbish.
I have made money on every car service contract I’ve ever owned. They exist. Typically I get service equal to 3x what I paid for the policy.
They are rare and require a particular combo of company, car, and shop. We beat them like red-headed stepkids.
A fully regulated honest service contract and car repair world would be superior for society. More honest benefits and fewer rip-offs in both directions.
We’re not there today & show no sign of going there. If you have the set-up & connections to beat them bloody do so. If not, run away! Run away!
It’s not mathematically possible for that to be typical of everyone who has the policy, is it?
Of course not. It’s a game of mutual rip-offery. Where they goof, swoop in and score.
'Tain’t right; tis so. Lotta US commerce is like that.