Warranty wonders

[sparky65]

I have a third party warranty thru Mercury Insurance. I got it when I bought my 99 Boxster in June. 3yr/36000 for $3500. Best thing is ---no deductable.

It is a very comprehensive package and good on me...my driver's side window regulator just went south yesterday. They picked up the whole $477 tab.

It was a sound investment in my opinion.

brian

[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.

[MNBoxster]

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.

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

[David N.]

Thanks for the input everyone, apparently it seems I'm not getting much of a deal with the arrangement I've been offered.

More info, it is an aftermarket insurance company they are offering, called 'Total Shield', however it works through any repairer and not just that dealership.

I still think the real question here isn't the details of this policy but just what sort of expenses await me around the corner. I have no problem maintaining a 'war chest', but many many people on this forum have quoted the Boxster as an expensive toy to maintain, and having only 3 months on the clock of a 6-year-old car I'm just trying to figure out if a relatively problem free existance so far is more of a rarity than a normal expectation. Owning a rugged '95 Silverado for many years where the only significant problem I had was a water pump that went out, I just have no clue what to expect from Stuttgart's best.

The main thing that scares the heck out of me are CELs, just because the car throws a code that I can't decypher myself and if it is an engine-related thing I'm going to have a helluva time dropping it to take a look. And little things like microswitches, motors, AC problems...

-David

[unklekraker]

Hey, David...that's what i have. A company called "Total Shield". I Recently Bought A 99' Boxster W/ 44k Mi. About 4 Months Ago For $21k And Bought Extended Warranty 4yrs/48k For $2300 w/ $50 deductable per visit not per repair plus free car rental or loaner. I got the Platinum shield
List of what have done so far by the Porsche dealer with my Box that's been paid for by Total Shield:
1) worn camshaft gasket seal/cover
2) airbag module chip
3) worn passenger side seatbelt
4) coolant reservoir tank
5) MAF (just recently)

So far the Total shield has paid $1800 worth of repair to my car. It's not the parts that's really expensive, it's the hourly rate of the dealer

The only thing that you need to look out for is, if the dealer or the shop exceed the hourly rate of $115, you gonna have to pay the difference.

Try Warranty Direct again coz' that's what i have for my Benz. From what I heard they are really quick on paying claims. I haven't use it yet w/c is good in a way

Hope this helps...

[z12358]

MNBoxster:
"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."

Jim, I agree with you and bnorman but the answer is not absolute and needs to be analyzed on a case by case basis. Extending the argument to all insurance is a bit more complicated as both the AVERAGE and the VARIANCE of the random outcomes need to be considered. Sometimes it "pays" to buy insurance when the volatility (variance) of the unknown outcomes becomes too large. For instance, let's assume that the average annual house insurance claim is $1000 (per house per year) and the average annual house insurance premium is $1500 (per house per year) -- just inventing numbers here. The insurance company is making $500 (per house per year) profit. However, imagine that the volatility (variance) of the claims is such that $300,000 claims are still very likely every year (even though the average is still only $1000). Paying the extra $500 per year to GUARANTEE that you will never be losing $300,000 is not a bad idea in this case -- even if you had the $300,000 saved in a 'catastrophic loss' account.

Now the $500 (33% profit margin) may be excessive but that's really a question on how free the market is and how much competition is allowed in the insurance business. More competition would cut that margin down, of course.

My point is that when the volatility becomes much larger than the mean (average) of a random process, and especially when it becomes comparable to someone's net worth (or even larger), then it's worth paying a premuim over the 'cost' premium to avoid it.

Z.

[Brucelee]

In short, the probability that you will recoup all of your premium in claims is not good.

However, that is not to say you can't.

What we say in the insurance industry is that it is UNLIKELY that you will die before your time, but if you do, you are 100% dead!

You pay your money and take your chances!

[bnorman]

Actually the efficient way to buy insurance is to assume as much of the risk as you can afford and transfer catastrophic losses to the insurance carrier.

I buy $1,000 deductible comprehensive and collission insurance on all four of my cars. That is the highest deductible offered by my company. This saves me over $400 per year in premiums. I save at least one deductible every 30 months. I know that my statistical likelyhood of being involve in a insurable claim is roughly 8 to 10 percent per year (as long as the wife doesn't drive the porsche). So in the long run I am ahead.

