Why NOT to Buy that Extended Warranty?

When I help friends purchase new or used/lease cars they often ask about extended warranties (maintenance,engine, tires etc.). I generally ask how long they expect to keep the car, then I ask them have they done their research on common problems with the car (out of warranty) and average cost of the services/maint. Most of the time it doesn't make monetary sense. However, if the car is a high end or luxury car/suv and if they do the same analysis, about half of the time extended warranties are a good investment.
But since the average American keeps their cars for 3-5 years, it's hard to determine if extended or upgraded packages are needed. But since Clarity type cars are new to Honda and seeing some common problems on forums, I would have to do some serious research to determine if an extended service/car warranty is needed after standard expires.
I knock on wood, my last three leases where error free but in 2009 I purchased a 2008 Infiniti M35 and decided to purchase extended service warranty (48 months 36K miles for $828.00) and it worked out great. It seemed close to the end and early after the normal warranty a lot of issues happened that saved me a lot of money. First the radio stopped working so the dealership had to swap out the entire center console entertainment system (at no charge), shortly there after my cooling system had to be replaced. Then the internal chrome trip faded so it had to be replaced. The dealership never contested nor made a big deal but always fixed any problems my car suffered. The dealership thought I put water in the radiator in stead of coolant and asked if I did but it must of been at the dealership I purchased, they still replaced. Before I sold the car (and transferred the extended warranty) total cost of work outside of warranty was close to $4,900 but it only cost me about $950 out of pocket (that included extended warranty cost and deductibles). In the case of my infiniti, purchasing the extended warranty (after I owned the car for two years) was a great investment.
 
Timothy said:
I love your persistence, I have a feeling you sleep very well at night. But that all seems like a bit of rationalization. We all do that (i.e., I love this Clarity, imagine all I will save on gas). How about another scenario. Let's say I don't buy the warranty and I don't buy road side assistance. I am starting out $1.3k ahead. Chances are I won't spend that $1.3k. If I have an issue chances are that it will be less than $1.3k including the tow. But instead of just stating my scenario and yours and wondering 'what are the chances?', it would be great if someone had just crunched the numbers. Oh, wait, I think they folks who sell the service contracts have likely done that. I wonder how it came out?

Please, don't take my sarcasm wrong Ken. I do believe the piece of mind the service contact has bought you is worth something. But I am quite certain that most folks who pay for a service contract will be worse off. Some will not. The payoff for those who make out on the deal is likely not enough to have been worth the risk. Numbers are still numbers (they don't lie). If in 8 years we tallied up the winners, and those who bought the plans came out on top, there would be some unemployed Honda actuaries.

"No matter the exact type, extended warranties are an investment in peace of mind that limits financial risk for a set period of time. But beware: A CR member survey conducted in 2013 showed that car owners typically paid more for the coverage than they got back in direct benefits. This isn’t surprising, because extended warranties make a lot of money for those who sell them."
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Tim, I absolutely agree with your points and would not have purchased without the offset from cancelling AAA. As an old guy recovering from a bad motorcycle wreck, my days of working on a car on the side of the road are long over. So I have to have some form of roadside assistance. That’s why I subtracted out the AAA. I understand that doesn’t wash for others.

But the point of insurance and any evaluation of its benefit is not how many people will end up receiving more paid out than they paid in. As you mentioned that’s not going to happen without those actuarials taking a Great Depression like plunge off their skyscrapers. The point of insurance is to eliminate the liability of having a large expense. And of course each person must determine what they consider is too large a potential expense to self insure.
I wasn't rationalizing, just explaining why my scenario makes financial sense. And I guess that would be more accurately stated as financial sense to me in my situation.

I hope none of us has to have any repairs done after 3 years because IMHO there’re most likely to be very expensive given what a whiz-bang computerized electronic marvel our Claritys are.
 
MNSteve said:
I am not replying to this thread to get into the debate about whether purchasing an extended warranty is a good or bad idea. It's a bet; it's insurance; the warranty issuer will make money overall. All of these are true. We all make our own decisions using our own set of parameters and priorities. Frankly there is no wrong answer. I bought the warranty; I will be amazed if I end up ahead financially, but that's not why I bought the warranty. I am comfortable with my decision and the two of you are comfortable with yours; that's all that really matters.

