Making cars people want to buy

[Bruce Nunnally]

http://www.speedsportlife.com/2007/12/26/a...llac-christmas/

Interesting blog post on the resurgence of Cadillac relates the author's experience with driving his neighbor's 06 STS4 for a week.

Everywhere I’ve gone - from the drive-thru at a downtown Wendy’s, where a young black man at the cash register regaled me with the story of his ‘91 de Ville and the long hours of effort he’d put into making it “just right”, to the gas station down the street from my house, where a rather tough-looking kid with tattoos on his eyelids begged me to open the hood so he could see the V8, to my own cul-de-sac, where my neighbor, who has managed to utterly ignore everything in my driveway from Viper to CL55 AMG, completely amazed me with his exacting knowledge of the differences between the STS-V and the “regular” STS - people seem to resonate with Cadillac. They resonate with Cadillac as an idea, as an aspiration, and with the car itself. There’s a passion in this country for the wreath and crest, and it’s beyond anything I suspected.

I think people DO want Cadillac to be successful. The key is in continuing the terrific quality level while pushing the envelope with styling and performance.

[joeb]

I think caddy is making progress but I do notice lots of comment on this board that owning a caddy without a warranty is not recommended for a person of limited means. newer cars seem to have MORE options than ever and once the warranty expires, how can the common man hope to maintain stuff like magride suspension bits, on board NAV systems, adaptive cruise control and so on? imagine a caddy whose systems almost never failed after 5-6 years? yes they are luxury cars which means high power, excellent fit and finish and fine interior appointments but reliability is nice too. I see new STS's and think, wow thats a cool car but what happens when it breaks down?

[Texas Jim]

I think caddy is making progress but I do notice lots of comment on this board that owning a caddy without a warranty is not recommended for a person of limited means. newer cars seem to have MORE options than ever and once the warranty expires, how can the common man hope to maintain stuff like magride suspension bits, on board NAV systems, adaptive cruise control and so on? imagine a caddy whose systems almost never failed after 5-6 years? yes they are luxury cars which means high power, excellent fit and finish and fine interior appointments but reliability is nice too. I see new STS's and think, wow thats a cool car but what happens when it breaks down?

I can guarantee that when my factory warranty runs out... it will either be traded or I will get the GM Major Guard extended warranty. I am getting too old and stiff to work on it myself so anything that broke would have to be fixed by the dealer or a machanic.

Mine has all of those things you mentioned... Magnetic ride...nav system..etc etc

I am of fairly limited means myself, so I would not want to put all my spare money into a car that was several years old. Thats why I would have the extended warranty on it.

When I could no longer have the warranty... I would get rid of it.

[joeb]

you can pick up a 02' STS with low miles for around 12k. what will an 07 STS go for in 2012? how about an STS-V after 5yrs or so?

[jcobz28]

Making a car I WANT to buy....

Are you talking about THIS?!?

[Poobah]

When you get an extended warranty, you pay for the average cost of repairing your car whether you need the repairs or not. There are also administrative costs and profit built into their cost. A warranty is great to have if you have to make a major repair. Often, you end up paying more for the warranty than you would have for repairs. Warranties help control your exposure to repair expenses, which is nice, but they end up costing you more in the long run. I think you come out best by being knowledgeable about your car and having a reliable independent mechanic to take care of the things you can't (or don't want to) do yourself.

[WarrenJ]

When you get an extended warranty, you pay for the average cost of repairing your car whether you need the repairs or not. There are also administrative costs and profit built into their cost. A warranty is great to have if you have to make a major repair. Often, you end up paying more for the warranty than you would have for repairs. Warranties help control your exposure to repair expenses, which is nice, but they end up costing you more in the long run. I think you come out best by being knowledgeable about your car and having a reliable independent mechanic to take care of the things you can't (or don't want to) do yourself.

I'm in complete agreement with you.

The only extended warranty I pay for is the one on my (expen$ive) cell phone. And that's mostly because it covers loss, theft and damage and provides immediate replacement. Don't ask about the one that went in the toilet.

Regards,

Warren

[JasonA]

I'm of the mind that the only insurance I buy is for the stuff I can't afford to replace, or are forced to have. Like my health. Like my house. Like liability insurance on my cars.

Consumer product warranties are small insurance policies, and are losing propositions for the consumer. They are by definition -- they HAVE to be, or the warranty companies don't make money. When you think about it, nobody can afford to offer you a warranty on a Cadillac that will cost them more to administer than it cost you. You always hear the stories about paying for a $1000 warranty and needing $5000's worth of work done on the car. Most stories aren't like that...they CAN'T be, or the warranty company, or the auto manufacturer, wouldn't exist. It's exactly like gambling at the casino. In the end, the house ALWAYS wins. If the consumer always won, "the house" wouldn't be around for long.

