Re: Extended Warranties (NATWOB)

[Michael_Bird@xxxxxxxxxxxxxxx]

JOHN FAGERLUND asked about pricing of extended warranties, having gotten a
quote for 1800 odd dollars for his 95 540.   Yo, John, don't you have a
year left on the factory warranty?

Anyway, FWIW IMHO I feel that any extended warranty is generally a complete
waste of money, or if you prefer, ACFWM.    You figure out what the F
stands for.  Look at Circuit City, Best Buy, etc., and you will notice that
90% of their profit is from extended warranties.   Look at the salary basis
for the F&I guy at your dealership, and you will discover that he makes his
money on commission on the sale of extended warranties, high money factors
on your lease and buy backs from the banks and BMW Financial for loans.
These guys make 60,70,80K a year, just on warranties and leases.

If someone is selling you a warranty, then they have to do two things to
stay in business, make a profit and pay off claims.   Naturally, to do
both, they figure the average expected cost of repairs, add something to it
(called profit) and sell it.   Now, if the company selling the warranty is
doing so through another party, such as your dealership or an insurance
broker, than the seller must also make a profit for his time and trouble,
so the price goes up a little bit more.   So a large percentage of your
"cost" is actually profit to the sellers.    50% or more.   Really.

Now, if your car is a total POS, then an extended warranty would make
sense.   Actually, selling the POS would make more sense.   But if your
car, while under warranty, has proven to be average or even slightly above
average, then it would seem more financially prudent to "self-insure" it.
Take that $1800 and put it in a money market account.   Let it earn
interest while the factory warranty remains.   Then, as large repair costs
come due, take the money out of the account to pay for them.   Chances are,
if you are fair and use the same exclusions and deductibles and other BS
that warranties hold you to, at the end of the warranty period, you will
have money left over in the account.    You will then take that remaining
money and send half of it to me, as thanks for helping you out with this
wonderful advice.

Yes, yes, I know there are people out there who have had engines replaced
and major work covered under their extended warranty and it worked out well
for them.   But using the law of averages, you come out better without it.
Laws vary from state to state, opinions stated herein may not be valid,
true or otherwise factual in all areas.   Garbling, translation and just
plain wrong comments may be due to Internet protocol address translation
interface transmission communication exchange failures, or IPATITCEF and
are beyond the control of the author.  Factual and Relatively True
Statements, or FARTS, are accidental and should not be taken personally.

Michael

BTW, I am working on a Y2K extended warranty plan too, details to follow.

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