But I am not following something here and KentuckyKen's logic must be simple and sound; I'm just not following it.


Where did this factor of two come in? Why wouldn't the repair have to be $680 to create the break-even point?

None of this changes the basic logic, and we could debate this forever, and everyone would be right. I just want to understand the $340/$680. It must be staring me in the face.
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Hmmm...
Let me redo the Jethro math on this...naught times naught equals naught, carry the naught and...
Dang, now it doesn’t make sense to me either and I typed it! I think you gave me way too much credit for always being logical.

I think I illogically subtracted $340 not spent on my covered repair from the $680 originally spent for the ext warranty to erroneously say now I’m only out $340. That is indeed wacky math. Can I blame that on the NewMath that came out in the 70s or maybe the closed head injury from my son’s motorcycle.

Anyway, you are correct. If a self insurer has less than than $680 ( my cost after subtracting savings from AAA cancellation) in repairs in those last 5 years the he has beaten me like a rented mule from a purely financial standpoint.
May I reduce the breakeven to around $400 to $500 by counting an out of town tow to get home or a local tow and hotel while on the road? Just trying to save a little face here.

In my own defense, I was left unsupervised during that post.
 
I agree with what others said for and against the extended warranty. I just want to add the fact that HondaCare warranties are well priced. Even if you look at the average owner, they will probably end up paying just a small amount less than the warranty price. So when you make this decision, it is not comparing zero out of pocket vs. $1100-$1300 for hondacare, for an average owner not getting the warranty will save a few hunderd bucks.
 
I got the $1310 6/120k extended warranty. I got the car cheap and I plan to drive it a lot, a new car, new transmission and high mileage will bring much higher chance of failure, the money buys me peace of mind.
 
On the humorous side of extended warranties: I enjoy reading the stories on Jalopnik.com where they take advantage of CarMax's extended used-car warranties. Jalopnik chooses an expensive car that's known to be wildly unreliable, purchases one of those cars used from CarMax at a much-lower price than new, and also purchases a long-term, bumper-to-bumper CarMax warranty. As expected, the car breaks down over and over and CarMax pays for the repairs--it's amazing how unreliable some expensive cars can be! The purchaser gets to drive an expensive car for a lot less money than would be possible otherwise, but has to put up with frequent repairs and the attendant loss of utility while the car is in the shop. We get to enjoy the story of a company that thinks they've got the extended-warranty game all figured out losing their shirts on these outliers. Here's a Jalopnik story about a Land Rover halfway through it's $3,900, 66,000-mile extended warranty that has already saved the purchaser more than $6,000. I doubt any Hondas cause CarMax's insurance underwriters similar regrets.
 
I purchased the Honda Care extended warranty today. Generally I am no fan of these warranties. However, the concept of a wrap around approach has some appeal to me. Covering everything for 6-7 years seems reasonable.

But to he honest, and I hope I am wrong- I have concerns about longer term reliability (over 3 years) with the Clarity. Even troubleshooting software glitches that may impact critical systems takes time and money- and I am not yet confident all the bugs in the Clarity's electronics have been worked out. It would probably be a miracle to have cars like my 1989 Accord or 1981 Civic as far as reliability. But then again, they couldn't deliver 100+ mpge at a weight of 2 tons and still manage an under 8 second 0-60 and incorporate advanced safety features, and...

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Lowell_Greenberg said:
I purchased the Honda Care extended warranty today. Generally I am no fan of these warranties. However, the concept of a wrap around approach has some appeal to me. Covering everything for 6-7 years seems reasonable.

But to he honest, and I hope I am wrong- I have concerns about longer term reliability (over 3 years) with the Clarity. Even troubleshooting software glitches that may impact critical systems takes time and money- and I am not yet confident all the bugs in the Clarity's electronics have been worked out. It would probably be a miracle to have cars like my 1989 Accord or 1981 Civic as far as reliability. But then again, they couldn't deliver 100+ mpge at a weight of 2 tons and still manage an under 8 second 0-60 and incorporate advanced safety features, and...

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Huh, that takes a revolution in science to bring all your wishes into reality.
 
