Why NOT to Buy that Extended Warranty?

In evaluating these extended warranties, it is important to note that an OEM such as Honda has decades of experience in manufacturing and selling conventional ICE vehicles and therefore presumably know how to profitably price extended warranties on those vehicles AND have the advantage that they further hedge the risk by spreading it over many different models and many millions of vehicles.

However, Honda has sparse knowledge about longer-term reliability and costs of EV’s in general and the Clarity in particular. Nor do we, as buyers of the Clarity, and we are not able to spread these risks across many models and millions of production vehicles.

This, to me at least, means that purchase of an inexpensive, low risk, refundable and assignable extended Honda Care warranty for our Clarity cars may well be a prudent choice.

 

I don't think there is a wrong answer. I bought the extended warranty, but I don't disagree with the logic of those arguing against it. Yes it is designed to make more money for Honda than it would save the owner. That is evident. I also continue to spend a fortune on health insurance in spite of being healthy.

I think we should be clear that it is not putting up $1300 with a likelihood of getting $0 value in return. Honda hybrid cars average ~$350 - 400 per year in repairs after year 5 (repairpal.com, edmunds.com). Even if you assume much more conservative numbers, you would still have to estimate that the warranty-eligible repair costs for the covered years would offset a substantial chunk of the warranty cost.

But a the end of the day it comes down to the individual's perception of risk and uncertainty and value. People who have had some negative experiences with crazy repair bills will likely be more prone to see the value in extended warranties than those who have had no such history. Some people are more risk averse. Some people know some great trustworthy repair shops, and others think every maintenance shop is out to rob them blind. So for some it really becomes partially an emotional decision rather than strictly a logical decision.

 

I am on the fence on this. I had a 2014 honda accord v6 that had a bad starter at 45 k miles. Dealership wanted $1300 to replace along with other parts that was necessary. I traded that car in at a different honda dealer and got the clarity.
Clarity was built in japan so it should be more reliable (accord was built in US). My wifes lexus was also built in japan and lasted 15 years and 250 k miles without issue.

 

The thing is that they want to sell it at a large profit. Today with everyone knowing invoice, hold backs, dealer cash and what not, dealers are maybe making $100 on a sale, nowhere near what they would have made years ago. Manufacturers extended warranty prices are a big unknown in general so dealers can make big profits. Ask the finance manager how much the $1300 Honda Care warranty costs and they will tell you $2300. So they instead say they sell you a package that costs only $1800 by a third party, which in reality is not worth the paper it's written on.

 

Does anyone know what the warranty costs are after the 3 year mark? If it is much more than $1300 it would help in decision making.

 

Here's my thinking on the subject of extended warranties.

For a given item such as a high end camera or car an extended warranty (basically insurance) is very tempting. If I think it is a good buy for one item then I'd have to consider it for other items that might be costly to replace. Lets say a high end camera, Clarity, expensive lenses, vacuum cleaner, AV amplifier, two cell phones, two laptops. etc. The cost of extended warranties could start to add up quickly.

Yes any one of those items could fail but many have some kind of warranty which will cover early (they call them infant) failures. If an item lasts a year it is a good bet it will last much longer. For sure I'm not going to make a claim on all of the devices.

Then there is the question of how much that insurance will cover should the product have a problem. It may be 100% of the repair cost or replacement cost. Or it could be some reduced amount. I've also noticed a number of people who report a failure occurred one month after the extended warranty ended.

So my thinking is if I don't buy any extended warranties I could easily save quite a bit of money that I could then use to pay for a repair should I need it.

We had two Prius cars, a 4Runner, and now the Clarity. Totaling the miles driven on those four cars it comes to about 300,000 miles (most on the first Prius) over the past 10 years. During all of that time I've had exactly one problem with the 4Runner that cost about $200 to repair (not counting two gas caps that developed leaks).

Home insurance covers some items if they are damaged in the home or stolen (not cars). But car insurance covers stolen vehicles and things like a broken window caused by a thief.

Of course there will be the story where someone spent $1,500 on an extended warranty for a car and it paid out $5,000 for a repair. I think that is quite possible but I also think it is quite rare. It's a gamble and I'm willing to take the risk. So far, for me, it's paid off.

 

I don't know what the price will be but if you get a warranty before your 3 year warranty expires it shouldn't be much difference in price because you car has been covered and the new warranty had no different liability than when the car was new. I checked online and Auto trader says you can buy anytime before your manufacturer's warranty expires.

