Well, easy math…
I got a quote for 84 Month, 96k Mile service contract for $3189
Let’s say you put $3189 in a SoFi High Yield Savings account (currently 4.5% APY) for 5 years (length of the Powertrain Warranty). At the end of the 5 years you have $3931 in the account.
Now, will you have a $4000 bill at 5 year? I bet not, but let’s say at that point you have a $1600 bill for some repair that isn’t maintenance. So, get it fixed, you still have $2400 in the account.
12 more months at 4.5% interest and your slush fund is back up to $2510.
Now you have another $800 repair. So down to $1700
Go another 12 months…balance back up to $1778.
You are at year 7, of that 96 month service contract. Maybe you have another repair, maybe not…if not, let another year go by and you now have $1859 in the account at the time your service contract expires, and you funded $2400 in repairs.
Your call, but…the actuaries at the service contract companies are running the numbers…and taking in enough cash to cover all the claims, pay their employees a salary and benefits, pay for real estate, and return value to their shareholders…I guarantee this is more expensive to the consumer than self insuring yourself…on this one vehicle, you may get unlucky…but over a lifetime…self insurance is less expensive…it has to be this way…or the service contract (insurance) companies go out of business…