Is Prius extended warranty ever worth it?

Discussion in 'Gen 3 Prius Care, Maintenance & Troubleshooting' started by mrpulp, Jul 26, 2015.

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  1. mrpulp

    mrpulp New Member

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    Wife & I purchased a new 2015 Prius today. Super excited! We are really happy with it. We decided to purchase the 7yr/100,000mi extended warranty because (a) we have 60 days to cancel the extended warranty any time without any fees or penalties, and (b) were able to negotiate the price of the warranty down to $2k. I still thought it was a little pricey but we thought - we can give it some time to think about it more and do additionally research, and then cancel if we want, or if we can get it cheaper somewhere else.

    Is the extended warranty ever worth it? I need to look at the fine print even more carefully, but the key question is: which systems are covered under the extended warranty that are not covered under the 5yr Powertrain warranty or the 10yr battery warranty, and to what extent do these systems actually fail?

    I know that the Prius is a very reliable car - which is why we bought it. And I know that these warranties are essentially "betting against the house" - and the house always wins. But I'm weighing whether it's worth essentially knowing exactly how much we will spend on service, versus the possibility that we will essentially be wasting a bunch of money on a car which doesn't need an extended warranty.
     
  2. JimN

    JimN Let the games begin!

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    What is spent on service is irrelevant as you bought a warranty. Can a part fail after the manufacturer warranty expires so that the extended warranty pays? Sure but the probability is low. If Toyota believed the car (in general) would need anything close to $2000 worth of repairs spanning the time between the original warranty and year 7 up to 100000 miles they wouldn't sell the plan.

    Look through the list of exclusions. How much of the car are they actually covering?

    Get a refund while you can and invest it. You'll be way better off when it is time to put some money in the car.
     
  3. mrpulp

    mrpulp New Member

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    Yes, this is the kicker... I need to look at it very closely. When we purchased it, we decided to go with it tentatively to lock in what we thought was a decent price, since we knew that if we decide to go against it, we can cancel it with no penalties. We didn't want to sit there for 3 more hours going over the warranty with a fine-toothed comb when we could purchase it, and then spend a couple of days looking over it carefully.

    I tend to agree with this perspective, because it does make financial sense. If we take the $2k and invest it now, even 3 years from now when the regular warranty comes up we will have (at least in theory) even more money saved up for potential expenses.

    The thing is, because of the specific deal, we actually aren't spending $2k up front, so we don't have $2k that we are spending right now that we could otherwise invest. Instead, we got a very advantageous financing offer from the dealer (0.0% for 60 months) and the extended warranty is part of this; so we are actually only spending about $33/month on the warranty as part of the car payments. So the financial logic is that by the time the standard 3 years warranty is up, there would be about $1,200 which we would have spent on the extended warranty through our monthly payments which in theory we could invest right now.

    In general I'm not a big fan of extended warranties for exactly the reasons you listed -- if Toyota wasn't making a profit on them, they wouldn't sell it. And if the car is really unreliable and needs the warranty, then why buy it in the first place? But it seemed like something to at least look into, and a way to potentially provide a sense of "peace of mind" in that we would know more or less exactly how much we will spend on car service (outside of regular maintenance, which is also included for the first 2 years free) over the next number of years.
     
  4. bisco

    bisco cookie crumbler

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    nah. congrats and welcome! all the best with your new wheels.(y)
     
  5. SageBrush

    SageBrush Senior Member

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    Asked and answered.

    The overwhelming reason -- the real reason, not some flimsy rationalization -- for people to buy an extended warranty is because their finances are over extended, their credit is trashed, and any "unexpected" expense that exceeds their cumulative monthly payments puts the car at risk of being repossessed. Further insult to injury, they typically lack the discipline to put into a savings account the money they would otherwise spend on the warranty.

