What coverage to purchase?

True statement.

And so equally true is the statement
"It *always* makes sense for some of us to buy the extended warranty.

Which group are you in ?

I hate to say it, but warranty hawkers prey on people with over-extended finances. I'm willing to bet the best predictor of whether a person buys these warranties is interest rate. Moreover, I doubt even 10% of people who buy cars with cash buy warranties. This also explains why money arguments do not sway warranty buyers -- they are driven by fear of rare outlier events, even if the outlier event is less money than the warranty itself!

So I try to save them some money by not getting screwed by greedy dealers, and do not try too hard to convince them of warranty statistics. That is not an argument they will consider, regardless of merit.

 

You make some good points, as to this topic the OP is buying a Prius II and an extended warranty would be a bad bet for her.

I have a Prius V with ATP that I put more mileage on than most owners. With the DRCC, PCS, LKA, and Nav systems an expensive failure is more likely than it is with a base Prius II.

I went over 36K miles last December, with the expensive to fix options and plans to keep the car several years I think it made good economic sense to buy the 100K mile/5 year extended warranty for around $800. One repair to one of the ATP systems could cost several times that much.

I guess I'm one of those 10% you mentioned. I pay cash for everything I buy and have for quite a few years now. Cash is king.

 

Since the warranty costs the same no matter the Prius, you have a sound argument that the more expensive models make the warranty a better value.

Consider this, though: You will burn through your warranty in under 3 years based on mileage, so you are buying insurance against repairs which Toyota nominally figures into its OEM warranty structure. I say this based on an assumption that the rate of failure for the toys you mention strike me as mostly time-based and not mileage-based. With confidence we can say Toyota expects a whole lot less than 1% failure rate in the first three years, and if they are wrong past experience says they will fix the part for free as a manufacturing defect outside of the usual warranty limitations.

Another aspect of warranty evaluation also comes into play: none of the toys you list interfere with the car's basic functions, so failure only diminishes your car to a lesser model trim. In 3 years when you go to sell your car, how much do you think the LKK feature, e.g., will be worth ? NOTHING depreciates on a car like the rates of high trim features. You will be lucky to recoup 30% of purchase cost of your toys in 3 years, so why pay a high premium to warrant them ?

By (my best guess) numbers: You paid $5k for the toys, and will recoup $5000*0.3 = $1500 in 3 years if they all work. So you paid $800 to protect $1500. Smart money move if there is a ~ 50% chance of all the toys breaking within 3 years and no Toyota help.

I know -- you are going to say that the $800 is not just for the toys, it also covers the entire car out to 100k miles. True enough, but that value is really, really, low.

 

Let's check back here in three years and see. I'll bet you a dollar that you get back less than half of what you paid for it.

 

Holy crap!?!?! No, I certainly don't think that is a good deal -- AT ALL. Your salesperson LOVES you, LOVES you.

A) Few things are likely break
B) Even fewer things will break that are worth more than the car, at least during this extended warranty period. Basically your car has to turn into a complete and utter lemon for this to be true.

Cheaper in the long run? No it is cheaper all over. This is insane, really. So you think it is even remotedly better to finance $1,800 than to spend $1,000 within the next 36,000 miles. I am sorry to come off as cruel, but that is just nuts. What is your interest rate and term? I can do the rough math and tell you what you will be spending.

Also, what would you payments have been with a loan of $1,800 less? You could have maybe put that aside every month for the next 3 years or 36,000 miles and had the $1,000, gotten the coverage you wanted (I would still say you don't need) and had lower payments for the rest of the loan term.

These two things are not arguable. Sometimes things are so close to the same it can come down to personal choice or that two reasonable people can come away with a different view. This is not one of those cases. You are financing, with interest, $1800 instead of coming up with $1,000 within 3 years??? That is very clear which makes sense over the other. And that doesn't even factor in the whole is the warranty worth it at all part of the equation.

I don't know about just people with overextended finances, I would guess, and it is a guess that it is people that are fearful of the unknown and scare easily. People who don't understand basic economics would be another group. People easily swayed by salespeople would be another. People who don't understand the idea that when you buy a 5 year extended warranty for say $1,500 that you aren't paying $300 a year for the coverage but rather more like $750 a year, assuming a 3 year standard warranty. Because really, they call it by the name of the total number of years of coverage, but really you are only buying the years difference between stock and the extension.

And the rate of failure on the ATP system is what? 100%, oh than that is a good deal. Oh wait, it is less than 1% a year for the extended coverage? Then no, it doesn't make sense. Less sense if you finance it, but still no sense. The vast majority of us will make it well over 100k miles and 5 years without having a single repair bill.

How many cars have you ever bought, how much have you spent on extended warranties, how many times have you gotten a qualified repair covered, how much would they have cost you otherwise.
Since you seem to have your finances in order, the warranty makes even less sense for you than someone on the edge financially. As you seem better able to absorb the bill in the exceedingly rare case of something needing repair without much hardship. Since the chance of a repair is so remote, then it doesn't make sense.

And yes, I bought mine fully loaded. And that was back in 2004, when the technology was a little less known or proven. That was the only time I have ever thought of buying the extended warranty since I was a kid.


How about this, to cut down on the chance of death or a paralyzing injury I start requiring myself and all passengers in my car a race helmet and roll collar. Now I do this because if I am in an accident this can prevent damage to my head and neck and that of my passengers. Would that come across to any of you as sane and/or even slightly rational? No. Yes if I had a rollover accident I would be glad to have it, but the chances of that kind of accident are so small it just doesn't make sense.

