Extended warranties

[cemaykan]

Originally Posted by Randy Chase

I think you are still agreeing. They work on averages. That was my point.

And I said, if for some reason, you buck the averages, then it might be a good deal for you. But my point is still 100% valid. This is how they make money. Just like a casino. You can tell me how you went into Vegas and walked away with money, but I am saying the casinos bank that on average, they take in more than they pay out. It is just math.

No I still don't agree

You have a auto insurance right, they work on averages to.

There is no guarantee, you might end up paying 10 years of auto insurance with no incidents, but that doesn't mean you don't need it...

Saying extended warranty is useless(especially with dealer service gouging) is similar to saying auto insurance is not needed because they base their calculation on averages.

[Lotusmotion]

As an finance entrepreneur, I am quite familiar with the extended warranty business model having evaluated it for my own business purposes. The business model is underwritten and managed pretty much the same way for home appliances, electronic gizmos, or cars. It is a very profitable business for the insurer and dealers that sell it.

The comments are spot on...extended warranty risk is underwritten on a policy-by-policy basis but the underwriting is based on averaged risk, managed accordingly, and a very tidy profit is made by the insurer.

The product sells because buyers really do believe they will beat the odds and receive more benefit in return than the policy costs them . Sometimes they do (I did), but on average they do not. Everyone wants to believe they will be a special case or maybe even smarter than the next guy. The product also sells because sometimes buyers believe that the insurer is well intentioned and is watching out for their customers....

A manufacturer issued extended warranty is most likely going to be around for the long haul versus a third party.

Check the state-by-state insuance requirements yourself...there ain't a whole lot of financial backing to extended warranty companies .

Major financial companies are dropping like flies and will continue to do so, and there is no guarantee your extended auto warranty vendor will be around (unless from the manufacturer). Just because extended warranty policies are profitable does not mean the extended warranty company will be well managed and be around long-term.

I had an extended factory warranty on my Audi Allroad. Its pneumatic suspension can be finicky, problematic, and expensive to maintain and repair. The warranty was part of the purchase deal from an Audi dealer.

For my Allroad, it paid off. I was lucky...not because the warranty provider was dumb, generous, or watching my back...I was just plain lucky and beat the odds.

[Randy Chase]

Originally Posted by cemaykan

No I still don't agree

You have a auto insurance right, they work on averages to.

There is no guarantee, you might end up paying 10 years of auto insurance with no incidents, but that doesn't mean you don't need it...

Saying extended warranty is useless(especially with dealer service gouging) is similar to saying auto insurance is not needed because they base their calculation on averages.

You don't agree because you are misinterpreting what I typed.

I never said it was useless, in fact I said the opposite. It could make sense for you. It is a gamble.

Are you arguing that the company that offers the policy does not think they will spend less than you pay them?

[charliex]

if extended warraties and insurance were a great deal for everyone, then they'd go out of business immediately, same way as for every winner in vegas, there are something like 1,000,000 losers.

like all gambling its a factor of luck against improbable fixed odds, you might put the insurance money in a high yield account or attempt on the stock market and luck out, or put it all into blackjack, then it'd pay for any repairs.

calculate the average costs of repairs over the lifetime of a comparable vehicle, number of sales/owners, factor in that some won't be settled or used, and figure out a price, if its above a certain watermark, they'll offer, if not they won't, if previous data changes out of favour they'll cancel it.

its a major money maker for businesses, thats why every electronic store you go to wants you to buy a 'performance guarantee or extended warranty', they know the amount you pay and the time it'll take to break on average is a win win situation for you.

the fact that they gain more than their customers generally without question is why its a bad deal.

[cemaykan]

OK, Let me put it this way:

It is true the odds (%) of having any financial benefit by extended warranty compared to the insurer is against us. I agree with you on that Randy.

BUT, I prefer the piece of mind that comes with it even though not everything is covered.

[Randy Chase]

Originally Posted by cemaykan

OK, Let me put it this way:

It is true the odds (%) of having any financial benefit by extended warranty compared to the insurer is against us. I agree with you on that Randy.

Then you *ARE* agreeing with what I typed.

