extended warranty, is it worth it?

adrianv · 04-27-2014, 02:04 PM

The short answer to the OP question is NO, you should not buy the warranty, regardless of cost.

The rationale as someone else mentioned is that a warranty by definition is priced such that the seller of the warranty is making a profit on average between the payout of the warranty and the influx of premiums.

The only time you should ever purchase a warranty is if you cannot absorb the cost of a catastrophic loss. Note "cannot absorb" doesn't mean it would suck really really bad, it means it is a loss so great that you cannot recover from. (You get cancer without health insurance, a tornado wrecks your house without homeowners insurance, etc.) If a car puts you in this category, you should reconsider if you should be purchasing an expensive car to begin with.

The only time a warranty is a good deal for the buyer is if the buyer has information that the actuaries didn't account for when the warranty was priced. For a car, this would be something like you have a lemon and you take the car in for warranty repair for something new a couple times a year.

You being an intelligent person though, would get rid of such a money pit car once it was obvious that was an unreliable piece of junk. Even in this contrived example, buying a warranty on a car is a sucker bet.

jeffclev · 04-29-2014, 12:44 PM

Quote:

Originally Posted by jeremicium

As you probably know, the warranty is a wager between you and BMW. They are betting that your car will be cheaper to fix than the cost of the warranty, you are betting that the warranty will be cheaper than the repairs. All extended warranties are priced so that statistically BMW will come out on top. A wise betting person would choose not to get the warranty.

However, its hard to put a price on peace of mind. BMWs can be very costly to repair...obviously...especially if you are unable to do any work on your own. I've been out of warranty on my 335 for 16,000 miles. with zero warranty type issues. I thought about a warranty, but they were in the $3000+ range. I'll pass.

The benefits of getting the warranty at the time of purchase is you can roll the cost into the loan.

The drawbacks are, in my opinion, cars normally show whether or not they are going to be reliable fairly early on. Mine has been pretty good from the beginning. Many others had problems early...and the problems continued as the miles piled on. In this case you can make an educated decision based on the reliability over the first year or two. Hope that helps a bit. The pricing through that third party seems a bit too good to be true. I would really question the quality of coverage. One thing is for sure... DONT DO THE MAINTENANCE WARRANTY. That is a complete and utter waste of your money!

Good explanation. Personally, I would put the $ in an index fund and "self insure" with that fund.

Krisms · 04-29-2014, 01:28 PM

thanks everyone for chiming in. lots of good points that got brought up here. i currently have an '07 335i that i'm trading-in in just a few hours. so far, with the 84k miles that i've racked up, i spent a total of $2,450 in repairs (not via bmw service, so it could have been more expensive if via dealership) and now having issues with the transmission. that being said, my credit union's extended warranty only costs $2,100. no deductible and bmw dealership service/repair shop is covered. also covers all of the vehicle except for wear & tear items and after market installs. so if i am to gamble, looks like i'd be putting my money on the extended warranty. this vehicle is to be kept for the long haul so i think it will be worth it. oh and it's for 7 years / 100k miles. thanks everyone!

bman6074 · 04-29-2014, 01:35 PM

Quote:

Originally Posted by Krisms

thanks everyone for chiming in. lots of good points that got brought up here. i currently have an '07 335i that i'm trading-in in just a few hours. so far, with the 84k miles that i've racked up, i spent a total of $2,450 in repairs (not via bmw service, so it could have been more expensive if via dealership) and now having issues with the transmission. that being said, my credit union's extended warranty only costs $2,100. no deductible and bmw dealership service/repair shop is covered. also covers all of the vehicle except for wear & tear items and after market installs. so if i am to gamble, looks like i'd be putting my money on the extended warranty. this vehicle is to be kept for the long haul so i think it will be worth it. oh and it's for 7 years / 100k miles. thanks everyone!

Is that 7 yr 100K miles a BMW warranty??
When i got mine they said they only had a 7 yr 70k miles warranty. I would have liked what you are getting.

BEM-S4 · 04-29-2014, 02:07 PM

But the BMW one includes wear and tear right? So you'd have 7 years / 100K miles and also free pads, filters, oil changes, etc. etc. etc. everything except tires. Not "free" but already included in the BMW deal.

bman6074 · 04-29-2014, 02:08 PM

Quote:

Originally Posted by BEM-S4

But the BMW one includes wear and tear right? So you'd have 7 years / 100K miles and also free pads, filters, oil changes, etc. etc. etc. everything except tires. Not "free" but already included in the BMW deal.

no that is a separate maintenance warranty you have to buy

04-27-2014, 02:04 PM	#23
adrianv New Member 2 Rep 23 Posts Drives: M235 Join Date: Apr 2014 Location: Arizona iTrader: (0)	The short answer to the OP question is NO, you should not buy the warranty, regardless of cost. The rationale as someone else mentioned is that a warranty by definition is priced such that the seller of the warranty is making a profit on average between the payout of the warranty and the influx of premiums. The only time you should ever purchase a warranty is if you cannot absorb the cost of a catastrophic loss. Note "cannot absorb" doesn't mean it would suck really really bad, it means it is a loss so great that you cannot recover from. (You get cancer without health insurance, a tornado wrecks your house without homeowners insurance, etc.) If a car puts you in this category, you should reconsider if you should be purchasing an expensive car to begin with. The only time a warranty is a good deal for the buyer is if the buyer has information that the actuaries didn't account for when the warranty was priced. For a car, this would be something like you have a lemon and you take the car in for warranty repair for something new a couple times a year. You being an intelligent person though, would get rid of such a money pit car once it was obvious that was an unreliable piece of junk. Even in this contrived example, buying a warranty on a car is a sucker bet.
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04-29-2014, 01:28 PM	#25
Krisms Private First Class 26 Rep 110 Posts Drives: 2014 BMW 228i Join Date: Apr 2014 Location: Florida, USA iTrader: (0)	thanks everyone for chiming in. lots of good points that got brought up here. i currently have an '07 335i that i'm trading-in in just a few hours. so far, with the 84k miles that i've racked up, i spent a total of $2,450 in repairs (not via bmw service, so it could have been more expensive if via dealership) and now having issues with the transmission. that being said, my credit union's extended warranty only costs $2,100. no deductible and bmw dealership service/repair shop is covered. also covers all of the vehicle except for wear & tear items and after market installs. so if i am to gamble, looks like i'd be putting my money on the extended warranty. this vehicle is to be kept for the long haul so i think it will be worth it. oh and it's for 7 years / 100k miles. thanks everyone!
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04-29-2014, 02:07 PM	#27
BEM-S4 Major General 4516 Rep 8,942 Posts Drives: Dinan M235, Dinan Sport Wagon Join Date: Oct 2012 Location: Philadelphia iTrader: (5)	But the BMW one includes wear and tear right? So you'd have 7 years / 100K miles and also free pads, filters, oil changes, etc. etc. etc. everything except tires. Not "free" but already included in the BMW deal.
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