Extended Warranties: Worth The Money?

"davesaddiction @ opposite-lock.com" (davesaddiction)
02/12/2016 at 09:20 • Filed to: RFD, BMW, ///M, warranty

I’m generally of the opinion that extended warranties are not worth the cost, unless your name is Doug and you deal in used Range Rovers or Astons. When I buy a TV or an appliance (or seemingly any damn thing these days) I reflexively refuse the extended warranty/protection plan, and that’s worked out pretty good for me so far. I also usually do not buy them for my cars, but a few years ago, I made an exception. I was buying a used BMW with some existing factory warranty remaining, but not much, and this particular BMW came with an ///M badge — much like Josh’s !!!error: Indecipherable SUB-paragraph formatting!!! — which might as well stand for muy costosa reparación . To add fuel to the fire, I’d caught a bad AC evaporator soon after I bought it and had it fixed under warranty, a job that involved removing the entire dash would have cost me a few grand. So, I took to the task of finding a warranty to cover my ass for the next few years.

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Any research done on extended warranties results in many, many stories of denied claims and frustrated customers, but there are a few of these companies that actually seem to be trustworthy. In the end, I narrowed it down to a couple options, Fidelity and EasyCare, and ended up choosing EasyCare. (Just a note here: if you have access to USAA’s warranties because of your own or a relative’s military service, they seem to be some of the best in the business.) For EasyCare TotalCare — their top of the line coverage — on my car, for 3 years and up to 85k total miles with a high $500 deductible, I spent around $2500. I was really just looking for catastrophic coverage, and liked the idea of a $500 bill if something went really wrong compared to a $5000 bill. Just for reference, a replacement engine from the factory for my car is rumored to be around twenty grand before labor, and that was not a bill I wanted to ever see.

Image Credit: rioyellows2k

At the beginning, I was happy with my purchase, and was confident that I’d made the right choice. The warranty definitely made me sleep better at night, but as time went on, I wondered more and more if it had been a good decision. After all, I could have just put that cash into an emergency fund for repairs instead. I did end up having a couple small claims, both related to tire damage and both quickly covered, to EasyCare’s credit. The only other issue I had with the car over the past 3 years was a sensor that went bad, which just cost me a couple hundred dollars out of pocket.

With my warranty’s expiration coming up in a just a few days, I took my car to the dealer one last time for a thorough inspection, to make sure there was no issue that hadn’t yet presented itself to me. I got the car back with a clean bill of health, knowing then that I’d spent around $2000 on nothing more than peace of mind.

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Now you can say that that’s just $50 dollars per month for protection against a much bigger bill, but that’s also two grand that I didn’t spend on track days or performance modifications instead. In hindsight, would I have spent the money? Of course not. If I buy a similarly complex car in the future, will I buy another extended warranty? I might be much less likely to, but I wouldn’t be that surprised if I do anyway. Peace of mind is a valuable thing, after all.

DISCUSSION (30)

Smallbear wants a modern Syclone, local Maple Leafs spammer > davesaddiction @ opposite-lock.com
02/12/2016 at 09:41

Speaking as a sucker: Not unless it’s German or Italian.

davesaddiction @ opposite-lock.com > Smallbear wants a modern Syclone, local Maple Leafs spammer
02/12/2016 at 09:45

Seems like a pretty good rule (include French if they come back Stateside). What about the Swedes?

Tripper > davesaddiction @ opposite-lock.com
02/12/2016 at 09:50

Nice article! I made a bad deal on the warranty on my E90. The car still had 6 months left on the BMW CPO warranty, and the sales guy assured me that the Zurich warranty that I purchased (2 years/24k miles for $3300) would not begin until the CPO warranty expired. I never followed up on that, and by the time that I called the dealer about it, neither of the people involved in the original transaction were still working there. So I had two warranty’s for six months! Unfortunately that was the only time when I had make a claim (Throttle actuator $1100 ish).

