Need Advice about extended warrenties

Plan to keep it past 100K miles? Then it may be worth it. It's a gamble that you may never use it, but that one time when something breaks and cost $2000, you will wish you had it. It's an insurance policy, just like what you get for your car, you may never use it, but you have to pay for it, and when you do use it, it is well worth it.

If you do get one, make sure its a reputable one, not some run of the mill one no one heard of. Should be the same one Toyota dealers sell. I own Fords, and if I get one, which I am contemplating at the moment since I am keeping my 2010 FFH until it dies, it will be the Ford ESP service contract. So see what Toyota offers and that would be the one to get.

I don't know if it is still out there, but when I first bought a Prius, I could get the extended plan for $800 from Toyota.

 

Think of it as buying insurance. Like all insurance, on average you loose money. So the rule is to only insure for a loss that you can not afford. For example buying fire insurance for a house is a no brainer as few people could afford an unexpected $200,000 bill for recontruction.

But insuring a Prius? A 100,000 mile warranty might cost $1,600. Let's say something does go wrong and it costs $2,400 to fix. In that case you saved $800. It might be better to simply put the $1,600 in the bank (Or some kind of "liquid" mutual fund) and leave it there.

The other thing I don't like about the warenty is that, it seems, no one will write a warranty past 100K miles. I think because they know the car is likely to break down AFTER the 100K mile mark.

I'm not saying "don't buy it." Just think remember to do the math and decide if a future repair would be a "killer" hit to your credit card.

 

What are the "extended warranty" costs you'd be paying for?

Salesman's commission
Sales Manager's commission
Dealer's commission
Dealer's administrative costs
Profit for warranty company
Administrative costs for warranty company
Parts and labor to fix your car.

Consumer Reports did a study and concluded that less than 30% on average of what you pay goes into fixing your car.

As in a casino, a very few win big, most lose. But the casinos pay out over 90% of what they take in. Even Powerball pays out more.

If those seem like good odds to you, go for them. And if you do, examine carefully the company behind the warranty as many go out of business.

 

Peace of mind






There you go. If having an extended warranty makes YOU feel like you are covered when something breaks, then that's all that really matters. The last time I had a warranty, other than the one on the Prius, it did pay off. A fuel pump froze up, and melted all the wiring in the trunk. That combined with a leaking oil pan gasket resulted in a $2600 repair bill. Cost of ESP, $900. It all depend on how long you plan to keep the vehicle. Up until recently, I havent kept one past the factory warranty, so I had no need for it. On my F150 Ford gave me a 75K mile ESP due to some issues with the Ecoboost. Since I am keeping my 2010 Fusion for the next few years, and know I will put 100K on it, the $1795 ESP that covers everything, is Peace of Mind. The dash alone is $1400 to replace if one component fails. CVT failure? Who knows! NAV fails, covered, stereo fails, covered, the only thing not covered are the brake pads and rotors.

 

There are several warranties so the coverage for everything doesn't end at 3 years/36000 miles. The last things to come off warranty are the hybrid components at 10 years/150000 miles in CARB states. I don't recommend a warranty but if you're going to buy one then buy it from the manufacturer. Read what it covers & what it doesn't. I don't believe you'll find a warranty that will cover "everything".

 

True, it wont cover body parts, or hardware such as door handles. It does cover anything mechanical that is NOT a wear item like brake pads, rotors, or clutches. Then again, those are inexpensive items compared to an engine or transaxle. Hybrid coverage though is tricky. The controls, motors, and battery are covered, but the CVT planetary gear set may not be since thats a non hybrid item. Other than the battery, which is covered under the Emissions, the rest is 100k miles.

The one thing that I find questionable though is the Carb statement above. All I can find in regards is chat on it, with nothing official to back up what is actually covered, but from what I gather, that will only cover the battery. The rest of the components are under the standard warranty. Also of note, the car must have been purchased in one of those states, and operated in those states for that warranty to be in effect. In any case, it is up to the owner to decide whether to take the risk to have or not have one.

 

Remember that even if you do have that $2,000 repair bill the cost is not zero to fix it. there are two cases:

Case 1: You bought the warranty for $1,600. Then your cost is $1,600.

Case 2: You did not buy the warranty so now the cost is $2,000

So the difference in cost is $400. But of course the exact numbers will be different in every case. The misconception is that people think of the pair cost under warrenty as zero. It's not because you have pre-paid up front. It is the same with cell phones. People think there get a phone for $100 or even free but inthis case they "post pay" with a load that is hidden in the cost of air time. In both cases the way to look at it is to look at the TOTAL amount of money spend over the time period in question.

Another way to look at a warrenty is to use some "game theory". Here as an example if you have a 10% chance of winning $100, we say you "have $10". Or if you have a 10% chance of saving $900, we'd say you have $90. Apply this to the warranty: If there is a 5% chance of a $2,400 repair then your cost to repair is $120.