Only extended warranty I ever bought. On my son's portable DVD player. Let's see $15.00, which is nothing, covered his $125 or so, player from 1 year and a day thru 3 years against any failures and from day one thru the 3 year mark against any accidental damage. Full replacement, even shipping the replacement to me is free. Let's see, I am giving this thing to a 4 year old who is going to take it in the car, on planes, etc. he is going to be eating and drinking when using it. He is a kid so higher chance of dropping it. It has a laser in it, and glass, so easy to break. OK, I bit and bought it. He is 6 now and that damn player still works like a top! It has been on and off more than a dozen planes and driven to at least 4 states. Still works....

 

As I pointed out I think the OP would be wise to avoid the extended warranty, maintenance contract, or any of the other stuff dealers sell to make extra money.

In my case I would not have purchased an extended warranty if I did not have the ATP. When I sell the car I will know if it was a wise decision for me. I did not buy it because of a "slick salesman", I waited until I was at 35K miles and ordered it through this site for a bit less than $800.

Contrary to what is posted above the ATP options do add a little to the value and saleability of the car. I just checked Edmunds and at this time the private party sale price of my Prius V with ATP is $7000 higher than a Prius II, all other factors such as mileage, color, etc being equal. The ATP options alone add $2550 to the private party sale price, that's a little over half of what the ATP cost new. I realize it will be worth a lot less in 3 years if I keep the car that long. I also realize you never get back what you paid for options but you do get back a little bit and some of them are nice to have. I don't buy expensive options to increase the value of the car, I buy them because I want them and I can afford them. If you want basic transportation at an affordable price buy a base corolla or civic, probably a used one.

My extended warranty is the first one I have ever bought, on anything, and I don't really know if it was a good idea or not, time will tell. There haven't been to many problems with the ATP options reported here yet so maybe those systems will continue to be reliable. Of course one failure of the DRCC, for example, could easily cost more than twice what I paid for my extended warranty.

Anyway I'm sure Clark Howard would be proud of you guys, I'm one of his fans. But I am trying something a little different and I'll let everyone know how it works out when I sell the car.

 

why do you think that ATP adds so much to the possibility of repair? Some, sure, but significantly so?

so you did buy it out of a fear of an issue that is not documented, though, right?

I don't know that anyone said that your options don't add value to the car at resale. I certainly didn't. Over time the difference diminishes between the option package but you have to go pretty far out to totally negate it. And even if you kept your car for 7 years and 200,000 miles or whatever the actualy numbers are to do away with the dfference in resale value, so what who cares? you got to use and hopefully enjoy the options during all that time. I bought my car fully loaded, and my wife's nearly so (only skipped two that we didn't think we would use) So it isn't like you paid for something and got no benefit. What that benefit is worth is individual of course. But that is different from say the extended warranty, where the vast majority will never make a claim on it, so the odds are far far better that you will never get any benefit out of it and will have wasted the money.

not a big Clark Howard fan myself, some of what he says makes sense but an awful lot doesn't and his approach is just too goofy for me

And why do you figure that?
And let's say you do end up invoking the extended coverage you bought. Wouldn't it have been better to do so at less than half the price and no finance charges? it greatly increases the chance that the warranty will pay for itself. As long as they are exactly the same product, which I think they are in this case, why spend more?

And you gotta stop thinking about it as a 7 year warranty. Words matter and that is how they phrase it to make it sound better to you. Just like what used to be called a 5 year adjustable rate loan became a 5 year fixed rate loan in the mortgage industry about 10 years ago or so. Because it sounded better to people, not because it was changed in any way.
It is a 0 year warranty on your hybrid components, since the regular warranty already covers those. For your powertrain, your engine and tranny, the really big ticket items on a normal car. You have a 2 year warranty, since that already has a 5 year warranty. And for basic coverage, and I don't know how much of that stuff the exptended warranty covers, but even if it covers it all, you already have 3 years of coverage, so you only bought 4 years.
I don't know how many people have failures of any sort, in those particular catagories, within those prescribed time frames. But as the Prius is one of the most reliable cars sold in the US according to CR, I would estimate you have a fewer than 10% chance of ever having this make sense. Why are you/were you so hesitant to cancel it during the days that you could have reversed the transaction? At least to step back and think about it?

 

It's simply comes down to personal choice, it is not a decision that I intend to defend any more than I already have. I decided to buy an extended warranty and gave my reasons for doing so. Some will agree others will not. No I don't buy, or not buy, anything because of fear, if I were afraid of something I probably wouldn't buy it at all.

ATP systems, except for nav, are new to Toyota, this is their first try at DRCC, LKA, PCS, et al. They may or may not be reliable over the long term but they almost certainly will be expensive to fix if and when they break. Extra warranty coverage seemed like a good idea at the time and I haven't changed my mind about that.

If it turns out to be a mistake it won't be my first and probably won't be my last.

 

The other thing about extended warranties (for cars outside the manufacturer warranty period) is that you are forced to service the car every 6 months or 10,000 km's.... which is obviously more expensive than getting it serviced every year.

Warranty co's also have amazing contracts which increase their chance of getting out of paying for things, or at least minimise what they have to pay.

At the end of the day though, they are an insurance against something bad/expensive happening. If you have the cash, that insurance/warranty is peace of mind. I think $800 is a bargain for an extended warranty, and I also would have bought it.

 

'Peace of Mind' is a PC way of saying "I'm in debt over my head, but I think I can hold on to the car."

 

With the Toyota warranty, I do not believe you are forced to do anything other than normal maintenance.

Had the cash when I bought my Prius, still didn't buy the warranty. Why waste money? Now that I am over 7 years of ownership, I have to say that the warranty would have saved me $0 and would have cost me whatever I had to pay for it. With 5 new cars bought, 0 extended warranties bought. The cost of repairs on all those cars that would have been covered, is $0. Money saved is what, close to or above $5k? I did think about it for my 2004, since it was so new at the time, and I worried about it a little, but then didn't do it.