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mikefocke · 03-09-2011, 05:21 PM

have calculated the payout as a percentage of the income of these companies. And it only stands to reason that if I sell something that has administrative costs and sales costs (salesperson, upseller, sales manager, GM, owner, etc all take their cut) and profits in it, the amount I have left that I expect to pay out in parts and labor expenses to fulfill the warranty terms will be less on average than the cost I will change.

Consumer Reports calculated a 30% payout as a percentage of cost several years ago. 70% went for things that, in the end, didn't benefit the buyer...on average. Sure we'll hear from some who won...just like at the casino. But casinos don't take 70% off the top on average in any game I'd play.

And financing a warranty only adds to the cost and decreases the efficiency of the purchase.

A 2011 isn't that new and we have the experiences with the last 2 years from a similar design to judge from.

Porsche provides the CPO as a way of selling on used models so the dealer can talk the potential trade-in owner into the high margin new car. Curiously, the CPO terms and costs are a US specific item. In the UK it seems you can buy a warranty from a OPC (dealer) and it will be backed by the Porsche distributor in the UK through about 10 years. No such luck here. The cost of a CPO warranty that is subsidized by another product's sales is not a good measure of the payout liability in a warranty.

03-09-2011, 05:21 PM	#8
mikefocke Registered User Join Date: Aug 2005 Location: Sanford NC Posts: 2,537	Well those who have done serious research have calculated the payout as a percentage of the income of these companies. And it only stands to reason that if I sell something that has administrative costs and sales costs (salesperson, upseller, sales manager, GM, owner, etc all take their cut) and profits in it, the amount I have left that I expect to pay out in parts and labor expenses to fulfill the warranty terms will be less on average than the cost I will change. Consumer Reports calculated a 30% payout as a percentage of cost several years ago. 70% went for things that, in the end, didn't benefit the buyer...on average. Sure we'll hear from some who won...just like at the casino. But casinos don't take 70% off the top on average in any game I'd play. And financing a warranty only adds to the cost and decreases the efficiency of the purchase. A 2011 isn't that new and we have the experiences with the last 2 years from a similar design to judge from. Porsche provides the CPO as a way of selling on used models so the dealer can talk the potential trade-in owner into the high margin new car. Curiously, the CPO terms and costs are a US specific item. In the UK it seems you can buy a warranty from a OPC (dealer) and it will be backed by the Porsche distributor in the UK through about 10 years. No such luck here. The cost of a CPO warranty that is subsidized by another product's sales is not a good measure of the payout liability in a warranty.