BUT, I prefer the piece of mind that comes with it even though not everything is covered.

Of course. And I never addressed that. That is what insurance is all about, giving you peace of mind (not piece!) or covering what you can't afford to cover.

[cemaykan]

>>Then you *ARE* agreeing with what I typed.

Not really Because I don't agree, think that its %100 gamble.

A gamble that does not guarantee any form of return, while "piece of mind" although cannot be measured, photocopied, sold, or weighed is a value, return.

[charliex]

"Would you like to buy tornado insurance ?"
But there hasn't been a recorded tornado here in a hundred years!
"Well don't you think we're about due for one!"

/FG

[Lotusmotion]

Originally Posted by cemaykan

No I still don't agree

You have a auto insurance right, they work on averages to.

There is no guarantee, you might end up paying 10 years of auto insurance with no incidents, but that doesn't mean you don't need it...

Saying extended warranty is useless(especially with dealer service gouging) is similar to saying auto insurance is not needed because they base their calculation on averages.

You need auto insurance to protect yourself from financial damages or liabilities that may result from accidents. It is mandatory in most states. There are reckless drivers, financially irresponsible drivers, dweebs, numbnuts, and sometimes just good people caught in a bad situation.

Comparing auto accident insurance to product failure risk is not relevant.

Your best protection against dealer gouging is knowing your car and chosing who you do business with. Unlike risk from an auto accident, that is totally in your control.

Many car owners elect to not want to control that risk by passing it to a third party via an extended auto warranty.

That is okay, but that decision also comes with a cost (the policy) and risks (you will likely collect less than you paid).

Of course, extended warranty coverage is not useless...how else is the insurer going to make money?

[Randy Chase]

sigh

[agirls]

lol, how many ways can you say the same thing?

[lotusfan2]

Ok, if you are on the side of "I want to get an extended warranty" you can negotiate the price you're going to pay. It might pay off to call several lotus dealers and see if you can get a better price elsewhere.

Personally, I'm on the side of "the insurance company is making money hence I'm losing money" thus an extended warranty is not a good deal. I always have to laugh when I go to Best-Buy, or whatever store, buy a $40 item and the extended warranty is "only $15" more.

[charliex]

I like it when they call it a performance guarantee , I have to pay them to guarantee the product performs ?

I have a feeling manufacturers may be able to offer inferior goods given how common people do buy these warranties, those that don't buy it, think oh well my fault for not getting it, and those that do get a new item. It may train us to expect and accept early failure.

[Joecooool]

Originally Posted by Lotusmotion

Your best protection against dealer gouging is knowing your car and choosing who you do business with. Unlike risk from an auto accident, that is totally in your control.

Many car owners elect to not want to control that risk by passing it to a third party via an extended auto warranty.

I had a friend with a 911 a few years ago that took the car to the Porsche dealer because his transmission was slipping when he shifted. Now we as car guys all know that probably means you just need a new clutch.

The dealer told him he needed a new transmission. It was going to be about $6,000.

When he pulled out his extended warranty, the service manager said they were going to need to look the car over again. He said they made a mistake and the new bill came back for a new clutch which was about $700.

My friend didn't realise he was almost screwed. He just thought they made a little mistake. When he told me this I explained to him that had they tried to bill the warranty company for a new transmission, they would have wanted proof that it was damaged. They knew it wasn't, they were just trying to rape him.

So even though he still had to pay for the repair, the extended warranty forced the dealer to be "honest".

[Lotusmotion]

Originally Posted by Joecooool

...they were just trying to rape him.

So even though he still had to pay for the repair, the extended warranty forced the dealer to be "honest".

With all due respect, I think that arguement is a crock. It deflects personal accountability by taking the easy way out via the "victim" role and portrays transferring personal responsibility to the insurer as an economic decision.

What a crock. Buying an extended warranty is an emotional decision. End of story. That is okay. We all have our teddy bears that we cling to. But to rationalize it by embracing the "I'm gonna get screwed" mentality is a sure set-up for a nice screwing.

