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Originally Posted by bnorman
Extended warrantees are usually not a good value for any product including automobiles. When sold by auto dealers, 30% or more of the premium goes right into the dealers pocket as commission. I have seen these warrantees marked up as much a 100% over cost by some dealers. It is a huge profit item for them.
Take the money and put it in a conservative investment. If you do this with all your household appliances, electronics and vehicles, and pay the repairs out of your pocket you will be money ahead in the long run. This is especially true for people who a fanatical about the care and maintenance of their toys.
Just my $ .02.
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Hi,
You're absolutely correct, you will be money ahead. I know 2 guys who own an Aftermarket Warranty Co. and they make a fortune! They say that fewer than 30% of the customers ever make claims exceeding the premium charged. It is simply insurance by another name, and as such, is predicated on the fact that fewer people will make claims than those actually taking out the warranty.
So, the smart thing to do, as you so rightly point out, is insure yourself by making and investing a small contingency fund dedicated to only those major repairs.
The problem with this approach is that it requires a discipline which few people possess. I maintain such a fund and have funded it by continuing to make Car payments to a specific investment account after the actual note on the Car is paid off for 9 mos. This way, I take advantage of the already habitual payment I have been making all along, and it doesn't disrupt my other budgetary concerns.
Many people however cannot do this, or fear a major repair before they can accumulate a decent
War Chest, and so opt for the Aftermarket Warranty as being easier or more manageable, even if they may never actually use it, or pay more in the long run...
Happy Motoring!... Jim'99