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Extended Warranties


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I ran across this post by Ur7X at caddilacforums and thought it was worth sharing here.

Somethings you need to know about extended warranties...

1) 50 cents of every dollar spent goes directly as commission to the signing agent. This is the standard for all of them from the good (GMPP) to the bad.

2) 15 cents of every dollar goes directly to profit of the warranty company

3) 4-5 cents of every dollar goes to corporate overhead and management of the agreements...

SO... Before you even start, on average, if the agreement costs $2000 only $620 of it will ever be used to fix a car.

Or another way to look at it...

Lets say that some Las Vegas Casino offered a game called "head or tails..." To play requires a minimum bet of $2000... They flip a coin. If it comes up heads they pay you $2620. Tails you get nothing...

Would you play?

Some on this board have played, and a couple hit several heads in a row and came out "ahead" (sorry for the pun) but on average you will lose.

Thanks Ur7X

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I read that post on warranties, and it always strikes me that people purchasing service extensions miss the biggest drawback. The free powertrain warranties offered by most used car lots have a very small cap on them.

Toronto has used lots on every corner in the burbs, usually run by people with english as a 2nd or 3rd language. A few years ago, I was pricing out a 98 Infinity Q45, and I searched out about 6 dealers from the autotrader. The engine or tranny on a Q45 can cost as much as a N* ... so a $5-10k repair is not unheard of.

When I pressed about the no charge 2 yr warranty, I was given the basics ... further questions revealed the deductable.

When I directly asked about the $$ cap per repair, the language barrier came into play every time. I rephrased the question ... will Lubrico or whoever your service provider is cover a $5k repair .... no response, just blank stares.

The reality is they throw on a 2 yr powertrain warranty that retails for $500, costs about $200, and build it into the unit price of the car. The repairs are capped between $1000 to $1500 dollars, and you pay the balance.

Then, of course, you must find a garage that works with the warranty provider, and hassle about what is or isn't covered.

None of this applies to the OEM warranties ... my wife's car came used with a Honda Plus warranty, which covers everthing to 100,000 miles or 6 years. But, to transfer the warranty, I had the seller provide all Honda service records to date. The cost of the OEM warranties are stiff, and I would've passed if it was my dime.

I too sell service extensions in a non automotive field, and the markup is at least 100%, and one of my manufacturers tracks a 1st year breakdown rate of under 5 %.

No, I wouldn't purchase an extension, nor would I ever coerce someone into buying one. The warranties sold by corner car lots are a farce ... they don't cover anywhere near the actual repair cost of the vehicle, yet this is rarely explained to the consumer.

1989 FWD Fleetwood, Silver

1995 STS Crimson Pearl on Black leather

1997 STS Diamond White

1999 STS Crimson Pearl

2001 STS Silver

2003 STS, Crimson Pearl

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It goes without saying that overall, warranty companies come out ahead. That's why they're in business. They're not in business to help you out, they're in business to make a profit. Like insurance. In general, most people never get out what you pay in. But in that rare case where you get into an accident and get sued for $2m, that insurance policy really comes in handy.

That's all any warranty is, even OE warranties. The longer the warranty is, the more you pay for the car. Just like with aftermarket warranties, automakers aren't in business for you, they're in it for them. You pay for any warranty you receive with a car...the longer the warranty, the more that cost is built in up front.

You have to run the risk for yourself regarding warranty coverage. Insurance policies are often mandatory, because we're many times talking about health and safety, but for mechanicals on a car, you have to decide for yourself whether or not you think you'll "win", knowing full well that in general, the house "wins"...or they wouldn't be there.

Jason(2001 STS, White Diamond)

"When you turn your car on...does it return the favor?"

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Here's one for a good laugh....A couple of weeks ago, I received some junk mail and it had a logo that looked Similar to the GM logo but it had the initials DS which stood for (not dumb$hit... :lol: ) "Direct Services". The letter informed me that the factory warranty on my 1986 Park Avenue has expired...DUH no kidding...it expired 17 years ago!

They were attempting to sell me warranty coverage in order to avoid "costly powertrain repair"...the cost of that gem was in the $1300 range. What kind of moron would attempt to sell warranty coverage for the price of $1300 on a $500 car??? :lol: Even more difficult to believe is someone actually falling for that....

'93 Fleetwood Brougham
'05 Deville
'04 Deville
2013 Silverado Z71

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I get them all the time for our 2003 Grand Caravan -- which isn't out of powertrain warranty yet.

The sad part is, you (we) keep getting them because people actually DO patronize those types of solicitations. The same is really true for spam...they wouldn't use their time on that type of marketing if it didn't generate $$$.

Jason(2001 STS, White Diamond)

"When you turn your car on...does it return the favor?"

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I would not purchase a new or used car without a warranty. darn I paid 1k for the extended certified warranty on my car and I'm willing to bet if i total up what has been done to the car under warranty it would have cost 15x more than I paid for the warranty work done on the car so far So flipping that coin has been a good choice for me.SO far I won ANy cadillac I have ever owned the warranty has come in VERY handy


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