I'm on the fence on this one now. I paid 1500 for an 7yrs 80k bumper to bumper warranty. Since I'm in CA, the battery is good for 10yr/150miles and the dealer I purchased it from offered the lifetime honda powertrain warranty. I'm really questioning the value of the warranty I paid for. I'm still in the grace period and debating on if I want it or not.
 
dannieboiz said:
I'm on the fence on this one now. I paid 1500 for an 7yrs 80k bumper to bumper warranty. Since I'm in CA, the battery is good for 10yr/150miles and the dealer I purchased it from offered the lifetime honda powertrain warranty. I'm really questioning the value of the warranty I paid for. I'm still in the grace period and debating on if I want it or not.
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I believe Hyannis Honda can quote this at a $896. However, you may wish to confirm they can sell into CA. They are based in MA.

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I didn't buy an extended warranty because I wasn't sure how long I would keep the car. My reasoning was that I already have a 36K mile bumper to bumper warranty. So for the first 36K miles, you get nothing. If I decide to keep the car after 36K miles I will look into the cost of an extended warranty to 80K miles. I may have a better feeling for the reliability of the car in 3 years. Right now the difference in the warranty costs between a car with 3K and 35K miles is very little. You can go to Honda Care and run the numbers. Of course the cost may be greater when the car is 3 years old. If I knew I would I keep the car indefinitely when I bought it, I would have probably bought the warranty.
 
Mesa said:
Right now the difference in the warranty costs between a car with 3K and 35K miles is very little.
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Well, crap. I guess I will never learn not to ASSuME. I did not check this; just assumed that the cost of buying the warranty at 35K would be prohibitive.
 
M. Shah said:
Does anyone with a car with over 6K miles and 6 month old got a warranty price check?
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I did it at one time.. but you can easily do it now.. Hyannis sends you the prices automatically.

But the way it works is the length is from day of purchase and until the stated miles. So max for a 2019 with 10K miles you could get is 6 years 120k miles.
 
I got a 2 month old 2018 with 2K miles. Debating if I should get the extended warranty now or wait till I get close to 36 months or 36K miles. Is there a price difference in doing it later.
 
When I checked with Hyannis after I went over 6000 miles, the longest they quoted for, if I remember correctly, was 5 years. When I checked at 4700, they offered a plan up to 8 years. You can see what plans are available here: https://hyannishondacare.com/questionnaire.php
Here is what another online dealer Sarcucci Honda said, which kind of explains the difference:

All "C" and "D" plans start at the original in-service date, and 0 miles(Vehicles under 6,000 miles).

All "F" and "G" plans start at contract purchase date(Vehicles over 6,000 miles). Seems like once you are over 6000 miles, you might as well wait until near the end of the regular warranty period.

If I remember correctly Sarcucci were a little more expensive, but their site is more informative. They have a copy of the contract. https://www.saccuccihondacare.com/coverage.php
 
LuckyLasagna said:
After my infotainment system froze up for a day, I freaked out and bought the extended warranty.

I have a 2018 Clarity with 5950 miles. Lynn for College Hills Honda gave me the D80 (8yr/100k) for $1364. This was lower than Sarcucci. Hyannis was unable to offer Honda Care for CA residents. The whole process was super easy and I verified coverage through my local dealer the next day.

Infotainment system ended up fixing itself. I walked away and left the car on for a few hours... turns out it was an over the air update.
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I would doubt that it was an over the air update. A lot of time just turning the car off resets the electrical warning messages. If the radio freezes up again just hold the post button for 5 to 10 seconds and do a hard reboot of the unit.
 
dannieboiz said:
I'm on the fence on this one now. I paid 1500 for an 7yrs 80k bumper to bumper warranty. Since I'm in CA, the battery is good for 10yr/150miles and the dealer I purchased it from offered the lifetime honda powertrain warranty. I'm really questioning the value of the warranty I paid for. I'm still in the grace period and debating on if I want it or not.
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In California many repair items will fall in the category of emissions. When i looked into it a saw that emission items are covered for 10 or more years and 150k, i felt better about not getting the ext. Warranty. In reality the ew will be trumped by the emissions warranty on much of the electric system and wasnt worred as much about the ice components.
 
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