In August of 2015 I was doing the same thing that you did. I took it to a dealer to makes sure that the few times my car had gone into limp mode were not part of a bigger issue, before my extended warranty expired. Two separate dealers said that they could not even find evidence that the car had been in limp mode. I was getting ready to take it to my inde when I got this notion that the car was just going to beat me sideways after my warranty expired. I couldn’t shake it, and you know the rest of the story.

So not only did my warranties overlap, but I never even used the one that I paid extra for. I’m not saying that I would never get another extended warranty, but I would be much more careful about it next time.

190octane > davesaddiction @ opposite-lock.com
02/12/2016 at 09:52

Is any form of insurance a bad purchase?

You can say any form of insurance was money wasted if you don't use it, but unless you can afford to live without it, it makes sense to have it.

Smallbear wants a modern Syclone, local Maple Leafs spammer > davesaddiction @ opposite-lock.com
02/12/2016 at 09:55

No experience on Swedes, but my impression would be they are quite reliable but also quite expensive once something does go. I’d saw the odds are on that happening outside the extended warranty anyway though.

Could lump in the Brits with Germany and Italy I think.

davesaddiction @ opposite-lock.com > Smallbear wants a modern Syclone, local Maple Leafs spammer
02/12/2016 at 10:02

How could I forget the Brits?!

AMGtech - now with more recalls! > davesaddiction @ opposite-lock.com
02/12/2016 at 10:05

If your car cost more than $50k new or has fancy suspension of some sort, these warranties can be a very good idea. I’ve seen them save people well over ten grand more than once. The trick to getting claims paid is to read the fine print before buying packages, many only cover a handful of items.

davesaddiction @ opposite-lock.com > 190octane
02/12/2016 at 10:12

Well, I have medical insurance, home insurance, car insurance and life insurance, and these all seem to be universally accepted as things you pay for to be a good, reasonable citizen and conscientious spouse/parent. Every insurance purchase is a hedge against future problems, and the reason that insurance companies make money is that the odds of those future problems are generally small. In many cases, like my extended warranty purchase, it is catastrophic coverage, paying a small bill now to prevent a potential large bill in the future. I guess everyone just has to look at the odds in your situation and decide whether you’re willing to take on whatever level of risk you think there is. Buying flood insurance if you live along the Mississippi or earthquake insurance if you live along the San Andreas are both probably good decisions. Buying an extended warranty on a Toyota Camry probably is not...

davesaddiction @ opposite-lock.com > Tripper
02/12/2016 at 10:16

Yeah, definitely. It’s a must to read all the fine print and know exactly what you’re getting into. Seems like CPO might be the best way to go on cars like these. If my car had shown me similar signs as yours before my warranty expired, I’d have also thought long and hard about letting it go.

Still enjoying the S3? Did you say you had your sights on an M2 next?

davesaddiction @ opposite-lock.com > AMGtech - now with more recalls!
02/12/2016 at 10:21

Yeah, my car has dynamic suspension, a high-strung engine with some known potential to implode, and a myriad of other electronic doohickeys that could fail at some point. Thankfully, up to now, I seem to have gotten a good one (knocks wood).

190octane > davesaddiction @ opposite-lock.com
02/12/2016 at 10:21

True, but a BMW is not exactly a Toyota Camry. One is like buying flood insurance in New Orleans and the other is like buying flood insurance living on top of a mountain in the Sahara.

Sure, you might have not have been in a flood yet, but it's only a matter of time.

davesaddiction @ opposite-lock.com > 190octane
02/12/2016 at 11:15

And that’s exactly why I got an extended warranty on mine for my first 3 years of ownership. I did call looking into to extending my coverage to 100k, but they quoted me more than my initial warranty for just powertrain coverage. When it comes down to it, the car has been paid off for some time and I could swallow a big bill (or even a total loss) as much as I hate the thought of that. As the miles rack up and time marches on, the value of the car decreases, but the enjoyment remains very much the same. I love the thought of keeping this car for a very long time, but we’ll see what the future holds.

Tripper > davesaddiction @ opposite-lock.com
02/12/2016 at 11:33

Yep, still loving it. It has been great in the snow too, even with the crappy winter tires I have.