We all have the screwed stories. I was almost screwed by a supposedly reputable (but actually shady) mechanic on a carb issue that affected my '70 Porsche 914 / 6. I did some homework, paid the full infalted $1,500 bill to get my car out of his shop, got a second opinion, busted the shady mechanic's scam of installing mislabelled carb jets, showed him the evidence and a threatened lawsuit. The matter was settled to my satisfaction.

As I said, your best protection against dealer gouging is knowing your car and chosing who you do business with...that is totally in your control.

No one is gonna beat you up for buying an extended warranty. It is okay. Your thought process is exactly why they are such a money maker.

[AdamT]

I'm with Randy and Lotusmotion on this one... but only because we are talking about Lotuses and not some other sort of exotic car or expensive GT. I just can't see the need for it with the Lotus given: (a) the reliable Toyota powertrain, (b) the general lack of overly-complicated electronics and other mechanical parts in the car, and (c) the ease of repairing some things in our cars compared to other sports cars.

Now, I'm in a very different boat with the 2004 Mercedes E55 AMG that I just picked up! (1) It's not nearly reliable as the Lotus (and isn't that sad for MB?!), (2) it has a sh*tload of outrageously complicated and expensive mechanical and electrical things in it, and (3) I don't have the first clue how to do anything about any of them if they fail. In this case, therefore, I am considering an extended warranty.

And my God, I am here to tell you that they are outrageous... assuming you can even find people to cover you! How bad is it? Well, I walked into one of the local MB dealers last night to ask about extended Mercedes Benz Factory warranties and the first thing out of their mouth was, "Oh, well it's not for an AMG, is it?" That's right... MB won't even cover their own recent AMG models with their factory warranty! Insane. (Amazingly, Chrysler will however. Weird.)

Regardless, I am considering an extended plan for my AMG after going through an absolutely horrific set of mechanical and electrical failures with a past luxury GT (a BMW 850i). And if I had a different luxury GT (like a Maserati Coupe, which I almost bought recently), then I would probably consider one. But for a Lotus, nope. Just can't see the gamble being worth it because, luckily for us, they are simple and (generally) reliable little machines. For a fancy sports car, that is!

[R'elise Me]

The cars are solid mechanically IMO, and my service history would support that. However, the are super costly to repair mechanically so one should buy the ext warranty, especially if you drive them hard. It's not likely that you will actually use the value of the policy, but in the entirely-possible event that you need it, you'll be damned happy you bought it because NOTHING mechanical on this car costs less than $1k to repair. Trannies are in the $5k area, engines and blowers are astronomical. And they do blow - I've seen it a number of times. It's just peace of mind for those that hate to pay dealers what they charge to work on these cars.

[Joecooool]

Originally Posted by AdamT

I'm with Randy and Lotusmotion on this one... but only because we are talking about Lotuses and not some other sort of exotic car or expensive GT. I just can't see the need for it with the Lotus given: (a) the reliable Toyota powertrain, (b) the general lack of overly-complicated electronics and other mechanical parts in the car, and (c) the ease of repairing some things in our cars compared to other sports cars.

If you read my original post, its not the power train I am worried about. Its the stuff made by Lotus that worries the hell out of me. Are we forgetting this is a British car company?

You guys have any idea how many instrument clusters have been replaced? Do you know how many have had to deal with switch pack problems?

Some of you guys should spend a little time over here and see the nightmares some of these people are dealing with. Electrical - LotusTalk - The Lotus Cars Community

And Lotusmotion, I don't care how well you think you know your own car, you are not able to fix the electrical issues common to these cars.

[Lotusmotion]

Originally Posted by Joecooool

And Lotusmotion, I don't care how well you think you know your own car, you are not able to fix the electrical issues common to these cars.

Knowing my car and chosing who I do business with is all about managing personal accountability, not setting myself up for a fleecing, and not paying someone to "protect" me.

It has nothing to do with fixing electrical problems.

The electrical components in Lotus cars, like most modern cars, are not designed to be repaired. They are intended to be replaced just like any other modern car I own.

[charliex]

Easy there, Lucas is long gone and the electronics (cluster) aren't all made in the UK !