Sponsored

Extended warranty - please explain the appeal

rickinAZ

Well-Known Member
First Name
Rick
Joined
Jan 2, 2020
Threads
234
Messages
3,471
Reaction score
4,988
Location
Phoenix
Vehicle(s)
2021 Rubicon EcoDiesel (11th Jeep)
Occupation
Retired CFO. Mayo Clinic volunteer.
There are many threads discussing the purchase of an extended warranty, but the math doesn't work for me. One would think that, to stay in business, claims paid out must be less the premiums received. And...they must allow for the administrative cost of running the program plus a provision for profits. As a result, most insurance companies only pay out 50-75% of premiums received.

Plus, what if your Jeep doesn't break down? What if your claim is denied? What if the company goes out of business? What if you sell your Jeep earlier than you thought? In the broader retail world, extended warranties are known as the most profitable item sold at most establishments - which is not good news for the purchasers.

So...what gives? What have I been missing by automatically rejecting any form of extended warranty; on any product?
Sponsored

 

Pete-2018

New Member
First Name
Pete
Joined
Jan 25, 2020
Threads
0
Messages
2
Reaction score
1
Location
Virginia Beach Virginia
Vehicle(s)
2018 Wrangler JLU Sport S
I only consider an extended warranty if it is offered by the OEM. Totally agree on many warranty companies going out of business. I ended up getting a 100K bumper to bumper on my 2018 JL. If I have no claims I am fine with that as the warranty cost was less than I spent on my TJ AC at 80K. My reason to get it was the amount of complex electronics on the Sport S, with them all integrated into a connected computer system. One downside is I am going to have to watch mods carefully to not replace expensive items under warranty or void warranty areas. Always a hard choice, as you are gambling when purchasing, that your purchased item will break.
 

Paluss

Well-Known Member
Joined
Feb 15, 2018
Threads
59
Messages
696
Reaction score
688
Location
maryland
Vehicle(s)
2022 JLURD
There are many threads discussing the purchase of an extended warranty, but the math doesn't work for me. One would think that, to stay in business, claims paid out must be less the premiums received. And...they must allow for the administrative cost of running the program plus a provision for profits. As a result, most insurance companies only pay out 50-75% of premiums received.

Plus, what if your Jeep doesn't break down? What if your claim is denied? What if the company goes out of business? What if you sell your Jeep earlier than you thought? In the broader retail world, extended warranties are known as the most profitable item sold at most establishments - which is not good news for the purchasers.

So...what gives? What have I been missing by automatically rejecting any form of extended warranty; on any product?
it depends on a lot of factors as well as how you use and take care of the vehicle and the mileage and how long you plan to keep the vehicle. If you plan on dumping the jeep before 100K miles and 7-10 years you are probably better off not purchasing the extended, if you are driving 25K mile a year and plan to keep if for a while the extended is probably a good purchase.
 

palmor

Well-Known Member
Joined
May 29, 2018
Threads
1
Messages
123
Reaction score
119
Location
Mass
Vehicle(s)
2019 Jeep Grand Cherokee High Altitude, 2018 JLU Moab
So...what gives? What have I been missing by automatically rejecting any form of extended warranty; on any product?
Depends on the warranty and how long you plan on keeping your vehicle. Had one for our 2010 GC (Mopar lifetime warranty) and it paid for itself a couple of times over. Not that we had anything major but it adds up after 9 years and 150k miles. It even paid for shocks at 120k miles (which was a surprise to me). Then, for some people the money is worth the security of knowing you aren't going to have any surprises.
 

Sponsored

cosine

Well-Known Member
First Name
Chris
Joined
Jun 1, 2019
Threads
73
Messages
13,035
Reaction score
72,964
Location
NY
Vehicle(s)
2019 Wrangler Sport jl
Occupation
Gone Postal
i've never purchase a extended warranty on any vehicles i've owned and i keep them for a long time. my first new car was a 99 chevy cavalier. sold it to my brother with 78k miles on it . he still has the car and it has 200k+ miles on it. the second i had was a 07 jeep grand cherokee with 91k miles on it before it shit a brick. by that time i was looking around for replacement. now i have a 19 jl. i declined warranty when i drove the jl home that day and just last week put the reminder notice about the warranty thru the shredder. i've been easy with all my vehicle and keep up with the maintenance. on a side note any vehicle that my family had never bothered with the warranty and we run them down to the ground with 100k+ miles.
 

viper88

Well-Known Member
First Name
Nick
Joined
Apr 22, 2018
Threads
44
Messages
5,510
Reaction score
5,588
Location
IL
Vehicle(s)
'19 JLR 2.0T (past), '22 JLR 3.6 (present)
Peace of mind if you plan on keeping your JL beyond the factory bumper-to-bumper and drivetrain warranty.