 

Yep, like all types of insurance / coverage, they play the long game and know they'll make (much) more money than they pay out.

 

This pretty much encapsulates my thoughts. If I always say NO to extended warranties, I figure I will just pay for a repair IF it occurs. If the car proves to be reliable, then the money I didn't spend on the warranty just stays in my pocket. While there may be isolated examples where an extended warranty pays off, in the long run the smart money is on not buying them at all.

 

EV main components are covered by 8 year warranty. Regular drivetrain 5 years. Emission systems 8 years. Rest of the usual components are standard Honda parts from other models (like power windows, steering wheel...) covered for 3 years. In our long-term experience across 4 Hondas, we've only needed a minor out of warranty repair when the cars were under 7 years old that amounted to roughly $300 for the part and Honda covered the labour under goodwill becuase the car was just beyond the warranty period. If we bought extended warranties for all 4 cars we would have paid about $5000. Way more.

 

If I may just add - both options for and against an extended warranty make sense. It's a individual decision. For me, I took $1,500 from the $2,500 Massachusetts state Rebate I received and purchased the D82 8 year 120,000 mile warranty. I actually hope I never need a warranty repair because I will feel good keeping the car well into the 200,000 mile range. Now with that said, one week after getting my car in March 2018, the infotainment screen lights isolated to where the electronic volume buttons on the left side of the screen would periodically flicker but everything else worked fine. I was able to record the flickering on my phone and presented it to the dealer and they replaced the infotainment screen. That unit alone was over $3,000 without labor. I then started looking at parts diagrams and cost related to our car and there are some pretty big ticket items in there cost wise. Again, I hope I never have to use the extended warranty and my Clarity exhibits the legendary honda reliability, thus for me, I'd rather have the warranty for 8 years and 120,000 miles and not need it than need repair work and not have the warranty. Cheers and wishing you all and your families a blessed 2018 and beyond.

 

Question: If I were to purchase the extended warranty from a particular dealer, can I have the car serviced under the warranty at any Honda dealer? I ask this because if I decide to purchase the extended warranty I want to shop around and pit one dealer against the other to negotiate the lowest price possible. So I might end up buying it from a dealer that is too far away to use for servicing.

 

Yes, you can use it at any dealer. Just be sure you buy the Honda brand Honda Care. Dealers (like mine) don't even sell the Honda brand because they make SO much more money on an aftermarket 3rd party "warranty". Those are notoriously hard to get honored anywhere.

 

Excellent advice.. thank you.

 

Oh for the record, I did not purchase my warranty from the dealer I bought my car from because they are ridiculously priced. When I told them I purchased from another dealer at almost half what they wanted, they were fine and will honor the warranty without issue. The dealers know smart shoppers shop around for the best price. They still make money on the warranty work if needed.

 

Looking strictly at the numbers, automotive extended warranties pretty much never make sense. We did not get one on our Clarity. If you think of buying a warranty as placing a bet, which in many ways it is, I don't think it is a bet most of us would take if our car was not somehow brought into the equation. I know for many this decision is more than simple numbers. There is an emotional consideration to buying this product and I can respect that.

https://www.consumerreports.org/extended-warranties/extended-car-warranties-an-expensive-gamble/

 

I think there are only a couple valid reasons to get a warranty:

• If an unexpected repair expense would cause significant financial impact to you, perhaps to the point of not being able to repair the vehicle and having your transportation to work interrupted.
• If 'peace of mind' is more important than the cost of the warranty.

Somebody is making money on the warranty, and you can be sure it isn't the consumer . If you have sufficient rainy day funds to cover any reasonable expense, then from a purely financial perspective the warranty does not make sense. Sure, you could play the what-if game and imagine scenarios where the $1800 warranty saves you $3000, but that is essentially no different than buying a bunch of lottery tickets and hoping that it works out well for you even though statistically it is not a good financial decision.

 

This was covered under the original warranty right?

 

Yes, covered under factory warranty. It just got me looking at the parts diagrams for the car and the associated cost. It's a gamble for sure but I have not regretted taking a portion of the rebate to fund the extended warranty.

 

Ah ok good, just wanted to make sure And yeah the electric cars have a lot more expensive parts.. still silly pricing for repairs though considering that unit costs probably $100 to manufacture.