Re: Extended Warranties (NATWOB)

[Evan Arnerich <arnerich@xxxxxxxxxxxxxxxxxxxxxxxx>]

Michael wrote:

> 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.

I look at things from a slightly different perspective: extended
warranties are insurance policies, and as such are mostly designed to
protect against catastrophic financial loss. If you can prepare
financially for possible future losses (self insure as Michael puts it),
you can probably get by without an extendend warranty. If you can't (or
won't) prepare, then get the warranty.

We got the extended warranty on an '81 320i we bought new (when the
basic warranties were only 12 month/12K miles), but the only thing we
ever needed it for was a leaking water pump, less than the cost of the
warranty. I'm still glad we had it, because back then the extended
warranty was much cheaper than fixing anything major on the car, and we
weren't in the same financial position we are now. Peace of mind, I
guess.

We also got one on my wife's '95 Volvo wagon. The way things are going,
we'll probably need that one (don't ask). If my next new car is a BMW,
we probably won't get an extended warranty. Not just because the newer
cars are built better (and with a better basic warranty), but also
because even a major mechanical failure won't be as much of a financial
catastrophe at this point in our lives. I'm not rich, it's just that the
probability of something major is small enough to not have to worry
about it. 

Speaking of insurance, I finally dropped the comp/coll auto insurance
coverages this year on my '87 325. Not because I'm less likely to get
into an accident, but because I'm it's only driver, and at it's present
replacement value, even a total loss won't send me to the poor house.
Again, I'm not rich, the car's just getting less valuable relative to my
ability to incur the possible loss of it. One side effect: my driving
habits seem to have changed since I dropped those coverages. Hmmm.

Cheers,
Evan

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