No need to rush and buy a extended warranty when you close. You can buy it anytime before the standard 36mo/36K mile warranty expires. 99% of the time the price from one of the discount dealers on this forum will be cheaper then the dealer you are buying from. The only down side is there are sometimes very modest price increases.
 
Last edited:

YYCSahara

Well-Known Member
First Name
BDLL
Joined
May 3, 2019
Threads
0
Messages
234
Reaction score
185
Location
Calgary AB Canada
Vehicle(s)
2019 Jeep Wrangler Unlimited Sahara 2.0T
While I personally never get extended warranties because I never keep my vehicles past warranty period I can see why people get it.

It is like insurance. You have car insurance and you pay for it over the entire year, if you don't smash your car up, that money is gone and you never use your insurance. You can go your whole life and not have a claim, but you still paid for it.

Some companies will give you credit if you buy OEM extended warranty for example. If you don't use it, they will give you a credit back toward purchase of another plan if you buy another car from them.
 
OP
OP
rickinAZ

rickinAZ

Well-Known Member
First Name
Rick
Joined
Jan 2, 2020
Threads
234
Messages
3,471
Reaction score
4,988
Location
Phoenix
Vehicle(s)
2021 Rubicon EcoDiesel (11th Jeep)
Occupation
Retired CFO. Mayo Clinic volunteer.
It is like insurance.
EXACTLY. Except I buy insurance because I'm fearful of catastrophic loss (like being sued for $100K if you rear-end someone), not because I fear a smaller, more manageable repair- and virtually all auto repairs fall into that category. A kissing cousin is paying (much) extra for super-low deductible auto insurance so that your out-of-pocket expenses are next to nothing. Peace of mind is sometimes very expensive. Too expensive, if you run the numbers.

Another way of looking at it is: Why do you think the providers are dying to sell this to you - so that they can lose money?

Full disclosure, I'm a retired CFO. You will not find any finance professionals who buy these products. None. Zero.
 
Last edited:

viper88

Well-Known Member
First Name
Nick
Joined
Apr 22, 2018
Threads
44
Messages
5,510
Reaction score
5,588
Location
IL
Vehicle(s)
'19 JLR 2.0T (past), '22 JLR 3.6 (present)
EXACTLY. Except I buy insurance because I'm fearful of catastrophic loss (like being sued for $100K if you rear-end someone), not because I fear a smaller, more manageable repair- and virtually all auto repairs fall into that category. A kissing cousin is paying (much) extra for super-low deductible auto insurance so that your out-of-pocket expenses are next to nothing. Peace of mind is sometimes very expensive. Too expensive, if you run the numbers.

Another way of looking at it is: Why do you think the providers are dying to sell this to you - so that they can lose money?
Insurance and warranty companies are in the business of making money. Insurance companies are also some of the most profitable business.

Everyone has a different tolerance for the unknown. About 10 States allow you to "self-insure" and not buy liability insurance. I have a friend who is pretty well off and he chooses to self-insure in his State. Would I self insure if I could? Nope. Would I consider a Mopar Extended Warranty after my normal bumper to bumper expires? Don't know yet? I usually don't keep my vehicles beyond the bumper to bumper warranty. I will get a better idea as the months and miles count down. I will know if I like it so much that I will keep it longer. And I want to see if my JLR is problematic for the first 36 months first. I look at the first 36 months as a free preview into how reliable it will be.
 

Sponsored

Gee-pah

Banned
Banned
Banned
First Name
Andy
Joined
Nov 19, 2019
Threads
59
Messages
1,658
Reaction score
1,264
Location
SanFrancisco
Vehicle(s)
JL Wrangler
EXACTLY. Except I buy insurance because I'm fearful of catastrophic loss (like being sued for $100K if you rear-end someone), not because I fear a smaller, more manageable repair- and virtually all auto repairs fall into that category. A kissing cousin is paying (much) extra for super-low deductible auto insurance so that your out-of-pocket expenses are next to nothing. Peace of mind is sometimes very expensive. Too expensive, if you run the numbers.

Another way of looking at it is: Why do you think the providers are dying to sell this to you - so that they can lose money?

Full disclosure, I'm a retired CFO. You will not find any finance professionals who buy these products. None. Zero.
Rick is "financially" correct. What I mean by "financially" is that if you take the cost of the repair and multiply it by the likelihood of it occurring across many independent JL Wranglers, a.k.a. the expected value, it's a lot less than any insurer will charge you to cover it should such bad luck hit your doorstep. Still more that cost isn't catastrophic to pay out of pocket, at least as compared to being named in some large vehicular law suit--to Rick's example--the latter being what insurance really is for.