 

Financially, extended warranties make no sense for the buyers. Sellers love them, of course. If you get "peace of mind" from giving the salesanimal a $1000 to $2000 Christmas gift then go for it.

 

That is a valid way to look at it. One more wrinkle to consider though is that a warranty claim that costs the warranty issuer $2k (Toyota in the case of a manufacturer extended warranty) could easily cost you $3k or $4k or more because it's lot easier for a dealer to hose an individual customer than it is for them to hose Toyota.

Even given that, so far I am losing on extended warranties. On my last 3 new car purchases I have bought about 7 years worth of total manufacturers warranty coverage at about 1/2 of suggested retail price by buying online, approximately $11oo for each car. The 7 years of coverage on my Corvette just ran out with no extended warranty claims, the 7 year coverage on my wife's Acura will run out in a few months with no claims so far. Both cars have been slightly more reliable than my Prius, but all three have been close to perfect.

 

Ah, but here is another way to look at it, you can get the extended warranty for a monthly payment with 0% interest, or you can pay for the repairs later, provided you have the cash to do so, or put it on a credit card and pay, say 18% interest, so that extra $400, is going to cost you a lot more in interest.

A lot depends on whether you have flush cash in the bank that can cover a major repair, or not. If you dont have that spare change, then an ESP can be of great benefit down the road.

So in a sense it can be a means of saving up for that dreaded repair bill that may never happen, which of course you could do the same by dropping $100 in a savings account at .001% interest(Thanks FEDS), but the chance that you may discover that you can use that cash for something else is so great, that you just might do that and not have the cash on hand after all(don't ask, been there, done that).

 

But given the payouts on extended warranties, dropping $100 in the bank is equivalent to paying $300 for a warranty in terms of probable payout/use. I know there are people who tell you they went to the casino and made money (over my lifetime, I'm one of the very few) just as there are a few car owners who have been fortunate to collect more than they paid. But if the company is only paying 30% of what it costs you, I wouldn't play in that casino. Some casino games pay out around 3 times as much.

I'd save the money over all the gadgets and cars and be well ahead...as I am and do.

My last car I had a chance to buy the car and transfer the extended warranty or save $2500. Guess which I did. And an engine transplant would have cost me $27k.

The Prius, I declined the extended warranty they wanted to sell me. Ditto my wife's Avalon.

 

Borrowing money to pay for an extended warranty is paying twice for something you will more than likely never use. It's very silly. The "0%!" argument is a sales tactic: they make it up by jacking up the total price. They are not in business for your health and well-being.

If you can't afford to keep a thousand in the bank to cover household emergencies, such as a car repair, then you really can't afford to buy a new car in the first place. Sad but true.

 

Of my last four new vehicles (2 have been Prii) I bought an extended warranty for one - the 06 F150. It has more than paid for itself as I had nearly $7K in repairs in year 3 and 4 of ownership. I bit the bullet and purchased another extended warranty for it that will run out to 9 years and 100,000 (only drive it about 9500 miles per year) for less than $1700. One more 4-wheel drive repair like the last one will pay for it, but I hope it never happens. Peace of mind on the truck.

Oh yeah - both were 0% financing. So I have about $3400 dollars in warranty payments and have more than twice that in repairs.

As for the 2 Prii and the VW Beetle - the Prii have been great. The Beetle (traded it on the second Prius) not so much. Several repairs in years 6 and 7 - total cost around $4K. BTW - turned down the offer from the dealer for an extended warranty when we bought the 2012 a few weeks ago.

 

I am so glad I found this post. I am also reconsidering the extended warranty offered. I am buying a 2013 Prius 3. Dealer offered an extended 7 year/100K warranty for $1,700.00. I agreed but after reading this, I am not sure where I stand now. I do plan on keeping this Prius for a while. Hopefully for more than 7 years but all my other vehicles I have not kept past 2 years. I bought extended warranties on all my previous vehicles. I was told by the Toyota dealership that only certain mechanics can work on the Prius and the work on it is more expensive so that is why I initially went with the extended warranty offered. I go in to sign the documents in a few days so I can easily take the warranty off. HELP! lol Worth it or not? Is it true that mechanics charge more because it is a Prius on only specialized mechanics can work on a Prius? Thanks!

 

At our local dealership there are specific mechanics for different models in some cases, but for the most part the work you'll get done is regular maintainence - oil changes, tire rotation, ATF drain and refill - most of the guys in the shop can do it. If they are charging me more for the Prii those guys with Corolla's must be getting it for free. Of course that may not be the case everywhere.

Our gen II is just hitting 65K and (knock on wood) has only had "routine" stuff done. Most of the Prius owners in my area all say the same thing - no big problems. I know of two people who have replaced their traction battery in their 05's, but both did it on their own - with some help from the "experts" on this site. I also know of at least 4 locals in the 200,000+ range that haven't had any major repairs. Save the $1700 for something fun - like a down payment on your second Prius.