Extended Warranty

[The Mister]

<font size=2>As you know, the wife and I are in the market for a new (to us) car. I think we've found a selection of what we want, 2001 Mazda 626s with 10-15K miles (they were program cars).

Mazdas are good - not quite Toyota or Honda but not American either - but Mazda's warranty is the least impressive (36 months on *everything*, including powertrain).

Questions: What do you think about extended warranties? Would you buy one from the dealer (not a Mazda dealership)? Or would you go to a more broad-based company like Warranty Gold? (I might go for their Platinum.)

What are the differences between the two? Are there any non-dealer-affiliated warranty issuers that you would recommend?

Thank you.

[Shrek]

Oooh, oooh, pick me.

Things to keep in mind:

1. You should have a good idea of how much you'll drive annually, and how long you plan to keep the car to get the best value (don't buy a 6 year contract if you think you'll only keep the car for 4 years, and don't pay for 100,000 miles if you only drive 10,000 per year.)

2. The price of these is just as negotiable as the price of your car.

3. Watch who you buy them from. I'm biased, but buying it from the manufacturer is probably the best.
-It's possible that you will need to be reimbursed for your expenses if you chose a third party, rather than having the dealer file the claim. (not sure about this)
-There are a lot of companies that enter the market thinking they'll make big $$ and exit it just as quickly because they don't understand it and in 5 years they're losing their arse.

4. Consider your coverage and deductible carefully. The broadest coverage will get just about everything, but a lot of the repairs are relatively cheap. If you opt for a higher deductible, you may be eating a lot of those costs, essentially you'd be paying for the opportunity to pay your deductible. If you're willing to pay a deductible, go with a powertrain contract - that's where the big expenses are.

[Crystal Dragon.]

I've had quite a few salesmen as friends over the years (I hang out on the rough side of town), and their personal advice to me time and time again is just this:

Never never never buy an extended warranty.

Why do you suppose these warranties are pushed so hard? Because they mean pure cash to the retailers.

That's just MHO + $0.02. (would that be MHO2? can you breathe that?? I wonder)

_________________
-CD

<font size=-1>[ This Message was edited by: Crystal Dragon on 2001-12-05 08:03 ]</font>

[Oracle]

I agree with CD on this one.

It's sort of like CDW on rental cars - way overpriced, but enough suckers go for it, and it helps the profit margin.

[Laffit Pincay, Jr.]

I bought a warranty on a used Honda Civic once. When the clutch cable broke it cost $100 to replace, exactly the deductible amount.

A warranty can bring some peace of mind knowing that if something big but relatively rare happened such as replacing the engine or transmission you wouldn't be out much dough.

It really depends on how much you can find out about the car and where it's been before you buy it. If the car is priced great and seems o.k. but you aren't sure, the warranty may be a good route.

My Mazda Miata has been trouble-free for the first 24,000 miles and my friend has a Miata with over 150,000 miles on it that he has driven for about 10 years. I don't know if the reliability carries over to their bigger cars but their engines and transmissions seem very dependable.

[Laffit Pincay, Jr.]

One other thing you may consider, Mazda is in pretty bad financial trouble, they don't sell enough cars to be profitable. Even though Ford owns a chunk of them they may go belly up or close down a lot of US dealers.

For a used car this may not normally be a consideration but it could change your warranty decision.

[Dr T Non-Fan]

Mazda? Try the 2001 Acura Integra. There's a rare, fast version 2-door that are hardly ever for sale (at a reasonable price, at least), but the less fast version comes in 4-door as well. It's less desired by racing thieves and might be just what you're looking for. Just don't buy the one I'm planning to buy. Someday.
It should last approximately forever. Barring any totality, of course.

[Damn, Dirty Ape]

I bought a warranty on a new Civic for about $500. It was 5 years extended with no deductible (the factory warranty was 5 years drive-train). As a bonus, if you didn't use it in the 5 years, they gave you your money back (without interest). This sounded relatively risk-free, so I went for it, despite my solid position on these warranties (don't!).

I sold my Civic after 3 years. I called Honda to either a)get my $500 back, or b)transfer the warranty to the new owner. They replied with c)no way, read the fine print. No early withdrawals, and no transfer of ownership. Even if your car is totalled, no luck.

Lesson learned. Oh well.

[The Mister]

On 2001-12-05 12:34, d*mn, Dirty Ape wrote:
I sold my Civic after 3 years. I called Honda to either a)get my $500 back, or b)transfer the warranty to the new owner. They replied with c)no way, read the fine print. No early withdrawals, and no transfer of ownership. Even if your car is totalled, no luck.<font size=2>I wouldn't consider any warranty that didn't offer transfer or cancellation.

Quote from http://www.warrantygold.com/faqs.asp :
Is the Warranty Gold contract transferable?
Yes, if you sell your vehicle to an individual, the contract may be transferred to the new owner for a $50 fee. This enhances the value of your vehicle when selling to a private party.

What if I don't keep my vehicle for the term of my contract?
You can cancel your contract at any time and receive a pro-rated refund. Other terms and conditions may apply.

