Extended Warranty

[Stbentoak]

Not defending extended warranties, but one positive with them is if your vehicle is laid up for three months, say for parts, or whatever reason, a warranty usually will cover a rental car. If you’re on your own….well….you’re on your own, and it could easily add up to two or $3000 pretty easily.
I have read of many cases on here and other sites about vehicles being laid up anywhere from a few weeks to months and months for whatever the issue. If you have to have a vehicle, and this is the only one you have, then what?

 

[OR VietVet]

Ever considered going “self insured?”

Put the cash of the service contract in a high yield savings account and watch it grow. Debit the account for any repairs.

Example:
My dealer wanted $3975 for “8years, 96k miles”. But of course that is truly only 5 additional years and 60k additional miles from the factory warranty.

Deposit $3975 in a high yield savings/CD (you can find one for 5% these days.
After 36 months you will earn 643.00

Your balance will be 4628.

Now, let this cash ride and withdraw only when you need repairs.

If you never make a withdrawal, you will earn $1954 in interest in this 8 year period.

Thus, you would have $5500-6000 available for repairs over this 8 year period…depending on the repair withdrawals you make (and don’t withdraw for maintenance, cause service contracts don’t cover maintenance either).

My bet, and those offering service contracts bet the same, is that your vehicle won’t need $6k in repairs before you hit 96k miles, trade it, total it, etc.

It’s just math…and the people peddling these contracts know it…it’s an expensive insurance policy.
Cost of the policy goes up and your advantage goes down if you roll the service contract into your loan and pay interest on it. You’d be better off making monthly deposits to the account I mention above if you can’t drop the whole $4k in up front…will make slightly less interest, but at least won’t pay interest.

That is why I call them an "Instead of Warranty".

 

[DuraYuk]

Ever considered going “self insured?”

Put the cash of the service contract in a high yield savings account and watch it grow. Debit the account for any repairs.

Example:
My dealer wanted $3975 for “8years, 96k miles”. But of course that is truly only 5 additional years and 60k additional miles from the factory warranty.

Deposit $3975 in a high yield savings/CD (you can find one for 5% these days.
After 36 months you will earn 643.00

Your balance will be 4628.

Now, let this cash ride and withdraw only when you need repairs.

If you never make a withdrawal, you will earn $1954 in interest in this 8 year period.

Thus, you would have $5500-6000 available for repairs over this 8 year period…depending on the repair withdrawals you make (and don’t withdraw for maintenance, cause service contracts don’t cover maintenance either).

My bet, and those offering service contracts bet the same, is that your vehicle won’t need $6k in repairs before you hit 96k miles, trade it, total it, etc.

It’s just math…and the people peddling these contracts know it…it’s an expensive insurance policy.
Cost of the policy goes up and your advantage goes down if you roll the service contract into your loan and pay interest on it. You’d be better off making monthly deposits to the account I mention above if you can’t drop the whole $4k in up front…will make slightly less interest, but at least won’t pay interest.

It covers rental and even has clauses for trip interruption if it's a true GMPP policy. It's also closer to 3k for the longest policy with 0 deductible. So your breakdown wouldn't be as good. And in 100k miles it will pay for itself I promise you. Doesn't have to be a catastrophic failure either. Plenty of electrical sensors or motors will quickly add up. GMPP also covers seals which most warranty dont. 1 oil pan gasket alone will almost pay for the warranty.

I also don't know that we need to make 2 grand on a 10 year investment. What I want is for the vehicle I just paid 75,000$ for to be as tip top shape as possible for as long as posible and that's what an extended warranty like GMPP does.


And if I don't keep the vehicle for the whole term you get a pro rated refund. Or you can transfer it to the next owner so again adds value.

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[OR VietVet]

It covers rental and even has clauses for trip interruption if it's a true GMPP policy. It's also closer to 3k for the longest policy with 0 deductible. So your breakdown wouldn't be as good. And in 100k miles it will pay for itself I promise you. Doesn't have to be a catastrophic failure either. Plenty of electrical sensors or motors will quickly add up. GMPP also covers seals which most warranty dont. 1 oil pan gasket alone will almost pay for the warranty.

I also don't know that we need to make 2 grand on a 10 year investment. What I want is for the vehicle I just paid 75,000$ for to be as tip top shape as possible for as long as posible and that's what an extended warranty like GMPP does.


And if I don't keep the vehicle for the whole term you get a pro rated refund. Or you can transfer it to the next owner so again adds value.

Two things: 1. Well all I gotta say is "case closed" because there is NO WAY to lose when you get an "Instead of Warranty".