The same is true of the $400 service warranty on that new TV you just bought. The same is true of the $50 road hazard program on those tires you just bought. If you've worked in retail, you know the sales folks have service contract quotas. Those warranty programs are pure profit for the stores, and their sales folks have quotes to sell a certain number of them for every hour on the job. It's just part of the business now.

Like Poobah said, aftermarket warranties are a loss. Take the $2000 it'd cost you for that warranty and put it in the bank. At least let it make some money for you. 5 years down the road, when you haven't used it all, and maybe none of it, go on a vacation.

[Bruce Nunnally]

In the book "Drive it Forever" the author recommends that you establish and fund a budget for your used car. Knowing that a used car will have more repairs and maintenance, he suggests that you actually set aside the estimated amount, say $200/month or whatever your estimate is, into a separate account. Then if / when you DO need to make repairs, you have the funds available. Having the money for repairs set aside can change the complexion of how upsetting the repair is.

An additional issue for driving an older car is having backup transportation to get to work if your car is in the shop. This can be a huge factor -- you end up in a emergency state to get the Cadillac repaired when it is down in order to have it available, and at the 'mercy' of the first mechanic's estimate in order to get the car on the road. Again, having a plan in advance either in the form of keeping a 'beater' backup vehicle, or in having a good dropoff and pickup plan for a rental car can save the day.

The warranty costs get a separate multiplier / advantage that has to be considered also. If I go to the mechanic to get work done, I get quoted "Customer Pay" hours and "Customer Pay" rate per hour. So say my job is going to take 10 hours at $99/hour or $990. The SAME job under warranty might book at 7 hours and $75/hour, or $525. So the Warranty company ends up paying much less than I would pay out of pocket. I don't know what the sales multiples are for the warranty company and for the Dealer who is selling me the warranty, but let's say the dealer is making 40% markup and the warranty company is making 20% profit. If the warranty costs $1,950 on discount, and the sales markup is still 40%, the warranty company gets paid $1392. If the warranty company has a 20% markup, then they fund $1,160 of warranty work.

That same work on customer pay would have cost me around $2,320 because of the higher customer pay rates and book charges. So the total average value of the warranty in terms of out of pocket costs may be similar to the average repair bills for the car. The warranty also gives the additional benefit of risk avoidance -- as long as the dealer honors the warranty, then the total out of pocket cost of repairs is now a known value, the cost of the warranty. In addition, the warranty covers rental car fees while the car is in for repairs.

So, while I normally agree with Jason's summary and/or argue the same, I am not clear that it as open and shut as that because of the difference between warranty work cost and customer pay cost. It is financially attractive to self-fund your vehicle warranty if you actually set aside the repair costs, and if you have a way to get to work if the Cadillac needs repairs. It is attractive to buy the extended warranty if you want to limit your total risk, and if you want the 'drop it off, get a rental car, and don't worry about how much it costs' benefits of the warranty coverage.

[Texas Jim]

Howdy to all,

Thanks for all the comments, both pro and (mostly) con about the extended warrantys. I have to both agree with you all and disagree at the same time.

While it is very true that they have to make money to stay in business, it is also true that I want to limit my financial exposure to expensive repairs.

I plan to keep the Cadillac for several years ... up to 100,000 miles. Maybe longer if it turns out to be a good car and needs very little repairs. In that case, I wasted some of the money for the warranty.

If it turns out that is needs even a couple of repairs to some of the electronic stuff it has on it, like the Navigation system or to the Magnetic Ride supension or the struts, I will be money ahead. The struts have a liquid in them and the viscosity can be changed 1000 times a second by the computer. They also cost over a grand EACH. Or that is what I have been told.

The Air Conditioned seats have a control module for each seat. Already had to have one of THEM replaced. One of the Ultrasonic Parking Assist modules went out in the front bumper.

All of this plus a few other things, have of course been covered under warranty. I feel that if I have a -0- or a $100 deductable, I will be more apt to keep things fixed and not let them go. Assuming that you could let it go.... safety wise. If this assumtion is TRUE.. then it stands to reason that on trade in.... I will get more for it than if it has several things wrong with it that may be expensive to fix which will recoup some of the money I spent on the extended warranty.

On a related side note, my 2002 Taurus (with an extended warranty) is in the shop now getting a new torque converter, a new HVAC blower fan and the electronics that control the HVAC. Per the service writer.... right at THREE GRAND total. A couple of years ago, the right front half shaft, the seals on the Trans and both front struts were replaced under the extended warranty. I think that was about $1,700 total. On "THAT" particular warranty I am ahead on it. It cost me (I think) about $1,900.

Again....THANKS to all of you for your input. I am still debating it a little, (not much) in my mind. To me, it is just another type of insurance and it limits my cost if and when something DOES go wrong. And with ME, something usually does.