    The prudent answer for these people is to not spend even more money they do not have on an extended warranty, but to spend less on transport. <<shrug>>

    Ask yourself this question, OP: can you weather the very unlikely but non-zero possibility of a $2000 repair ?
    • Yes ? then save the money
    • No ? then buy the warranty, and be smarter with next car purchase
     
    #5 SageBrush, Jul 26, 2015
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  6. ursle

    ursle Gas miser

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    As I'm in my second prius, and the first needed front wheel bearings at 40,000 and a steering wrack at 50,000 neither of which was covered by toyota, nor are brake pads, tires, anything that moves (drive train is covered) and now my third just got front wheel bearings at 40,000... no an extended is just money that would power you along the road, instead of sending your dealer to Tijuana for some "fishing"
    Struts, brakes, tires, bearings.. things that wear are your dime.
     
  7. SageBrush

    SageBrush Senior Member

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    That is part of the analysis. The other part is to consider how much of possible expensive repairs are not covered by one of the other warranties bundled with every new car.

    Then realize that just about any expensive repair can be dealt with much cheaper by buying a lightly used part.

    The arithmetic is a no-brainer: the extended warranty is a fool's errand.
     
    #7 SageBrush, Jul 26, 2015
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  8. DoubleDAZ

    DoubleDAZ Senior Member

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    Tell that to the guy who cancelled his $1,300 extended warranty on the advice of others and then had to replace an engine at 42,000 miles to the tune of $5,400. That guy happened to be me, but I still don't "advocate" buying an EW. I just think it's a personal decision based on any number of factors.

    That said, I did buy one for our Prius, but for far less than $2,000 and for reasons I've already shared here. I don't expect to ever have to use it, but it had value to me and that's all that matters. If that makes me a fool in someone's eyes here, so be it, I'm not about to lose any sleep over it. I'm quite sure everyone here has done something that someone else thinks is foolish.
     
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  9. SageBrush

    SageBrush Senior Member

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    I imagine you have told that story before but I cannot remember the details. Would a standard drivetrain warranty from Toyota have covered that repair; or was it in the realm of warranty exclusions ? In any case, lets count the number of engine failures in Prius that have been reported to this forum over the past 10 years not due to owner error.

    I know most people do not like arithmetic but consider:
    $2000 repairs not covered by a standard Toyota warranty before 100k miles are I bet (way) below 1%. That would set the extended warranty cost break-even cost at no more than $20. If someone will sell OP an extended warranty for $20 I say why not.

    $100 ? Bad choice
    $2000 ?? You have to be kidding
     
    #9 SageBrush, Jul 26, 2015
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  10. lar.smith42

    lar.smith42 Active Member

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    I got the extended warranty thru Toyota when I bought my 2010 Prius. Naturally if you have not had any problems you don't think its worth the cost. I just had to have the left front drive axle and bearing replaced because the clamp came of the boot ,leaked all the oil out and bearing failed. cost about $1800. Covered by extended warranty. My warranty is bumper to bumper coverage except for tires, breaks, lights. I got it because I was afraid I might have to replace some of the expensive electronics down the road. Peace of mind is a great thing when you travel a lot.
     
  11. mrpulp

    mrpulp New Member

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    Clearly the warranty pays off for some people. For many, it doesn't. On the whole, Toyota wouldn't be selling these if their actuaries didn't do the math and decide that in the end they would make money. The dealerships love these for obvious reasons. They make a ton of profit on the warranties themselves, and then they get paid for any service that they do under the warranty, whereas someone who doesn't have a warranty might be more hesitant to pay for pricey service.

    In any case, I honestly don't care if the dealerships make money. Of course the goal when buying a car is to get the best deal possible. But some people, I think, believe that the absolute end goal is to make sure that the dealers don't make any money at all. That is, if the dealer made any money off you, that's money that you could have kept in your pocket if you had negotiated better. I'm not sure that I'm of that camp, at least as far as the warranty goes. If the warranty saves me money in the long term, even if I "overpaid" for it, in the end I still save money. That's what matters. (Of course, if I paid less for the warranty, the chances of it 'paying off' for me are higher. But that's besides the point.)

    The question I'm looking at right now is: does it make sense to have the warranty from the get-go. I am leaning against it, with the option to buy it again in the future. Especially if the deals to buy a warranty at near-wholesale price are still available. (I just called one of the guys who does it in MA, and they said that they are still able to do it for people in "reasonable driving distance," and so I could get my same 7yr/100,000mi warranty for a little less than $1,200). I still am looking over the paperwork, and I still have a number of weeks to make a decision while I can cancel the current warranty with absolutely no penalties. I just don't think that it makes sense to have the extended warranty from the very beginning. It does very little for me right now, since the car already has the standard warranty. The extended warranty only really is useful starting in 3 years -- so why should I be paying for it right now?

