Extended warranties are still not a good deal, right?

[drwex]

The dealership would like to sell me all kinds of packages and things for the car, from an extended warranty to coverage against curb damage (tires and rims) to LoJack and on and on.

I'm still vaguely of the opinion that these aren't particularly good deals but if people have other ideas I'm open to hearing them.

Comments

[donnad.livejournal.com]

I bought my car used in April 2009, (2009 Mustang convertable, It was a high end rental vehicle, had 5000 miles on it.) and bought the extended warranty (5 years on everything except the ragtop, no warranty will cover a ragtop.) About two years in I had a noise and a pull in the front end. Some sort of stabilizer bar had let go. It was a $2000 repair, 100% covered by the warranty.

If you are buying used from a dealer, and they offer it, get a warranty. You don't know how the previous owners treated the car, you don't know what they might have done that could weaken or damage something that could cost a small fortune to repair. You don't know that they got regular maintenance, if they didn't the engine could have suffered damage.

If you are lucky you will never have to make use of the warranty. But it's money well spent, for piece of mind, especially if you are buying a used vehicle.

[caulay.livejournal.com]

IMO, LoJack is worth it. Luckily we have never had to use ours but it's a one-time charge and should save you more than that in lowered insurance costs over the life of the vehicle.

As for extended warranties, those depend on what they cover. One's that cover everything (parts & labor & roadside & towing) are usually a good deal but very often what is being offered is not comprehensive. Specifically, HondaCare is a good deal, the default VW one, unless it's changed, is not (too many loop holes).

[drwex]

Interesting, thanks. I was sort of doing the computation and the cost per month of the extended warrantee is such that it would need a pretty huge repair in the Nth year to pay back. Essentially you're paying for 5 years for a warrantee to be used in the future so you've got all those years of premiums paid, which comes to a fair chunk of change, I think.

[tikibar]

One of the reasons I got the extended warranty on my VW is that, if it's not used, I get it back. It was also only a couple grand and, frankly, that's really not hard to use up on repairs (i.e. one transmission).

[(Anonymous)]

For the low-profile tires on the VW, the tire warranty has paid for itself multiple times over already.

[points.livejournal.com]

Gah, sorry. Car tire warranty comment was mine. For my low-profile tires on the VW, that warranty has paid for itself multiple times over.

[drwex]

Thanks. What happened that the warrantee was used?

[points.livejournal.com]

Boston potholes and angled-out curbs are hell on the sidewalls.

[points.livejournal.com]

They'd take photos, wait for the warranty folks to clear it, then slap a new tire on. Already done it three times or so.

[shades-of-nyx.livejournal.com]

I really liked the pre-paid service package and extended warranty on my Prius. It paid for itself repeatedly with in 5 years.

[drwex]

In what ways did you save money with these things?

[shades-of-nyx.livejournal.com]

The pre-pay service package got $120 of work for $90 every 5k miles. Water pump was replaced completely free when it failed at 20k miles.

[meadmaker.livejournal.com]

I liked what this article had to say. The short answer is that it's not a good idea unless you have a reason to expect it to be useful. For instance, if you drive a car harder than most people, it might be a good idea. Also, if you expect that you won't have the cash reserves to pay for a major repair, then it's also a good idea.

I'm not sure how this applies to your life. One thing that pops to mind is when Thing1 will start driving. If I count correctly, that should start up within 2-3 years. Would he drive hard enough to put undue strain on a vehicle?

[taura-g.livejournal.com]

I echo the comment on the warranties--check to make sure what they cover.

I got a very comprehensive one but only because I tend to drive 20K+ miles a year. In the past they have been useful.

[vibrantabyss.livejournal.com]

As with all insurance-type thing, your win condition is having an above average loss...

[wotw]

The benefits of Lojack are huge, but most of them go to other people. (By using Lojack, you make car theft less safe and deter car thieves in general, which benefits me. The value of these benefits dwarfs the expected benefit to you if your car gets stolen.) If you like, I can point you to careful estimates of those benefits.

I am generally of the view that we should welcome opportunities to do a lot of good for others at a relatively small cost to ourselves. But of course there are many different ways to do that, and whether Lojack should in this case be one of them is between you and your own conscience.

[drwex]

I surprised that you view LoJack as reducing car theft in general. Does it not simply shift the problem of car theft around? Presuming that stealing a car brings P profit for R risk and Lojack simply increases R why would theft overall go down? (This is a serious question - I'm not trying to be a wiseguy.)

[wotw]

Your analysis is correct for something like The Club. If you install The Club, then car thieves can see you've got it installed, and hence move on to someone else's car. So there's a sense in which installing The Club imposes a burden on your neighbors.

Lojack is different for two reasons. First, it's invisible. Thieves have a general idea of what fraction of cars have Lojacks, but they don't know *which* cars. The higher the fraction, the riskier it is to steal a car. Getting a Lojack raises that fraction (just a tiny bit of course) and therefore discourages car thieves (just a tiny bit per thief, of course --- but you have to multiply that effect times the number of thieves, and it turns out to be quite substantial).

The other reason Lojack is different is that if you've got a Lojack, your car might get stolen and taken to a chop shop before the thieves realize it's Lojacked. Then when the police track your car down, they take down the entire chop shop, which has a huge effect on car theft going forward. It turns out that this happens a lot.

Steve Levitt has done very careful empirical work on this stuff and the bottom line is that you do a great deal of social good when you install a Lojack, and a considerable amount of social harm (equal approximately to the cost of The Club) when you install The Club.

[drwex]

Interesting. I have seen cars marked as having Lojack installed and I was under the impression that such marks appeared on all cars - roughly the equivalent of "this house protected by $alarmsystem" signs that you sometimes see.

Thanks for the info!

[macthud]

When I got the VUE, I extended the bumper-to-bumper warranty to last as long as my payments (5 years or 75,000 miles).

It was wrapped into the 90ish% financed purchase, at 0% interest, so it was fairly painless. I don't remember the exact price, but if I remember right, it added $30/month or so to my payments, so call it $2000.

And it covered a stabilizer bar thing, and the back wiper arm, and something in the transmission programming, and the turn-signal return spring, and a few other odd hundred-plus-dollar jobs, and rental cars while all those repairs were being done, the net of which I'm fairly confident totaled more than I paid for the warranty. The only things it didn't cover were the consumables (tires, brake pads, oil, etc.). Several of these irritations, I might not have paid to repair, but with the warranty, they were *brief*, and thus I still mostly like my car, approaching its 7th anniversary, even if it remains too small.

All things considered, I would do something like this again. I might extend the bumper-to-bumper to sync with powertrain or whatever longer coverage there was -- something like 7 years/100,000 miles, I think.

At expiration, I could have gotten another 24 months or 30k miles coverage for another $2430 (such clever pricing). What with one thing and another, I didn't sign up for that, and that's worked out OK (touch wood, as I'm now ~4 months or ~10000 miles from when *that* would have expired...)