This said, it doesn't mean that some vehicle maintenance insurance isn't better than others or that all people are stupid for getting that insurance. You see, Rick may differ from others in two ways (in addition to being smart). The first is that Rick may have more financially flexible to absorb these costs better than others, and the second reason is that Rick may be bothered by such self insurance risks less than others not only because he can afford "the hit," but we all value things differently.

Think about it, if I sell you a can of soda for profit for $1.25, it's only because you value it more than that amount, and me less.

Here's the rub; the irony. People living closer to their means, attracted by such repair insurance's guarantee to cap certain costs, (and their greater aversion to risk because of this than likely Rick) often live more expensive lives paying for that insurance. Rick offers the classic example of people paying auto collision deductibles below $1,000: an amount you should likely not even file a claim for if your damage is less, as having to pay a king's ransom for this "benefit."

(I will spare you the "if you can't afford to self-insure the vehicle's repairs you shouldn't buy speech.")

Rick--thank you in advance for letting me use you to highlight a point I suspect your financial background has you concur with.

No profit seeking entity offers you a warranty because it's a nice service. It's done at a profit you pay for.

A simple example: I bought a pretty cheap tool at Harbor Freight recently where a warranty was offered at the cash register for a good percentage of its price.

"If it breaks," I replied, "I'll just buy another." (I.e. I self insured.)

"They make me ask," was the check out clerk's honest reply. :)
 
Last edited:

AlamedaJeep

Well-Known Member
First Name
Jim
Joined
Jun 30, 2018
Threads
12
Messages
430
Reaction score
463
Location
Alameda, CA
Vehicle(s)
2018 Jeep Wrangler JL Unlimited Sport S
Financially, it probably doesn't make sense on average.

In my case, however, it MAY be worth it financially, and at least at a minimum it gives me a sense of security.

My last two Jeeps were 13 years old and 16 years old when I sold them. There is a good chance I will hang on to this one for a similar length of time. So it may pay off for me, or at a minimum I won't begrudge a $1,000 repair that is likely to be required at some point.

I was able to get a lifetime warranty while it was still available, so I may be someone who costs the manufacturer more than they charged me for the warranty. One unfortunate aspect (or fortunate, depending on how you look at it) is that it's hard to be tempted by newer Jeeps since I won't be able to obtain another lifetime warranty.

Just another opinion from someone who is probably an outlier.
 

aldo98229

Well-Known Member
First Name
Aldo
Joined
Nov 16, 2019
Threads
86
Messages
11,019
Reaction score
27,682
Location
Bellingham, WA
Vehicle(s)
2023 Jeep Gladiator, 2018 Fiat 124 Spider
Occupation
Market Research
Vehicle Showcase
3
Unlike my prior Jeeps, I plan to keep this JL well past the factory warranty. These Jeeps are now so expensive, and prices keep climbing so quickly, that it doesn’t make sense to get rid of it after three years.

But given the atrocious service I’ve getting from Jeep dealers, I can't justify buying an extended warranty; it would only prolong the agony.

Hopefully any bugs get addressed in the first three years. Beyond that, I have a very good independent shop to take care of maintenance and repairs as they come up.
 
Last edited:

Cthehentz

Well-Known Member
First Name
Kev
Joined
Jan 8, 2020
Threads
17
Messages
312
Reaction score
393
Location
Vegas
Vehicle(s)
Jeep JLU
Vehicle Showcase
1
Warranties in my opinion are well worth it unless you plan on modifing your vehicle that may cause a failure and possible denial of claim. I bought every warranty possible on my new jeep because I am retired and and these new jeeps have a lot going on. I read years ago if you are out of or don't have a warranty you should have $5k for vehicle repairs and that's kinda true, my 2011 Land Rover LR4 out of warranty just cost me $5800 in repairs because the timing tensioner was failing so that work had to be done.
 

viper88

Well-Known Member
First Name
Nick
Joined
Apr 22, 2018
Threads
44
Messages
5,510
Reaction score
5,588
Location
IL
Vehicle(s)
'19 JLR 2.0T (past), '22 JLR 3.6 (present)
Mopar used to offer a Lifetime Warranty. That warranty might make sense IF you definitely kept your Wrangler for a very long time. Unfortunately FCA stopped offering the Lifetime Warranty back in late 2018 or something. They were probably loosing money on them. I read about some people still using that warranty on Wranglers that are 20 years old.
Sponsored

 
 



Top