Regarding the M2; someone is supposed to contact me when they are taking orders. They offered the “opportunity” to put a deposit down a few months ago, but I declined haha. I’m not looking to be the first kid on the block with one, I just want to make sure I get a drive in one early on so that I can make my final decision.

A lot of variables at the moment though. I’m sitting on 3 cars, getting married in July, and looking to make a big career step in the not so distant future. Also as I’m sure you are aware, marriage opens the door for little ones. On top of that, soon to be Mrs. Trip needs a new car before I get to buy any more vehicles (she’s in an 05' R53 cooper S pushing 115k miles).

Once Mrs. Trip gets her new Outback, we will be up to 4 cars (only space for 3 and no garage). We’re going to keep her cooper as we won’t get much for trade and she loves it. Selling the E46 is out, and I like the Audi a lot more than I thought I would. So for now I’m planning to put a deposit down when they start taking orders for the M2. If I fall in love on the test drive, then I will find a way to make it work.

davesaddiction @ opposite-lock.com > Tripper
02/12/2016 at 11:41

Glad it’s been good to you. They always catch my eye, and I love the blue you picked.

Yeah, I can’t imagine buying a car without driving it or paying over MSRP for the privilege of getting one of the first ones. I generally don’t like buying the first year anyway - let a few thousand others be beta testers!

Congrats on the pending nuptials and the upcoming career move. Kids complicate things, but are great fun (ours are 9, 7 & 3). Mrs. addiction is also next in line - her CX-9 has 180k miles!

Look forward on hearing what you decide in the end.

Biggus Dickus (RevsBro) > davesaddiction @ opposite-lock.com
02/12/2016 at 11:59

I saw the photo of that thrown piston before buying my M3 and it gave me nightmares. I ended up getting the extended warranty as well because if that S65 blows I don’t want to be out $20K.

davesaddiction @ opposite-lock.com > Biggus Dickus (RevsBro)
02/12/2016 at 12:07

It’s not a pretty sight. Seems to only be a very small percentage of failures, and yet to be determined if all of these engines will see this problem at some point in their life or if it’s limited to a small number for some reason. At this point, I’ll keep reading the forum posts to see if there’s an accepted permanent fix and continue to sent samples off to Blackstone each time I change my oil (my last one, at 77k, looked great). And maybe I’ll spend a couple grand at 100k to crack it open, take a look and replace them.

Biggus Dickus (RevsBro) > davesaddiction @ opposite-lock.com
02/12/2016 at 12:17

I did some extensive reading and it seems going with completely different Rod bearings could solve the issue.

davesaddiction @ opposite-lock.com > Biggus Dickus (RevsBro)
02/12/2016 at 12:33

Yeah, most people seem to be doing the treated bearings and aftermarket rods, but it still seems like the true cause and a consensus solution are still not really known.

Tripper > davesaddiction @ opposite-lock.com
02/12/2016 at 12:35

Thanks! Yea I’m kind of thinking second model year at this point. Either way the deposit is just for a TD. If I buy/lease one, I’m going to order it.

I used to be afraid of having kids, but I’m over the hump and looking forward to it now. I should have a much better idea come August/Sept.

RallyWrench > davesaddiction @ opposite-lock.com
02/12/2016 at 13:24

It depends on the warranty, the car it’s for, and the shop dealing with it. I deal with loads of warranty companies for client’s cars, and we sell one underwritten by Western General that has proven to be very good. It’s all in the fine print, and how well your repair shop plays the game with them because many will use all kinds of obfuscation and wordplay to get out of claims.

Interestingly (and not surprisingly), Western General and possibly others will no longer warranty any BMW M or Mercedes-Benz AMG cars, or anything with 12 cylinders.

davesaddiction @ opposite-lock.com > RallyWrench
02/12/2016 at 15:33

Ha - definitely not surprising...

Scott > davesaddiction @ opposite-lock.com
02/16/2016 at 22:25

I like them for the piece of mind, to me that’s worth it, regardless of a comparison between cost vs savings. Like insurance it's something I hope not to use, but if I do it's good to know it's there.

davesaddiction @ opposite-lock.com > Scott
02/16/2016 at 23:21

I hate paying for something I never use, but you’re right.