2. What is the pay off for buying a warranty that overlaps the bumper to bumper and emissions warranties? I call it an "Instead of Warranty" for a reason. I have said many times that if you just gotta buy that warranty and put that money in the Insurance Vaults, then buy it after the other warranties have expired. Am I missing a benefit of buying the warranty at the beginning that is gonna save me BooKoo Bucks? I must be dense. I am old. You know, "Old dogs and new tricks" problems.

 

[Stbentoak]

The issue is if you wait till the 3/36 is over you out of pocket costs will be reasonably higher. I can promise you; you will not get the same coverage at the same price at the end of your factory warranty as you can buy when the vehicle is new. I'm saying it will be 30% more.... plus the price of these warranties go up every year. By waiting 3 years your gonna pay that higher price...

Again, I'm not an advocate for them, just stating facts.

 

[OR VietVet]

So, let me get this straight....just gonna simplify the math for comparison sake.

You have a new vehicle that starts out with a 3 year 36k warranty from the dealer/manufacturer. You buy an "instead of warranty" for double the coverage of 6 year and 72k warranty for let's say $4k. IMO and in my scenario, you are paying $4k for the last 3years and 36k miles. If you wait till the first 3 year and 36k miles is up and then buy, the only way it costs more for the warranty after the first 3 years and 36k miles is if that warranty would cost $4001 or more. If you buy the warranty after the first 3 years and 36k miles is gone and pay $3999 or less, you have saved money.

If I am missing something, please straighten me out and I promise you, I will apologize for the confusion.

 

[Chad G 1979]

I am just curious as to how often folks use this? I have never had extended warranty on anythig including vehicles in the almost 30 years of driving. I have never needed it. I was in one fender bender back when i was 20, so it wouldnt have covered that. I have never worried about it either. I guess oeace of mind is much cheaper for me than others? Then again i have never had issues with my rides not getting me from point a to ooint b faithfully and i always keep on top of routine maintenance.

 

[Stbentoak]

So, let me get this straight....just gonna simplify the math for comparison sake.

You have a new vehicle that starts out with a 3 year 36k warranty from the dealer/manufacturer. You buy an "instead of warranty" for double the coverage of 6 year and 72k warranty for let's say $4k. IMO and in my scenario, you are paying $4k for the last 3years and 36k miles. If you wait till the first 3 year and 36k miles is up and then buy, the only way it costs more for the warranty after the first 3 years and 36k miles is if that warranty would cost $4001 or more. If you buy the warranty after the first 3 years and 36k miles is gone and pay $3999 or less, you have saved money.

If I am missing something, please straighten me out and I promise you, I will apologize for the confusion.

If you buy when the 3/36 is up, they will still only sell you 3/36 more, and the price that day will NOT be less than 4k if you buy the very same plan offered when new.
More likely 500-1000$ more. They know you waited and there is a price for waiting, besides inflation in general...

And for @Chad G 1979 .... You aren't driving the vehicle of 30 years ago if you have a new one. You can't just go to AutoZone and get any and every part needed easily, and many parts now have to be installed and then "Activated or Reprogrammed" by the dealer. You can go buy a new part and it still won't fix it and you can't return it? Then what? Any decent part or problem out of warranty on these new vehicles can cost you 1k easily and not bat an eye.

 

[DuraYuk]

Two things: 1. Well all I gotta say is "case closed" because there is NO WAY to lose when you get an "Instead of Warranty".

2. What is the pay off for buying a warranty that overlaps the bumper to bumper and emissions warranties? I call it an "Instead of Warranty" for a reason. I have said many times that if you just gotta buy that warranty and put that money in the Insurance Vaults, then buy it after the other warranties have expired. Am I missing a benefit of buying the warranty at the beginning that is gonna save me BooKoo Bucks? I must be dense. I am old. You know, "Old dogs and new tricks" problems.

The only reason you buy it in the beggining is because it's cheaper. You can wait until the almost end of your bumper to bumper to buy it but it will cost more. That's the main reason you buy in beggining , not to overlap but to be as cheap as possible.

If you read the platinum gmpp warranty it's an exclusionary policy. If it isn't expressly excluded its covered. It really is comprehensive compared to many products out there.

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[DuraYuk]

I am just curious as to how often folks use this? I have never had extended warranty on anythig including vehicles in the almost 30 years of driving. I have never needed it. I was in one fender bender back when i was 20, so it wouldnt have covered that. I have never worried about it either. I guess oeace of mind is much cheaper for me than others? Then again i have never had issues with my rides not getting me from point a to ooint b faithfully and i always keep on top of routine maintenance.

You have been driving for 30 years and never had an issue outside of the warranty period? If that's the case you are super lucky.