    Arguably, the warranty on the 0% loan so I am paying very little for it. I don't need to put all the cash down up front, so the argument that I should just invest it is a bit of a fallacy. So I pay $33/month for the warranty over 5 years. By the time that the 3 years are up, I will have put about $1,200 into the warranty. That's the same price I could pay for the warranty at wholesale now; the price might go up by then but probably not by that much. If I wait until 3 years to buy a warranty, I could use that money to buy a warranty, or just not do it depending on how I feel about the car. A lot changes in 3 years - one's financial situation, whether one wants to keep the car (who knows, I might decide to trade it in for a newer version...). And also by that time I'll have a much better sense of how much I've driven the car -- and will be able to buy the right warranty. If I am nowhere near 36,000 miles in 3 years then it makes sense to get an 8yr/125,000mi warranty, not a 7yr/100,000mi one. Or something along those lines.
     
    #11 mrpulp, Jul 27, 2015
    Last edited: Jul 27, 2015
  12. frodoz737

    frodoz737 Top Wrench

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    Blanket statements like "The arithmetic is a no-brainer: the extended warranty is a fool's errand." are both judgmental and condescending. The same can be said about the arithmetic in buying a Prius. To keep it fair let's compare two Toyotas comparably equipped with comparable reliability. A 2015 Corolla LE base with CVT and same basic ICE @33 mpg and $20,000 OTD to a 2015 Prius Two @50 mpg and $25,000 OTD. The average owner/buyer in the US now keeps their cars 10 years and drives 13,500 miles a year...both cars having the same basic "minimum suggested" maintenance schedule. At $3 a gallon the arithmetic shows you paid $1,000 more buying a Prius at the end of this period. Would you then call buying a Prius an fool's errand? Prius doesn't even make the top ten cheapest cars to own list (TCO), although Corolla did.

    Everyone has different reasons and logic they use to buy or not buy extended warranties...and vehicles. That does not make one opinion or the other any smarter or wiser. Do what you feel comfortable with...for what ever reason.
     
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  13. SageBrush

    SageBrush Senior Member

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    You are neglecting the higher resale value. If both cars e.g. depreciate 70% over 10 years then the Corolla residual value will be $1500 less than the Prius. You are also neglecting the time-value of the money saved in fuel. You are also ignoring the value of having a car that has a built-in hedge against future jumps in fuel prices. And of course you have ignored the huge social benefits that accrue from polluting less and sending less money out of the country and to OPEC. So to answer your question -- no, the Prius is not more expensive than a Corolla.

    Zombie errand does not refer to paying +/- 5%, it refers to paying 20x what the thing is worth to a rational actor.
     
    #13 SageBrush, Jul 27, 2015
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  14. frodoz737

    frodoz737 Top Wrench

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    ...and for those that actually used it?...those that needed it and didn't have it? Worth and value is relative and personal.
     
  15. SageBrush

    SageBrush Senior Member

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    And if you knew any of that ahead of time you would have a point. Well... almost a point, since your argument assumes the inability to save the warranty money for a future repair.
     
  16. frodoz737

    frodoz737 Top Wrench

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    My statements assume nothing of anyone.
     
  17. SageBrush

    SageBrush Senior Member

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    Fine, let's go from there. You see "value" in 99 people who do not have money, taking on another $2000 of debt they get no return on, because one person saves $2000 ?

    I'm done here. Zombies will be zombies.
     
  18. frodoz737

    frodoz737 Top Wrench

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    ...and if that's your interpretation of my words, so be it.
     
  19. SageBrush

    SageBrush Senior Member

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    On the subject of TCO, vincentrics has an updated study out for Canada:

    2015 Best Value in Canada Winner's List


    The Prius reigns supreme across any even somewhat similar car class. It even beats out the Korean sardine cans.
     
  20. frodoz737

    frodoz737 Top Wrench

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    Nice to hear...considering I just bought another one.
     
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