But there are a number of other companies out there, some less reputable than others. The insurer that backs the plans has an AMBest of A-, and their reinsurer is A+.

Also, look at <a href=http://www.warrantygold.com/news-cnnfn.asp>this article</a>.

I figure, if Warranty Gold is willing to put a relatively even-handed article on their own site, with other links to unbiased information resources like the BBB, then they're probably pretty fair. But yes, I'll be looking over any contract before I sign anything. :smile:

[nbd]

It can be inside information, let me say it anyway.

If you know how much commission and commmission override on those auto-warranttee products, you will not want o buy it.

There once was a reinsurance treaty with the dealers for the profit sharing. But they did not want to share the loss, and have the reinsurance company bankrupted.



<font size=-1>[ This Message was edited by: tonami on 2001-12-06 18:02 ]</font>

[nbd]

removed

[Griffin 1]

On 2001-12-04 12:59, The Mister wrote:
Mazdas are good - not quite Toyota or Honda but not American either - but Mazda's warranty is the least impressive (36 months on *everything*, including powertrain).

I have only owned American cars, have never bought an extended warranty, and have never had a problem beyond normal wear and tear.

[Klaymen]

OK, so your transmission goes out on you and you're out a few grand. Save up some money so you can afford to replace it. Or be prepared for another car purchase.

It's no fun having to outlay some cash for this purpose, but for such a low-risk exposure, is it worth adding on the cost of expenses, taxes, etc related to insurance?

<font size=-1>[ This Message was edited by: Anonymouse on 2001-12-09 20:45 ]</font>

[Ammie]

I just ditched a 1995 Mazda 626. 140,000 kms on it, and C$5,000 worth of repairs in the last 6 months, including the transmission. Did I mention it had barely been driven in the last year?

You get what you pay for. Mazda's are cheaper than Toyota and Honda up front, but Mazda's repairs will cost more as the car ages, not to mention the servicing costs before the warranty expires. Yikes! Also the residual value of the car will be lower. JMO.

I replaced it with a Toyota Corolla.

Hope that helps.

[Dr T Non-Fan]

A-mouse, I can see you want to negotiate! What will it tke to put you in this warranty?

Seriously, though, what would be your break-even point on an extended warranty? It's probably greater than $0, but below the going rate. An application of the Intermediate Value Theorem would show some point in which you'd be indifferent.

[Anonymous]

Up to very recently (and maybe still) the pricing on those contracts was so bad that even with the 100% mark-up you were getting a deal. 300% loss ratios anyone?

But yeah, keep in mind the dealer's cost is about half of what they quote you. I talked the dealer into selling me one at about half-price last year.

[Bob the Dog]

Bob agrees with Black Flag. Bob has seen poor results. Not 300%, but no U/W profit for sure.

[The Mister]

On 2001-12-20 21:53, Black Flag wrote:
But yeah, keep in mind the dealer's cost is about half of what they quote you. I talked the dealer into selling me one at about half-price last year.<font size=2>Same thing happened with us (I asked the original question). Except that I didn't have to talk him into it. He quoted me $1600-something. I just had a quote from WarrantyGold.com, and he said, "Uh, are you a fleet customer? (Say yes... *wink wink*) I'll be back in a minute... [comes back] How about $850? That's pretty much at-cost." The Warranty Gold quote was still less than that, though, and actually covers wear and tear on most items.

[Shaft]

Almost all the schemes I have seen have been real losers for insurers. The salemens and the administrators make the money, particularly when the administrator is paid according to number of claims settled.

Black Flag, I have had my suspicions for a long time now.... but I think I know who you are....

<font size=-1>[ This Message was edited by: Shaft on 2002-01-23 05:10 ]</font>

[Jonas Grumby]

This is interesting, I too was once deeply steeped in the world of pricing extended warranties... The splits I saw on the auto warranties had less than half going to the insurers (I did this at two different companies), and in one case it was only 1/3. The insurers and consumers get killed on these, while the administrator does okay and the dealer reaps big $.

[Shrek]

3. Watch who you buy them from.
Case in point (http://seattlepi.nwsource.com/business/apbiz_story.asp?category=1310&slug=Insurance%20Troubles).

[Maine-iac]

I don't really care for the warranties, but Mr. M bought one from the manufacturer when he was travelling out of state a great deal. His notion was that if he had trouble where he wasn't known, he could just pull into any nearby dealership, whip out the contract, and tell 'em "Fix it. You're covered even if you don't know me from Adam." And he wouldn't have to shell out major bucks from travel cash or load up the credit card.

He only used it once. It was just after we had moved, and he actually wasn't travelling any more, but we were very new to the area and didn't even have a permanent address to give the dealership. The alternator had gone bad, and the guys just looked at the policy and said "Good coverage!" and fixed it. Worked well.

But with our new cars, now that we are not on the road a lot, and know the area well, we didn't think the warranties were worth the bucks.

[Dr T Non-Fan]

But there exists a price point where you would be indifferent to the warranty, and below which you would prefer to buy it. Just simple economics, and it's the bargaining tool you need.
If time is a premium, say "No" to everything brought up in the two-hour grilling. You'll get out a lot faster if you don't engage in any conversation.