Warranty Decisions

my daughters 04 with 75,000 has never had an out of warranty repair except for the deer collision which insurance paid for except deductible.

 

My dad's 2004 prius has 150k miles and he's never had warranty related repair. Only Mfg recalls. You're buying a toyota...#1 in reliability. You're not buying a GM or a Kia or a VW. This isn't a honda civic hybrid either. Your HV battery will most likely last the lifetime of the car.

Cancel the contract! it will not be worth it. I seriously doubt you will ever have $2000 worth of repairs to do on the car. And if you want to get an extended warranty, just buy the extended warranty from Toyota here on the forum. You can get 7 years for like $1000 bucks. Still not recommended, but if you insist on a warranty, you have cheaper and better options.

 

So far I've spent $80 to replace the driver's Sunvisor on my 2004. You did exactly the right thing by canceling. It is highly unlikely that you would ever have gotten as much as $500 back from the $1900 cost.

But asking for personal stories almost always gives a distorted picture of reality. People who had something unpleasant or exciting happen to them are much more likely to write than are people who spent one or two thousand dollars and got nothing for it, giving the impression that extended warranties are not nearly so bad a deal as they actually are.

 

I'm not in the insurance business, but I find the "mechanical breakdown coverage", essentially a bumper-to-bumper warranty, bought year-by-year as part of Geico auto liability insurance more reasonable. They asked $80/year at current rates at least for a base 2010, covering 7 years / 100,000 (whichever sooner), and even covers abuse (mistakes made by owners causing damage). Eligible to start up to 15 mos / 15,000mi age, so can skip the first year covered by mfg. That's about $500 unrecoverable expense for a full 7 year warranty, compared to the supposedly repaid premiums costing up to four times that -- if you would ever really get it back after even a single repair (read the fine print). $500 is a reasonable premium with a genuine pay out ratio, unlike the common extended warranty policy with premium as high as a single major repair.

Geico is owned by Warren Buffet, Berkshire Hathoway insurance group. It's intensive advertising and expansion is due to his acquisition of the company several years ago. The old company was a venerable institution specialized in lower premiums by accepting only high rated drivers and government employees (Govt Empl Ins Co -- Geico). They were known for withdrawing from New Jersey in a period of disputes over regulation of premiums in the 1980's and 90's -- but are since back.

What I did not like about dealer offered finance company warranty insurance (they are essentially insurance policies), was sloppy requirements for repairs, such as contract terms that if not repaired by the original selling dealer, you have to call them for instructions -- instead of blanket authorization for all Toyota dealers and certified service providers (they just want to insure certified technicians -- yeah, right). They seemed to be connected to the selling dealer, and there can well be a specific contract and sharing of funds with them. They specified making claims by submitting to them documentation. All sorts of contract outs in their favor, eroding my trust in fulfillment of the contract. There is also a question these days, with the economy, whether a specialized finance company doing auto repair insurance will be in business a full seven years from now -- remember AIG, one of the largest insurance companies in the world. I'd trust Wachovia (now Wells Fargo) more -- what you'd call a fortress bank too big to fail -- but they seem to want an unreasonable premium.
The whole idea of extended warranties has been roundly criticized by consumer advocates as mainly gimmicks with little benefit to buyers after the high premiums are factored in.

Basic calculation -- if you own several cars over a lifetime which are reliable, only one of them is likely to fail requiring major repairs. Those costs will be lower over a lifetime than buying expensive warranties on every car. If all the cars are going to need major repairs, it is not an insurable risk and the premiums will be as high as the repair costs.
There is a benefit when only some cars fail by chance, in which case the premium should reflect the fact there will be few claims, and be much lower than the cost of a major repair. The payout should be reasonable. Most extended warranties on any kind of goods have dubious payout ratios.


Other insurance companies might be competing with Geico on this new class of insurance, "mechanical breakdown", I haven't checked. It's a pretty competitive field.

 

Can't get it without buying their liability insurance; charge a little less here, charge a little more there. Buffett didn't get rich by giving stuff away.