The problem with extended warrantees is they usually have a very low deductibles or pay first dollar losses. Thie insurer is going to charge enough to pay those losses and the expenses associated with handling the claims. That is after the have paid 30 to 50% of the premium to the dealer as a sales commission.

Just $ .02 more.

[unklekraker]

I think i'm one of the few consumer who bought extended warranty and use most of what I paid for in less than a year and still got 3 1/2 years left on the contract.

[seventythree]

Originally Posted by z12358

MNBoxster:
"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."

Jim, I agree with you and bnorman but the answer is not absolute and needs to be analyzed on a case by case basis. Extending the argument to all insurance is a bit more complicated as both the AVERAGE and the VARIANCE of the random outcomes need to be considered. Sometimes it "pays" to buy insurance when the volatility (variance) of the unknown outcomes becomes too large. For instance, let's assume that the average annual house insurance claim is $1000 (per house per year) and the average annual house insurance premium is $1500 (per house per year) -- just inventing numbers here. The insurance company is making $500 (per house per year) profit. However, imagine that the volatility (variance) of the claims is such that $300,000 claims are still very likely every year (even though the average is still only $1000). Paying the extra $500 per year to GUARANTEE that you will never be losing $300,000 is not a bad idea in this case -- even if you had the $300,000 saved in a 'catastrophic loss' account.

Now the $500 (33% profit margin) may be excessive but that's really a question on how free the market is and how much competition is allowed in the insurance business. More competition would cut that margin down, of course.

My point is that when the volatility becomes much larger than the mean (average) of a random process, and especially when it becomes comparable to someone's net worth (or even larger), then it's worth paying a premuim over the 'cost' premium to avoid it.

Z.

Z,
Tell me if you agree with the way I re-iterate your argument:

If the $6~8K repair bill most Boxster owners are concerned about, in the case of a complete engine replacement for example, represents a significant portion of the owner's net worth, then buying breakdown insurance makes good sense. Otherwise, self insuring is the way to go.

Net worth = $100K, buy extended coverage
Net worth = $1M, self insure

Regards

[z12358]

Originally Posted by seventythree

Z,
Tell me if you agree with the way I re-iterate your argument:

If the $6~8K repair bill most Boxster owners are concerned about, in the case of a complete engine replacement for example, represents a significant portion of the owner's net worth, then buying breakdown insurance makes good sense. Otherwise, self insuring is the way to go.

Net worth = $100K, buy extended coverage
Net worth = $1M, self insure

Regards

Close re-iteration, except it's missing the part where the VOLATILITY (range) of the random process is compared to its AVERAGE (which approx equals the annual premium minus the insurer's profit margin). If the average is much smaller than the volatility (i.e. premium is low enough) it may be better for both (net worth) cases to just buy the insurance. If the average is comparable to the volatility (i.e. premium is comparable to the worst case scenario) then it may be better for both to just self-insure as they will both be able to invest the premium into a "worst case" account and be able to cover the worst case scenario themselves.

But to answer your question -- and without getting into issues like liquid vs. non-liquid assets, utility functions, risk of ruin, etc. -- the richer guy should be able to self-insure much easier than the other guy, so your final conclusion seem to be correct but not at ANY price (premium), of course.

Z.

[wetstuff]

I did a lot of searching when the P-warranty was about to expire on a 01 Boxster-S I bought a couple of years ago. I looked at most third-party warranty companies before I came up with one that is only sold thru Credit Unions.

It's InterContinental Warranty Svcs. They had a variety of terms: I chose 5yr/80k (Ha!..I'm at 21k) I forget the big insurance company behind them, but the reason I opened an account at the MD State Employees (slackers..) CU is that I got the Guaranteed Price Refund rider which means: of the $1920 I paid - I get like $1800 back if I don't use it. ...They may only write cars that are still under factory cover. Mine had about 30days left.

We may sell the car, so I'll either pocket the warranty...or pull it out to close the deal. Cash-back doesn't transfer but the basics of the policy do.

Given the general long term quality of our cars and my limited useage - it's probably not statistically needed. That's why cash-back was especially attractive.

j i m